Closing Bell - Closing Bell: Moment of Truth for Your Money 5/22/24

Episode Date: May 22, 2024

Investors anxiously awaiting Nvidia’s report in Overtime … mulling where stocks are likely to go, regardless of those results. Our all-star panel of Bryn Talkington, Josh Brown and Stacy Rasgon break down what they’re expecting and what it could mean for the market as a whole. Plus, Light Street’s Glen Kacher tells us how he is navigating the AI wars. And, Seema Mody sets us up for what’s at stake from Snowflake’s results.

Welcome to Closing Bell. I'm Scott Wabner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with a make or break moment, perhaps for this market. NVIDIA earnings, as Don was just saying, in just about an hour from now, rarely has one stock mattered so much, which is why over this final stretch, we'll size up what is really at stake this evening. In the meantime, your scorecard with 60 minutes to go in regulation, well, it looks like this. We were green. Well, tech was green.

Some of the other sectors were green as well. Fed minutes, though, they were a little hawkish. Backward looking, yes, hawkish nonetheless. Market didn't like it very much. So we do have a bit of a sell-off on Wall Street at this hour. A couple of stocks to note, specifically Lulu and Target. Well, they are down sharply after their earnings reports, and those reports only raising more questions about the state of the consumer this afternoon. It does take us to our talk of the tape, this moment of truth for your money and where stocks are likely to go no

matter what happens this evening in overtime. Let's bring in our panel of experts, Bryn Talkington with Requisite Capital Management, a CNBC contributor, Josh Brown, CEO, co-founder of Ritholtz Wealth, cnbc contributor the star analyst stacy raskin is with us as well of bernstein welcome everybody it's good to have you we all know what's at stake here josh brown but why don't you tell us as a long-standing shareholder of nvidia yeah how you're thinking about this report tonight yeah i feel like i've grown up with nvidia it's like uh it's it's been with me for a long time. Look, I feel that this is such a hard story, believe it or not. You're up in this name. You're in this name for thousands of percentage points.

The problem, what makes it harder, normally when you have a stock that goes up this much, you say to yourself, OK, it's an easy sale because the valuation has caught up with the fundamentals. Oh, look, now it's outdone its fundamentals unfortunately nvidia doesn't make it that easy for you it just has not outdone its fundamentals yet it could happen hasn't happened and here's the example that i want to give you in january of 2023 people were saying nvidia is 45 times earnings the average semi is 18 it's too expensive we understand it's fast growing etc etc but, et cetera. But it's up so much. Here's the problem. NVIDIA then returned 239 percent for the remainder of 2023. It's up another 93 percent this year. So cumulatively, it's up 540 percent since January of 2023. The problem now is the stock is trading at a lower multiple. It's 34

times earnings. So it's really a difficult stock to be long. I say that tongue in cheek because, of course, it's one of the most rewarding names in the history of the stock market. But it doesn't get easier just because it's gone up. It doesn't make it simpler to sell. So it's well set up for you, Stacey, to tell us about your own view of the setup. As Josh points out, there's a lot going into this, a lot at stake, and maybe a lot to live up to. How do you see it? Look, I think it's going to be fine. Maybe that's being a little too blasé, but I can't imagine that anybody's going to come off of this print

feeling more bearish about the opportunity in front of them than they felt going into it. There's no way you're going to feel worse. You're going to feel better about it. I'm getting questions from clients on, you know, Blackwell's coming. Could there be like a bit of a delay or an air pocket in front of that if customers push out? And I guess it's possible, although I do think that there's enough pent up demand to cover over that if it were to happen. But even if it did, let's say that they have a bit of an air pocket because people are waiting for Blackwell.

Doesn't that dip get bought like hand over fist? It would just make next year look much, much better. And I think next year is going to look great anyways. I still think that this is a stock that you have to own. It has its ups and its downs. You sometimes need a strong stomach with it. But as the chart that Josh just showed, like, you kind of have to be there.

If you had these concerns like a year ago, again, you've missed out on 500 points of growth over that period. I think you need to be there. I think you need to be there. Bryn, Stacey makes a great point, which is why there's always that expectation. And we saw it when the stock got down to $750. The buyers come in because they feel like they have to be there, too. I mean, they do. And I think just a couple of what Josh and Stacey said is, I mean, not to be Pollyanna,

but it's just fact, is that the stock is trading at 15% below its five-year PE average. So as Josh was saying, the stock's getting cheaper. Regardless, this quarter will not define NVIDIA one way or another. It's going to be another solid quarter. Jensen's going to come out and he's going to tell all these great stories. They're going to deliver the numbers. I think they're going to validate this.

We're at the beginning of this 10-year shift in the data centers from CPU to GPU, et cetera, and there's going to be a tremendous amount of compute. You can see it with the builders that are building the data centers, with the CapEx being spent from Microsoft, Amazon, Apple, Meta, et cetera. I mean, all roads lead to NVIDIA. There'll be also lots of other winners, but I just still think within the AI play, this one is just the most straightforward play. And these numbers are going to be solid.

I think though, what's interesting is we would like to look at the options market because they typically get it right. And what's amazing is with a, what, $2.3 trillion company, the market is looking for a plus or minus 8% move. So think about that. That's close to a $200 billion plus or minus move for a company.

So I just can't overemphasize the size of that to get that kind of move with a stock this big. But that's what the market's anticipating. It's a great point you make. And Stacey, I know you didn't mean this so literally. However, you did use the words fine and blasé. And let's just say fine and blasé, not necessarily going to be good enough. That's not what I meant, actually. What I meant is everybody is getting like very worked up. And I've had people, oh, this is the,

you know, it's the most important print in history or like whatever it is. I think you need to relax a little bit. I think numbers are going to gonna be fine I think the story is gonna be fine the story is getting stronger not not weaker and and as Josh made the point I made this point you know several times with with you the higher the numbers go on the stock and the more the stock goes up I mean the cheaper it's been in getting it is one of the cheapest if not the cheapest AI plays out there and I don't have to argue with myself, is there actual demand for their products or not? I know that there was demand for their products and probably more than they've been able to supply.

You can look at the CapEx numbers that were just delivered from most of their hyperscale customers recently. Those are going up a ton. You can do the supply chain checks in terms of how much capacity is getting added. You can build to really, really big numbers, even bigger than I think where numbers are currently. I'm not terribly worried about anything around that long-term story. And I can't imagine, like I said, that anybody's going to walk out of this call feeling like that long-term story is impaired in any way.

Wow. Okay. Hey, Stacey, it's Josh. I want to say thank you for the great job you've done with this name over the years. Not only has the stock gotten cheaper, the company has actually gotten more efficient as an operator. This is a company that in 2021, free cash flow margins of 28%. Those are now 51%. This should not be possible. There is no textbook that anyone is studying in any business school that would say that this could even exist. And yet, here we are. EBITDA margins averaged 42%

in 2021, 25% the following year, the tech crash, 53% right now. Again, this should not exist. And the other point I would make is it's not a revenue growth mania type of story. It's actually really interesting. It's an operating income story. Operating income grew from May of 2021 through the last quarter they reported at 103% CAGR. Revenue growth has been great, but only 64%. So they're getting better at being a company. Am I missing something? No, no. So you're right. Revenue is growing a ton. Their spending is going up, and you want that to go up because they need to continue the roadmap. But the spending doesn't need to go up anywhere near as much as the revenue is going. So even with OpEx spending, I can't even remember. I think OpEx is going to be up like

35% this year or something like that. They're still getting a ton of leverage on that. And then the other is the mix has gotten a lot better. So, I mean, the company's doing mid-70s gross margins. That's because now the company gross margins are effectively the margins of their data center business because data center is like 80 percent of the revenue. And so you've got a ton of growth, a very high gross margin revenue that can fall through the bottom line because even when you're growing OPEX, and by the way, they're probably growing OPEX as fast as they can. They probably can't hire people any faster than this. The revenue growth is still growing much faster than that OPEX growth, and it drops through and it gives you those kinds of operating margins. Absolutely.

Hey, Stacey, what about the production ramp of the Hopper product, shortening the lead times so that you don't risk cancellations as people then decide they're just going to wait for Blackwell. Yeah, well, so lead times on Hopper on the H100 have pulled in. And, you know, forget NVIDIA for a minute. Semiconductor investors tend to get nervous when lead times pull in because that's when you do tend to see cancellations if people were ordering more than they needed because lead times were long. In this case, I think as those Hopper lead times have pulled in, I don't think we've seen any sort of broad-based cancellations if people were ordering more than they needed because lead times were long. In this case, I think as those hopper lead times have pulled in, I don't think we've seen any sort of broad-based cancellations. If anything, the demand has been more than sufficient to absorb

that. In fact, there's probably still excess demand versus that supply. They are still constrained, or they were as of last quarter, they were still constrained on the H200, which is sort of the follow-on. And then they'll launch Blackwell at the end of the year. And for any new product that they launch, they're going to be supply-constrained on that. They're going to sell everything that they can make, and they've got all of next year to sell Blackwell. Pricing is going up on that. Content is going up on that. I think it's going to be good. You know, Bryn, I see, you know, Stacy's got a $1,000 price target.

Joe Terranova on Halftime today says it's going to $1,000 tonight. He shares the optimism, obviously obviously that all of you do um what do you think really is though riding on these results for the overall market well i mean it's obviously a bit of it's becoming by the day by the week a bigger size of the queues and the nasdaq i think it actually has a halo effect not on the overall market but on the ai on the ai market i think it shows the durability like how does this affect a Palantir or a Broadcom or a Cloudflare, all these other companies that are competing in different areas. And I think depending on, I think the numbers will be great,

but the narrative that Jensen talks about, which I think will be just exceptional, I think it'll have, I think, a halo effect over these other names that have kind of been, you know, they've sold off like ARM is well off its highs. Palantir, CloudFare, all those stocks are, I think, well off their highs. You can kind of reignite that if the market likes what he's telling. How do you see this, you know, shaping up? As we said at the very top, it's a make or break moment in many people's minds for not only the AI trade, at least in the near term, and maybe for the Nasdaq, too, as technology has led the market back from the April lows. Yeah. So I would hope it's not make or break. One thing that I've been wrong about this year, I thought we had probably seen the best we would see out of the NASDAQ large cap tech trade. And for some of those names, that's been true. But we talked about this internal rotation within the MAC-7. As funny as that sounds, keep in mind, each one of these companies

is large enough to basically be its own sector, if not asset class. And so that's what's kept the NASDAQ where it is, making highs alongside the Dow and the S&P. I don't know if it has to be make or break because one of the things that I try to remind people, if you have a $940 stock, saying you think it goes to $1,000, it's the equivalent of saying a $94 stock is going to go to $100. Nobody on earth would say a $94 stock couldn't get to $100 on great numbers. Now, what complicates things here is the size of the market cap. Last quarter, they reported they crushed the market's expectations, obviously. They added $276 billion in market cap in a single day,

which I think is either a record or tied with the meta big earnings beat. That should not be our expectation, that that's going to be a normal thing that happens every time NVIDIA has a great report. So would I be totally, would I fall out of my chair at $100 or $1.05? Absolutely not. And again, reduce these numbers from $950 to $1,000 to $95 to $100, and this becomes much more feasible.

You know, Stacey, can you sort of take us inside your mind and how you think about ratings and price targets? And, you know, you're almost up against your 1,000. I can see a reiteration, obviously, of an outperform if it's good. But how do you think about price target moves? Yeah, so, I mean, it's a function of two things. It's the earnings, well, three things. The earnings, the multiple, and the horizon, right?

And so like with every quarter, you're sort of moving your horizon outward. And so if you've got growth in those numbers, that can take the, or either way, it can take things up or down. You've got the earnings themselves. And so if those are going up or down, that influences. And then you have the multiple, which is a combination of it. It's the expected growth and it's the narrative and everything else. So, I mean, it sounds trite, but it's some combination of those three factors. Mechanically, like our sort of, you know, framework, Bernstein's framework

is it's supposed to be a relative, a 12-month target pricing kind of relative to the market. So I think in theory, an outperform is supposed to outperform the market by 15% or more, and the underperform is underperform by 15% or more, and the market performance is think in theory now perform so stop perform the market by fifteen percent or more in the underperformers underperform by fifteen percent or more in the market for me in between now in reality that also in implies you have to make a market call to and so we do the best we can i guess but

uh... it really is those three things how do you feel about the earnings in the multiple and and the um... in the right hand so that's you you've said sort of the you know data centers the story right i think you know, data center is the story, right? I think we know that, right? The way that the hyperscalers are spending on that area, over 80% of NVIDIA sales go to cloud data center. Where does that number move? Does it continue to stay as strong as 80 percent? How should I view that as someone watching this stock, watching the fundamentals of this business and where AI demand continues to go? So 80 percent of their revenues are data center. That's not all necessarily like hyperscaler.

I think they said last quarter more than half was like large cloud vendors. And so I don't know exactly how they define that even, but that's kind of where it was. Look, this year, hyper-scale spending is, and you can go look at, you know, I don't know, Google and Meta and Amazon and AWS and Microsoft. And I think their CapEx spend is going up, oh, 50% this year, probably. And look, it'll probably go up next year.

And beyond that, I think we're in a world now where these guys are going to have to spend. Now, there's a longer-term question, which is ultimately there needs to be a return on these investments, right? And so you need to build business models that can eventually drive revenue or save cost or ideally both. And clearly, if it turned out there was no return on these assets, the whole thing would come crumbling down. I don't think that's the case. I think they're already getting returns on it. They clearly have line of sight.

If they're not getting it already to a return on it, they wouldn't be spending the kind of money that they are. That shows some level, I would say, of deep conviction that the opportunity, the revenue opportunities, the business opportunities for them are there. The returns that he's referring to is the spend on compute. And it's hard for me to see just sitting where I sit and talking to people I talk to. It's hard to see that pullback in spending on compute happening right now. There's so much enthusiasm. Silicon Valley-backed startups need to spend a lot on this compute, as do Fortune 500 companies. And it's just like, that's the part of the story that has to hold up. Most of that, interestingly, is outside of

NVIDIA's control. But this is how it always is with component suppliers. And from that perspective, they're not so unique from other great growth stories and semis or software that we've seen before. We really need that demand to stick around. It is somewhat unique, if nothing else, that we think that one particular stock could have such an outsized impact on how the overall market may trade in the days, if not weeks, following this report. Stacey, thank you very much. We'll see what happens. I know we'll talk to you afterwards. I want to kick the markets around for a second with with Bryn and Josh. So, you know, Bryn, we're in the midst of a bit of a sell off. Certainly,

the market rolled a little bit on the release of the Fed minutes were, you know, certainly hawkish. As Steve Leisman said at the very outset of delivering the news of the minutes, he called them outdatedly hawkish. And I think correctly so, right? The point being that these minutes reflect a conversation that was being had at a time where the inflation data that was coming out was hot. Now, obviously, it's cooled since. And it's one of the reasons why the market is where it is today, right around these record highs. How do you see things right now? I would ignore the minutes. You know, it's backward looking, but also they're just looking

at the same data, I think, generally that we're all looking at. And I think ultimately, when I look out over the next six months, to me, the last man standing or the last stat standing within CPI is owner equivalent rents, right? It's a third of CPI. Which is completely made up. Right. Right. And they survey 7,000 people per month and say, how much can you rent your house for? It's absurd. And so I think when you actually look at Zillow and some other indices, which have already rolled over a long time ago, I think there's about a 16 to 18 month lag. I think you are going to see OER come down over the next six months. That could be incredibly deflationary or disinflationary, whatever word you want to use, to the overall number. And I think that's why you're going to see that CPI number come down. And so disregard

those minutes. I wouldn't make too much of them because those minutes will change three months a month from three nuts of three months of not When we have the new data sure I do want to bring a comment to all of you that From David Solomon the Goldman Sachs CEO Josh. I'll get your reaction to this He was speaking at a Boston College CEO Club lunch according to Reuters where he said that he sees zero rate cuts by the end of the year. Zero rate cuts this year by the Fed. Would that be a problem for stocks in any way? I know people suggest, oh, we don't need rate cuts. Economy's strong enough. But if Mr. Solomon's correct, what's that going to mean? So I, as you know, I have been ridiculed for this stance,

but I think the higher rates are actually fueling spending in the economy. I've been one of the people saying that. Rick Reeder is now saying that. Yeah, Rick Reeder. Well, I was saying in November to a lot of derision, but I stand by that. I don't necessarily think lowering rates would somehow lead to this explosion in inflation. I think the amount of spending that's being engendered by the wealth effect from wealthy boomers, or let's just say the top 20 percent of the wealth distribution. These are people with stocks, real estate, houses and now cash balances. All four of those categories just absolutely booming. Look at 401k balances. This thing where we think the Fed does a 25 basis point rate cut and all of a sudden 10 percent of the labor force gets a raise.

That's literally not how it works. Didn't we learn anything from the last couple of years? Overnight rates just do not have that power. And Scott, to answer your question, I would say they don't have that power on the way down either. So I don't think that we need rate cuts. Now, I think you're going to get them because I'm watching some of these private REITs start to blow up. And that stuff's going to be in the headlines now for the next six months. And from a sentiment perspective, you're not going to read

any more Fed minutes about maybe we should tighten when you start to see the negative externalities of commercial real estate portfolios blowing up. That's not going to be the, I promise you, that's not going to be what's in the minutes going forward when they have to start rescuing some of these things. It does show you, if nothing else, that, you know, opinions change somewhat rapidly in the kind of environment we're in. I would just ask you all to recall a conversation that David Solomon had with David Faber, that was not two weeks ago, where he suggested you could get a rate cutter too this year, unless, of course, the data didn't prove that inflation was moving sufficiently back fast enough towards target in which you could stay where we are.

So we'll keep our eyes on all that. We'll track the move in this market throughout the rest of this final stretch, leading up, of course, to NVIDIA. Bryn, thank you. Josh, you're going to stick with us as well. To Christina Partsenevelos now for a look at the biggest names moving into the close. Christina. Well, let's start with Target shares because they're lower after the retailer reported an earnings miss

and year-over-year sales declined of about 3%. Consumers bought fewer everyday goods such as groceries, paper towels, and actually pulled back on discretionary items like apparel and home decor management, pointing to a cautious consumer. And that's why the stock is down over 7% right now. Lululemon announced last night the departure of its product chief, along with an updated organizational structure. UBS slashed the company's price target to $385.

Shares are trading at $297 right now. As it faces more competition from Athleta, Carhartt, and Viore. So again, shares down 8%. Scott? All right, Christina. See you in a bit. Thank you. We're just Viore. So again, shares down 8 percent. Scott. All right, Christina, see you in a bit. Thank you. We're just getting started. Up next, the new Apple. Just a few weeks ago, Josh Brown made a major call claiming that one of the other mega caps is actually the name investors are chasing. Now he reveals it. We'll discuss it, find out how he's navigating the trade, and we'll do it after the break. We're live at the

New York Stock Exchange. You're watching Closing Bell on CNBC. Dow down 253. Welcome back. Amazon has big plans to give Alexa an AI overhaul. Kate Rooney is here with that scoop. I think a scoop that you broke. I did indeed, Scott. Good to see you. Yeah, Amazon is giving Alexa a major AI upgrade this year and will add a monthly subscription to offset some of the costs. This is according to people familiar with Amazon's plans. Those sources telling me Amazon's new version of the now decade old voice assistant coming later this year would potentially position Alexa to better compete with a wave of these new generative AI-powered chatbots from the likes of OpenAI and Google. Sources telling me it's not going to be part

of Amazon's Prime subscription, and the pricing hasn't quite been figured out yet. Amazon was, of course, an early mover in voice-driven assistants back in 2014, but those capabilities really haven't kept up with some of the recent leaps we've seen in AI. Sources do tell me that voice-based chatbots from OpenAI and Google recently have increased some of the pressure on the Alexa division internally at Amazon, which did announce significant layoffs last November. Amazon declined to comment on the plans, but tells us Alexa is still a priority. Andy Jassy addressed it today at the annual shareholder meeting, saying their vision is to, quote, build the

world's best personal assistant, pointed to the 500 million Alexa-enabled devices out there. As Jassy put it, quote, we have a significant chance to be a leader here, and says they're in the process of building a more expansive AI model to run under Alexa. Scott, back to you. Speaking of the meeting, just real quick, investors rejecting all 14 outside proposals. Any of that a surprise? No, widely expected. These range from things like ESG to more oversight in terms of their labor practices. That was sort of the consensus going into the meeting. I think some of the more interesting stuff we got out of it was a little bit of the color from Andy Jassy, including that focus on Alexa. He talked about AWS. It kind of repeated what he talked about in the shareholder letter. But those votes,

at least, not necessarily a surprise, Scott. I got it. All right. Kate, thank you. Good scoop as well. Of course, Kate Rooney joining us here on Closing Belt. Josh Brown is still with us. He is, of course, the person who said of Amazon, it is the new Apple. You said that a few weeks back. What do you mean? This was this was the name. So Apple had this like massive run when people realized that, oh, actually, what what investors are prioritizing this year is stability of cash flow and the ability to either buy back or pay a dividend or both shareholder yield. And Apple had those things in spades. And as a result, it was the stock to own.

This year, I think that story belongs to Amazon. They've been growing revenue at a 9% CAGR, really back to the third quarter of 2021. They have now completely lapped all of the issues with the pandemic and the excess spending. We don't have to rehash that whole thing. Now you've got a stock trading at a 48 RSI, not quite overbought. It's 5% below all-time highs, not 52-week highs. This is it. I think it's under-owned. I know it's a large stock. It sounds silly to say, but I think it's under-owned by both growth managers and large-cap managers in general

because of what a difficult time they had coming out of the pandemic. And that's the thing that I think is about to change. So it's not crazy overbought, 17 percent above its 200 day. That 200 day obviously is rising. And I think it can consolidate here for a little while. But ultimately, this name looks like it wants 250. You know, it went through a pretty good period of underperformance. Yeah. Right. Yeah. Almost three full years. And there is this idea, it's pretty remarkable to me too, that of the mega caps that got really leaner, got really meaner, and they've been rewarded.

And I mean meaner from a stock performance, right? The meta, obviously, worst year in the stock's history in 22, best year in the stock's history in 23. Why. Best year in the stock's history in 23. Why? Gerstner told them to get fit and they did. Yeah. And Amazon needed to do that too. It was an interesting lift that Jassy had to do when Bezos left.

Yeah. And I think largely people would acknowledge now that this has been accomplished. There would be people that could quibble about why didn't they recognize it before Met meta did etc but that stuff's not important if you're a long-term investor what is important is that this company is now growing profits at a faster rate and most of its its peers in in mega cap tech like this is a this is not my opinion it's not how i feel this is what's happening right now they and arguably because of the structure of the company, they have more levers to pull than any of their other peers in order to keep that up. Now, Alexa is exciting. It's not going to move the needle. It's not that important. But it's important because they continue to innovate. The bigger story, though, will be AWS. I think they have the right

approach to the generative AI era. Bedrock AI, which is the AWS AI environment, is going to be, open source is the wrong word, it's going to be bring your own large language model, bring your own programs, and we're going to host all of it. This is a hundred billion dollar run rate business inside of Amazon. It's the primary engine of both the earnings and the growth rate, and I think they have it right for the era. They're not worried so much about launching their own LLM that's going to compete with 50 others. Instead, they're going to focus on making sure that their environment is the environment people want to keep paying for more and more compute as different applications are built. I like that bet. If you're an investor,

you don't have to bet on someone else's technology. You can just bet someone's going to win. It's been great having you for the first 30. That's Josh Brown of Ritholtz Wealth joining us here. Thank you for that. Up next, another big guest, Light Street Capital's Glenn Kacher. He is back. Tell us which names he's betting on right now

and where he sees his so-called AI5 stocks heading from here. It's just after this break. We're back on closing bell. The Nasdaq pulling back after hitting a record high earlier today. Investors, of course, bracing for NVIDIA earnings tonight in overtime and concerns grow about the sustainability of this AI driven rally. Joining us now is Glenn Kacher. He is the founder and CIO of Light Street Capital. It's good to see you again. Welcome back. I'm curious. Are you are you nervous? Are you confident? How would you describe yourself ahead of NVIDIA as a shareholder?

Yeah, we're feeling really confident. We've been investors in NVIDIA steadily since the fall of 2022. And we saw the beginning of this AI build out happening then. And you know what, Scott, it's still going on at a very rapid pace. Right now, it's pretty clear that we're experiencing a period where demand is still greatly outstripping supply and you know I think you see in these build outs when you when when the architecture of computing kind of changes every 20 or so years you see a very rapid kind of five-year investment cycle happening and then ultimately kind of a 20-year cycle that we're continued to rebuild and replace over a trillion

dollars of data center infrastructure. So as the cycle ages, we're going to see some ups and downs, surely. But right now, we think we're in the really sweet part of that investment cycle. I think most people would agree with you, which is why it's not a great surprise. And that leads to my question of how much do you think is already in the stock, given what you said and the broad consensus that your view is the correct one? Right. Well, look, I think you'll be surprised. You know, here's a company that's the most prominent display of AI. They're greatly leading the race here with over, let's say, 85-90% market share, I think is to be conservative. And it's roughly at a NASDAQ kind of multiple, and it trades at well less than a half PE to growth ratio. And it's one of the greatest investment cycles we've seen

since the beginning of the internet. So we don't focus on one-day trading and short-term profits, but we look at this and say, gosh, it looks really tasty over the next several years. I mean, if you look out to 2025 numbers, it's pretty clear, should be pretty clear that those need to come up quite a bit. You know, we'll expect tonight things to, you know, they'll probably beat the Wall Street number by a couple billion. That'll probably lead to a raise

of next quarter's expectations by a couple billion. And if you look out the next year, you know, I think numbers are way too low for this company. You know, it was an interesting week, obviously, on the AI front. We got stuff from Alphabet and Microsoft and spoke with one investor yesterday who almost described, you know, what Microsoft had to deliver this week as a non-event. It's somewhat disappointing. Ho-hum. How would you view Microsoft versus Alphabet, considering you own both? One sort of controlled the narrative, still figures to be in the leadership seat.

The other stock has done, and that's the other being Alphabet, has done quite well in its own right and has made it clear that it's not going anywhere. Yeah both companies are in similar positions where they're trying to build more software solutions for their customers and get those AI revenues going but you know there's a misperception always I think in the investment community that things happen very fast in technology. It takes years for, you know, to build out great pieces of software, to install them and to tune them and to get them running on the customer's

data and then to get the returns from them. And so I think both companies in their respective areas are in this period and some investors will lose patience. That's the tension of investors in this segment that, you know, they want to see those revenues today, but it takes time. And, you know, I think both companies are doing a pretty good job. I wouldn't call their development ho-hum. And, you know, we've seen CapEx over estimates for 2024 up 50% for Microsoft as they're building for the demand of their customer base to use AI. And the combination of Meta, Google, Amazon, and Microsoft, they're going to spend almost $200 billion in 2024. And they're going to spend almost 50% as a group, 45% more than they thought they were

going to spend back just a year and a half ago. So there's an investment period. You have to keep patience during that period in order to make the money over the long term from this amazing trend that we're seeing. So do you still think that mega cap tech is going to be the outperformer? Absolutely. And, you know, if you look at it, there are only a handful of companies that have the capital, the customers and the customers customers' data, and that gravity that

that data brings in order to provide these AI solutions. They aren't cheap. And if you look, if you listen to each conference, quarterly conference call, you'll hear Mark Zuckerberg from Facebook, Sundar from Google, Satya from Microsoft, Elon from Tesla, of course, Larry Ellison from Oracle, publicly appealing to Jensen, the CEO of NVIDIA, to get more chips. The NVIDIA chip is the most strategic piece of the AI solution. And so I see NVIDIA being the biggest winner from the infrastructure build-out, and then I see those hyperscaler companies and the very large internet platforms as being the only ones that can invest at a scale to really bring these solutions to their large customer base. You do own AMD, though, so, I mean, you must have some level of confidence that, you know, albeit NVIDIA has such a head start or a large lead,

but AMD has got some ideas of its own in terms of the kind of chip production that they can do. Yeah, they're going to be a second source. Everyone needs a second source, right? We also own Broadcom. We also own TSMC that makes the chips for everybody except, you know, Intel and Samsung pretty much and the analog players. But all the digital leading edge chips are made by TSMC. And you look at a stock like TSMC growing, an incredible stock to own, an absolute gift to investors. And we really see great opportunities across that infrastructure category.

We'll talk to you soon. I appreciate your time very much. Nice to see you again. It's Glenn Kacher. Great to see you. All right. Take care. Coming up, shares of the vaccine makers are popping in today's session. We're going to tell you what's behind those moves when closing bell comes back after this quick break. We're back watching the shares of vaccine makers today. As you can see, they are surging. Angelica Peebles is here with those details. What's moving them today? Hey, Scott. Yeah, we are watching shares of Moderna, Pfizer and the other vaccine makers. These are all higher today after two new confirmed cases of bird flu in humans.

Michigan today is now reporting a case in a farm worker. And this is the second case in the U.S. linked to the dairy cow outbreak and the third ever in the country. Earlier today, Australia confirmed its first case of bird flu in humans. Now, the CDC today is saying that the threat to humans is still very low. But we checked in with the companies and they are keeping an eye on this. Moderna is already studying a pandemic flu vaccine and CureVac is testing a shot specifically for bird flu. And we'll keep an eye out for updates. Now, Pfizer today is also revealing another one point five billion dollars

in cost cuts. And that's in addition to the four4 billion it announced last fall. This latest round will scale back manufacturing that it increased during the pandemic. And so, again, we'll keep an eye on what they're doing there. But they are pulling back after that big increase. Scott? All right. Understood. Angelica, thank you. Angelica, people still ahead. It's not just NVIDIA that investors will be watching in overtime. Remember Snowflake? Well, its results hit the tape top of the hour as well. We're going to bring you a rundown of what to watch for coming up. Bell's coming right back. Up next, we're getting you set up for NVIDIA earnings in OT.

The numbers hitting the tape around 420 Eastern. The key metrics to look out for. We will tell you what they are when we take you inside the Market Zone next. We're in the closing bell Market Zone now. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Sima Modi looking at what to expect from Snowflake when it reports an overtime today. Of course, the countdown to NVIDIA, the earnings, that's on Christina Partsenevelos' back with what to watch for there when those numbers hit the tape. Mike, you first, your thoughts. Yeah, I mean, the reaction algorithms are already preset. Whatever

this number is, if the whisper, in fact, is more than 10% beat on EPS for NVIDIA, so be it. I think aside from that, what is interesting today is a bit of a reminder of some of the other undercurrents. The market's been holding together fine as you've had some profit taking below the surface. But the response of the Fed minutes, this hint of hawkishness, maybe Fed financial conditions aren't tight enough. We know it's old news. We know that the Fed speak since then has been more benign. But there is some worry evident in the consumer cyclicals again. So that, to me, has been the issue.

The market wants to take it as that soft landing stuff. And the question is, can we take it for granted that that's the case? So I've been saying I'm not sure the 5% pullback in April was perfectly great to launch us much higher. We'll see what NVIDIA has to say about that. Target, you know, among the blowups today, Lulu, Ugly. William Sonoma traded down off a pretty good number, so we'll see. Okay, Sima Modi, what about Snowflake? What should we watch out for?

Well, Scott, Snowflake's weaker-than-expected guide for 2025 sent the stock down sharply. So expectations have come down, which shares off about 27% in the last three months. Investors will want an update from the new CEO, Sridhar Ramaswamy, a former Google executive, on his long-term vision following reports that the company is looking to acquire a smaller AI company, Recca AI, and what the cloud data management company is doing to capture more demand from the C-suite with the generative AI products it's been working on. Citi is cautiously positive with a buy rating at $240 price target. Wedbush's target is $210. You'll see the stock is trading at $163 a share.

Scott? All right, Seema, we shall see. Seema Modi. All right. You feel like this is your Super Bowl or what? OK, maybe, maybe. The chip world is exciting and this is going to add to it. But I think with NVIDIA, really, the big question, and Mike alluded to it, is the magnitude of the earnings beat in guides. So for the past four quarters in 2023, NVIDIA actually beat revenue by an average of 20 percent.

So, of course, maintaining that momentum is going to be hard. Expectations are around $24.6 billion in revenues for Q1. Obviously, the boogie a lot higher, but that's still 230% higher than just last year alone. The drivers, you talked about it, promised spending from hyperscalers. AMD raising its AI revenue guidance recently, which is a good sign for NVIDIA. Taiwan data center exports were high in Q1, and that highly correlates with NVIDIA. But we can't ignore anticipation for this name is high with the run-up in the stock. And for the guide to come in at least a billion dollars higher than $26.6 billion.

So the whisper number, buy side boogie, whatever you want to call it, is $28 billion for the guide. If that doesn't happen, some will take risk off the table. But I'd like our viewers to just remember that Jensen Wang, the CEO, is going to be giving a speech in early June at a keynote at Computex. Expect it to make news there. And then you have the launch of the next generation chip in just a few quarters, which helps this AI story stay intact for NVIDIA, even if they don't guide $1 billion over and $2 billion over the quarter in revenues. I don't know if you heard Stacey Raskin say he's really not worried. He's pretty optimistic about what still lies ahead, right?

Yeah, the blasé. Yeah. We shall see. Christina, thank you. And we'll see you, of course, in overtime, Christina Partsinevola. I mean, if you've been a semiconductor analyst for decades and your problems usually are these like slices of gross margin and this vastly cyclical, you know, dynamics in memory chips and all this stuff. I mean, the runway of NVIDIA looks like it's a cakewalk, right? Because it's just nothing but piling on demand on top of demand.

So I get why Stacey would feel that way, even if the market has been fixated on this and has added a couple trillion dollars in value to the business over the last couple of years. So we had a late-day reminder, and you alluded to it today, of the issue that hangs over everything, and it's the Fed and it's rates, inflation, and this and that. Now we'll see with NVIDIA whether it gets our focus back on the ball

of why this market is where it is, why we were able to come back from the April low led by technology and these themes of AI being so prevalent in a week in which you've heard from Alphabet and Microsoft. And here you go now with NVIDIA. And it really does sort of finish up this chapter of the story.

Obviously, you've heard from every other company that's been feeding into this theme. So I do think that whether it goes up or down and has legs is one thing. What you should remember is Jensen Huang, as Christina was saying, is going to speak at these conferences. But he always kind of pulls you back to the long-term story. And he always sort of keeps his eye on the long-term vision. This company's been public since 1999. They've seen a lot of cycles.

A lot of times they felt like they didn't have it in the bag. So I don't think he's going to take it much for granted, necessarily. Well, the moment of truth, if you will, is nearly upon us. The bell marking that, about 20 after the hour, but you've got a great setup coming with Morgan and John at OT.