Closing Bell - Closing Bell: Navigating’s Apple’s Big Event 6/10/24

Episode Date: June 10, 2024

Today’s Worldwide Developer’s Conference could be one of the most significant moments in the history of Apple. Our all-star panel of Steve Kovach, Alex Kantrowitz, Malcolm Ethridge and Ayako Yoshioka break down all of the biggest headlines. Plus, star analyst Dan Ives tells us how Apple’s newly announced partnership with OpenAi could impact the stock in the long run. And, Lauren Goodwin from New York Life Investments tells us why she thinks the “Fed is on a tightrope” ahead of Wednesday’s decision. 

Guys, thanks so much. Welcome to Closing Bell. I'm Scott Wobner, live today from Apple Park in Cupertino, California. This make-or-break hour begins with what some have suggested is a make-or-break moment for Apple and its place in the AI arms race. The Developers Conference, a chance for the company to unveil those ambitions today, try and keep up with competitors who've already revealed theirs to great fanfare, as you know. We'll ask our experts and shareholders over this final stretch whether they achieved that goal today and what it means for the stock, most importantly, going forward.

Interesting to note, Apple shares have moved lower during the presentation today. Moving around a bit, we'll track it down a little bit more now than 2%. We'll show you the scorecard as well with 60 minutes to go in regulation. There's not a ton of movement in the majors ahead of the CPI report and the Fed decision coming this Wednesday. We are on closing high watch, though, on both the S&P 500 and the Nasdaq. One of the reasons why the Nasdaq doing well. Take a look at CrowdStrike today at better than 9 percent. That's the standout on news.

It's going to enter the S&P 500. NVIDIA, well, it's up two. It's 10 for one stock split taking effect today. We'll see what that means over the near term for that stock. Shares getting a little bit of a bump. Does take us to our talk of the tape. One of the most significant moments in the history of Apple, called exactly that by star analyst Dan Ives.

He will join us in just a moment to assess what happened here today and whether it lived up to those great expectations surrounding this event. For now, let's bring in CNBC tech correspondent Steve Kovac. He's here with me at Apple Park, along with big technologies Alex Kantrowitz, also here, as you can see. Malcolm Etheridge, he owns Apple shares and, like Alex, is a CNBC contributor. And Ayako Yoshioka is with the Wealth Enhancement Group. It's great to have everybody. Steve, I'll turn to you because we talked to you going in. Now we're coming out. Yeah, and going in, we were talking, is Apple behind in artificial intelligence?

Everyone said yes, of course it is. Coming out, they've caught up. Basically, a lot of what we saw is stuff that we've seen from their competitors. I'm reminded so much of Microsoft's marquee AI product called Copilot, which they sell within their own ecosystem on Windows and so forth and Office apps and the like. This is doing the same thing, but within the Apple ecosystem. It's doing it across mail and images, image generation,

writing emails for you. Siri is more natural language. These are all things that we've seen over the last 18 months or so from other companies. Now Apple is bringing it in. We can't forget the ChatGPT OpenAI partnership. Unclear what the financial nature of that partnership is, but they did get the name check. It will be an optional feature within all this,

what they're calling Apple intelligence ecosystem. And then one more thing that's super interesting to me, a lot of the features they showed today were running on Apple's first-party apps. Those are the apps that come when you open up your iPhone for the first time, the apps that Apple made. But they're opening up developer tools so third-party apps can play into that as well. That is where I think the key feature is to unlock a lot of this. See what all the developers are here, there are thousands of developers registered to learn the latest and greatest from Apple. What they do with this is going to be almost more important than

what we saw from Apple itself. One of the great mysteries today, of course, well, it was no mystery that Sam Altman himself of OpenAI was on campus because we did see photos of him earlier and we showed it to all of you earlier. Some suggestion, is Altman going to be on stage at some point no he was not at the end of the day but as you allude to open AI was all over today's announcement and it is going to be all over their ambitions Apple intelligence just all over Apple called it the best AI product out there which is why they tapped into it first but they are opening up to others so we heard these discussions perhaps happening with Google perhaps happening with Baidu over in China. I would imagine some of those deals will be locked up by the time this software launches in the fall. The question,

Alex, becomes, is this what happened today enough? Steve said it's catch up. They've caught up. Is it enough to get people to get a new iPhone? Because at the end of the day, that's all that really matters. Yeah, that's all that really matters yeah that's a big question I agree that it's ketchup I thought this was cool didn't blow me away and throughout this entire run-up to WWDC we've always known that the ChatGPT app is available on your iPhone you don't necessarily need Siri to come in and say hey do you want to use ChatGPT and one of the issues with ChatGPT is so many people have tried it and then they forget exactly what the use cases are that they want to use it for. And so they back off.

You know, they had a surge of users in the beginning, 100 million users in the first two months. Now, latest public number, we have 100 million users. Maybe it's up to 200 million. So it's really going to be incumbent upon Apple to give people who are using its latest iPhones the prompts to say, hey, you want to use AI here and really make it something that they're going to want to put into place in their day-to-day lives. And then it's going to be up to the early adopters, the people who are on the 15 Pro, people who are going to get the next series of iPhones to really jump in. And the word of mouth is going to be so important on this, because if you're sitting at a table at a restaurant or you're making plans with someone and they're using

Apple's Apple intelligence and you can't use it and it works, then you're going to want to upgrade. But if they mess this product up or if this is like many products we've seen, a lot more marketing than it is actual useful integrations in the real life, that's going to make Apple's attempt to turn this into sales a real struggle. That's what I worry about. And that's the key here. They are hardware-gating this, which means you have to have the latest and greatest hardware in order to even use all those features that they're talking about. I'll tell you a story.

I bought a MacBook in the fall of 2021. It will be able to get all those features. A year later, I bought a new iPhone, the iPhone 14 Pro. That will not. That will not. So if I'm excited, if I want to use all these ai features i got to go either right now go out there and buy a 15 pro or wait until september for the 16 and buy that and so the question is is it just gonna be nerds like me going out there and buying it or normal people

gonna see what see what we saw today and say oh my goodness i need that oh my goodness i'm on iphone 12 i need to upgrade now you sounded a, modestly underwhelmed. I'm curious, is there something that you wished had happened today that you were hoping would that didn't? Well, it's difficult for Apple, right? Because you have a billion plus people using these iPhones and you can't put too much technology into them right away. You're going to risk alienating your core user base, right? This is cutting-edge technology. You have to jump in slowly, but show you're serious. I would have liked to have seen a little bit more risk from Apple, right? I mean, some of the things I liked,

right? They're going to allow you to make images of people in your contacts. Like, that could go wrong, but they're going ahead and doing it. I would have liked to have seen a little bit more vision setting, maybe bringing Sam Altman on stage, right? If he's the best at developing these models, why don't he's there in the audience? Why don't you have him in and talk about how you're going to co-develop? Does that really matter whether Altman himself was physically on stage if he is his aura and his company are actually in the devices themselves, so to speak? I would say so because this is a vision setting event, right? What this does is it opens up Apple's devices

to be able to start piping in the latest iterations of generative AI. And all Silicon Valley, or a good chunk of it right now, is betting that within the next 18 months that we're going to see a step change improvement over what we have now. And so you bring Sam Altman, not because you're doing the partnership, but because he's the one that got everybody on board with ChatGPT in the first place. And he's going to signal to everybody watching this event that Apple is not

going to be the one that's going to wait and watch, that this is the moment. That being said, like, I don't think it killed the event. But yeah, I would say modestly underwhelmed is probably the way I feel. But then again, we have a lot of runway to go. There's a lot of room for this to develop over time. Shares have been obviously on the move, Malcolm. As you and Aya know, over the last month, the last three months, they're modestly positive on the year. So they had already moved up in anticipation of what might happen here today as a shareholder. What's your takeaway? Yeah, so far, this does definitely look like the buy the rumor, sell the news kind of momentum, right? For the last month, I think the shares have gained about 5%, right? That was basically all the breadcrumbs that Apple had been teasing out everywhere on the internet, telling people what's to come, folks buying into that and buying those rumors.

And today, maybe we see folks selling the news. I think similar to what you guys started out talking about, this is great for Apple to basically say to the world, we are here now. We have answered the call. You guys have been asking us for a year. What are you going to do, too? And this just gets them into the discussion now. But there is definitely a lot more work to be done. So I think they've shown they're taking it seriously. They hear you and they're answering by partnering with ChatGPT and others who are basically their competitors in all the internally to integrate into iOS 20 or 21 or whatever iteration it is. And so I think that is enough to say we take this seriously. Tim Cook probably saw what happened at Google and said, I don't want any of that. I don't want folks doubting us and our ability to stay at the forefront. And so they've answered that question. I'm really concerned about what comes next, but I do at least see somewhat a path to monetizing Apple intelligence and making it so

sticky and so prevalent in my life that I'm willing to pay for a monthly subscription, which obviously goes to the bottom line of services revenue going forward. Aya, what's your takeaway? You know, similarly, I think investors aren't necessarily wowed by these announcements today from WWDC. I think a lot of it was expected. And I agree that a lot of the changes that are going to occur are going to be gradual and, you know, requires a lot of consumer behavioral change in terms of how they're using their phone and, their phone and what use cases are available to them. So I think it's going to take a while. I think investors were hoping for a little bit more of a reason to upgrade.

It's been difficult to see those numbers kind of increase in terms of how many iPhones continue to be iPhone 12 or older. I think it's over 40 percent now. And so investors want to see people upgrading so that the average sales growth of the iPhone ticks up a little bit. And I think people were hoping that AI would provide that. It's going to give, you know, to some degree an ease of use for some who can utilize these new features and an enhancement of the user experience as well. That's really what they're betting on, that the new features that they've rolled out will enhance the experience so much that you'll want to upgrade to one of the new phones, a 15 Pro or higher. Exactly. That is exactly the thing they're doing here. I will also say, you know, we're talking

about catch-up, we're talking about catch-up. We're talking about underwhelming. The stock price is reflecting that as well, you could argue. The other thing that I would also note is that they're trying to differentiate themselves with is the privacy angle. They started off, before they even went through the slew of AI features, the Apple execs went over how it's more private than some of them. They say there's guarantees that, you know, anything we do send to the cloud is going to remain private. We won't even know it's more private than some of them they say there's guarantees that you know anything we do send to the cloud is going to remain private we won't even know it's your data so maybe some people are waiting for that maybe some people who are worried about using some of the other competing ai products because they don't want their data trained on stuff i don't know if that's

true or necessarily a significant amount of people but that is that does seem to be one of the key selling points saying hey this is how we're different. And again, to use Tim Cook's own words, breaking new ground in artificial intelligence, we have not seen that from the competition. So if you are worried about using that data or your data being used to train AI, here you go, here's your option. Look, that was one of the first things that you said to me when we sat down, the privacy angle sort of is the differentiator in and of itself in a world where we're hearing all sorts of issues around lack thereof. Here they have a way to enhance that.

Or even just what we've seen, legal action, we've seen the Scarlett Johansson situation with OpenAI. We've seen the New York Times sue OpenAI and Microsoft. It seems like Apple is taking a much different approach from those issues, from those copyright issues, from those privacy issues, and really highlighting that as a key feature, why you should be using this instead of a competitor. I thought it was interesting too, Alex, the pricing model, if you will, which is no price, that it's free. If you have an open ChatGPT account already, you can integrate it here. If you don't, as long as you have an Apple account,

you're good. You can upgrade to the new operating system come the fall. You'll get all of these features as well at no additional cost. If you have the newest phone. If you have the newest phone. Yeah, and that's it. Well, that means, of course,

you've already upgraded to the phone. The whole thing, it's the entire phone. And by the way, that's what I liked about today, is that it's not just a side feature, right? It is the operating system. They want you to operate the iPhone with your voice. There was a moment in the presentation, kind of one of the funnier moments, but also one that I really enjoyed where it's like, text my wife that, oh no, it's play the podcast my wife sent me last week. This is like a real world interaction that a lot of people have. You spend hours like,

where's that podcast? Or you never listened to it before. And so by making this free, what they're saying is this device is going to be an AI device in its core, right? And so if you're going to buy the new device, you're going to get that. They baked it deeply into the operating system, and I view that as a big positive. You know, Malcolm, we're also sitting here on a day where we could get a new closing high on the NASDAQ, powered really by what NVIDIA has done lately. But Apple, too. I said at the outset in the first question to you that Apple shares have gotten off the mat. They've woken up after a long sideways move. How do you feel about this going forward here in terms of the tech trade overall and these two stocks that have primarily

powered it? Yeah, I am. I am concerned that we're going to see some give back not only today, but going forward with Apple shares now that we've actually gotten the news, right? You've heard basically all of us are not super thrilled and out beating the drum saying this is the moment for Apple. And I'm concerned that they're going to continue to fall behind. I think there will be some give back in what they've actually seen as the run up into this event. And I think that beyond the next two quarters, right, we will see some upgrading in the next iPhone cycle and we'll see some upgrading throughout the rest of this year into the holiday season. But beyond that, I'm concerned about what Apple can actually do to just excite shareholders and make sure that this name remains a must-hold in all of our portfolios, right?

Today, it's still a must-hold. It's powering the mega caps along with NVIDIA, like you said. But once upon a time, Disney was a must-hold. AT&T was a must-hold. Cisco even was the biggest, baddest must-hold in any portfolio. And right now, Apple is in danger of becoming forgotten about tech leader in the same way. And so I just really want to see them pivot away from we're just focused on these pieces of hardware that you already know and love, and giving us something that we can hang our hats on as shareholders to say that is what's

going to power Apple into dominance for the next five to 10 years. You've heard me make the case before about how pushing the envelope with Apple Financial, right, a place where they spent a ton of money and a ton of manpower developing, is the next frontier for Apple, in my opinion. They also have the opportunity in health care. We know they've turned their back on automotive. There aren't a lot of places for them to go to make a meaningful impact to that revenue mix. But I definitely think something has to happen in the next couple of quarters before we look and go, OK, another quarter of declining revenue from iPhone sales. I'm going to move on to whatever is the other crowd strike, for example, becomes the next must hold. Alex, the forgotten about. I'm sorry, Malcolm.

Alex, the forgotten about tech leader, as Malcolm just said, that's what this company has been reduced to. They would certainly argue otherwise and suggest that what happened not too far from here within this complex today certainly flies in the face of that kind of commentary. Yeah, absolutely. Look, I hear what Malcolm is saying, right? Apple's turned in five of the last six quarters negative revenue, right? That matters. They have slowdowns in China that they're still trying to overcome. And this is a potential computing shift that they're going to have to navigate.

So when you look at the Amazons or the Microsofts or even the Google, they have the AI that they can sell to others through their cloud platforms. When you look at NVIDIA, they have the chips and the software to train these models that they can sell to others through their cloud platforms. When you look at Nvidia, they have the chips and the software to train these models that they can sell to others. Apple is making the, I would say the biggest bet that AI is gonna be relevant to consumers. It's unproven at this point. If it nails it, that's gonna solidify its lead

in the smartphone market and maybe it can, we won't be talking about five or the six quarters of revenue decline. Of course, there was a lot of COVID upgrades that were happening, so it has tough comps. But this is, I mean, I think that Apple putting all the stakes on this moment makes a lot of sense. If they can nail it, the upside is, I wouldn't say unlimited, but like it's way up there. And if they can't nail it, then the concerns that Malcolm is talking about, they materialize. And you know the history, Steve, better than anybody.

For a company that is never first, but they are usually better. Right. Once they finally figure it out and they're hoping that this is going to be another iteration of that. Yeah, and right now we just have what they say it's going to be able to do. It's going to take a few more months for us to get our hands on it, for people to evaluate and test it to make sure it lives up to that promise. If you're in Malcolm's camp, though, I just want to talk about what's on the calendar for the rest of the year for Apple. This was the catalyst moment folks were looking for, hoping to be just blown away by some artificial intelligence announcement. It appears

that they're not. So what's coming up next? Well, we got the new iPhone. Perhaps that has some extra artificial intelligence features that weren't shown off here. Maybe they're going to say, hey, we got some really exclusive, amazing stuff that's only going to be available in this new model, the 16. And then beyond that, there's not much else going on. I mean, the Vision Pro is opening up to some more countries. We know that's not a big seller

and it's probably not going to be a big seller in those markets that it's coming to this summer. So there's not much left on the calendar this year if you're trying to hang your hat on. OK, it's coming. The next big innovation thing is coming. This was it. This was today. And we'll see what the effects are. Aya, I'll give you the last word. Thanks, Scott. You know, in terms of Apple, we still have the $110 billion share repurchase that is going on with Apple. And I think that could keep the stock sort of, you know, at least neutral for the rest of the year. And we do have that

September iPhone event that I think will be a catalyst for the name. It's tough to fight against Apple, but, you know, growth has been slowing and the valuation is a little high. So having a little bit of retrenchment might not be a bad idea. All right. We will leave it there. We'll see shares down about one and a half percent, just shy of one hundred ninety four dollars. It's been fun. Thanks so much, Steve Kovac, Alex Kantrowicz as well. I am Malcolm. We'll see you again soon. I'm sure of that. We are having some breaking news now out of the FDA on Eli Lilly's Alzheimer's drug. Angelica Peebles joins us now with that news. Angelica, what have we learned? Hey, Scott, FDA advisors just now voting unanimously that Eli Lilly's Alzheimer's drug is effective for early Alzheimer's disease. And there was a lot of talk about who should benefit

from this drug. Eli Lilly used some specific brain imaging to determine exactly how severe patients were in their disease. But the FDA advisors today saying that they support broad use of this drug for early disease and that requiring that specific imaging could provide or could actually limit who could benefit from this drug. There is another vote coming up on the safety of this drug. So we're going to tune into that and we'll be more. We'll be back with more on that. Scott. All right. You let us know, Angelica. Thank you, Angelica Peebles. Let's send it now to Seema Modi for a look at the biggest names moving into the close. Seema. It's got less than 40 minutes. A ruling in a California appeals court is sending some gig stocks lower Uber, Lyft and DoorDash all in the red after Uber and Postmates lost their challenge to the state's gig worker law.

Now, an Uber spokesperson telling CNBC the decision does not change the status of drivers due to California's Prop 22 law, you'll see lift down about 2.8%. Switching focus to shares of Southwest, climbing as activist hedge fund Elliott Management takes a $1.9 billion stake. Elliott will push for leadership changes at the carrier, including the ouster of its CEO and chairman. The airline has lagged in the past year, down just about 2%, but up 7.5 right now, Scott. Seema, thanks. Seema Modi. We're just getting started here from Apple Park.

Up next, more from the Developers Conference today. Star analyst Dan Ives, he told you what he hoped would happen going into today's big event. Now he is back to tell us what he thinks about what actually did happen. We'll talk to him in just a moment. And later, New York Life Investments, Lauren Goodwin is here with what she's forecasting for stocks ahead of the Fed decision this week. Don't forget about that. The CPI report is looming large as well. We are live in Cupertino today and you're watching Closing Bell on CNBC. We're back at Apple Park in Cupertino today.

The company revealing its highly anticipated partnership with OpenAI moments ago at the Developers Conference. For reaction to that and the other key announcements made today, let's bring back in star Wedbush analyst Dan Ives. Thanks for being back with us. You said going in that this was one of the most important moments in the history of this company, perhaps one of the top three moments. Did it live up to the hype? I think it was a home run. I mean, ultimately, they delivered on every item

that they needed to in terms of open AI, in terms of the privacy. And really, essentially what they're doing is they're laying out the stack for developers. The only way that they're going to tap into that data is going through Apple. So to me, this is the start of what's going to be an AI-driven, I think, super cycle from 16 to 17. And most importantly, Scott,

services. I think this is going to be really a game changer from a services perspective. You call it that, that it changed. By the way, here's the note. I mean, you published literally a new note before you sat down with us. So maybe a lot of it was locked and loaded and ready to go. You call it a game changer. You say that the company is not getting any credit for its AI monetization. Isn't that rightfully so? Isn't this a bit of a show me story at this point? Oh, no. And look, but Apple has been there before from a show me perspective. But if you look, you have 270 million. I think this is the most important thing. 270 million of 1.5 billion iPhones have not upgraded in four plus years. Pen up demands there. And now they're laying the yellow brick road to monetization for AI.

Look, we could talk about godfather of AI, Jensen, NVIDIA, and the Dell and Microsoft and everything that we see in this 1995 AI moment. But from a consumer perspective, 25% of the world, in our opinion, when they access AI, it's going to be through an Apple device. Let me ask you this. Why has the upgrade cycle been so slow? You highlight what you call pent-up demand. We could have said perhaps a year ago there's pent-up demand. The new phone did not lead to a tremendous super cycle as you suggested. Why? The products are too good. I mean, the battery technology has just gotten better. If you look at, especially in China, you really haven't seen many upgrades there for the last two,

three years. And from a hardware perspective, the innovations really haven't been there. That's been that catalyst. But now the catalysts are really going to be on the software. It's going to be on the chip. It's going to be on the LLM. And essentially what Cook here did is say, this is our castle. This is the Apple castle. The data is not leaving.

If you're a developer, you want access to it, you got to come to Cupertino and Apple Park. If not, you're not going to be there. And that's why, and there's 2.2 billion reasons, iOS devices, why I believe this is so important. Why do you think the stock is doing what it's doing today? And is it as simple as saying, well, it ran up into the announcement? But I want to hear it in your own words as to why you think whatever the stock performance reflects, if anything, in one moment doesn't make a full story for sure. But there's not a flying off the chart move today in the stock to suggest perhaps the optimism that you articulate in your seat. Because I think the knee jerk, there was nothing, there was no wow in itself in terms of an actual use case that they talked about that I think the average investor.

I mean, you just painted a whole wow thing now, but now you say there was no wow. I'm saying wow individually. I think when you look overall to presentation, I actually thought it was ahead of expectations relative to what they laid out. And I think a lot of times with Apple events, look, I remember, Scott, iPhone 6. I could go through many events. You came out here being like, well, investors are not, they're disappointed. And then all of a sudden you had a 500 billion go to a 3 trillion. So I do think in the Apple story, investors are glass half empty, but I believe we sit here six, 12 months from now, this will be a historical moment

for Apple. But when do we start to get the first indications of what this really is going to mean? Do we have to wait until deep into the fall, the early winter, right? A lot of this is not even going to be available for upgrade until the fall. Yeah, I think it starts with Asia checks, you know, that us and others do. Do you start to see tick-ups coming from the Asia supply chain? 3%, 5% type growth for iPhone 16. Then you start to layer on an upgrade cycle. That's really important.

Cause that's all doing what Apple sees from a demand perspective. I think it all comes down to China. I mean, China, we believe June's last negative growth quarter this will be a catalyst. And the biggest issue with AI is about privacy. And this is really a flex the muscles for Cook. And I think lay it out perfectly. I

also think OpenAI, it's a get out popcorn moment. There's going to be a lot more with Altman being here that we're going to surround OpenAI and Apple. You think the worst is behind this company in terms of China? We just showed the pie chart where I think it's at 18 percent of the revenue comes from the China region. I think worse is in the rearview mirror for China. And I think the reason we knew that you clearly have some headwinds in China given the geopolitical, we believe the worse in the rearview mirror bottoms in from a China perspective.

We get through one tough quarter June. And then I think that this is a stock that makes all time highs. $2.75 is the price target. You know, there are some, I mean, it looks like it's been on the march and wants to hit two hundred bucks. That may be some level of resistance. And who knows what the market itself is going to do from here. But just you're comfortable

with your 12 month price target of two hundred seventy five dollars. I think it could actually be conservative relative to where we see this story heading. I view it relative to where I saw Meta 18 months ago, where everyone was negative. And this event, we look back, it will be a top three or top two moment for the future of Apple. We certainly shall see. And I know we're going to talk to you often. Dan Ives, thanks so much for being with us today on both sides of this big announcement from Apple. Up next, we're navigating the tech trade.

Talk about the Nasdaq possibly hitting a new closing high. We talked to top strategist King Lip. He's breaking out his market playbook as well and flagging the big buying opportunities. We'll talk many more stocks than just Apple, of course, in that space. See if we get that record close. We're back after this. Welcome back to Apple Park in Cupertino, another record-closing high for the Nasdaq within reach today, a handful of points away from setting another milestone. Stocks us is Micron, Applied Materials helping. For how he's trading the tech space, Baker Avenue Wealth Management's chief strategist, King Lip, joins me now. It's good to see you again. So here we go again. Powered predominantly by a couple of names lately.

How does the tech trade overall look to you? Hi, Scott. I think the tech trade still looks very healthy. If you look at the last earnings season, you know, we had the tech sector, 89% of companies reporting above estimates. I think, honestly, valuations still remain fair, maybe slightly above five and 10-year averages. But for the most part, we're seeing a lot of timeliness. The semiconductor industry continues to outperform. So we've seen those signs of the tech sector trade weakening. Are we just going to have to wait until we get earnings in July to really assess the durability of this trade? And is that the new sort of mode that we're in?

Because, you know, we're hanging on every earnings report theoretically from the likes of NVIDIA to justify what the stock price has done and the valuation. So we have to wait for the catalyst of earnings to figure out whether these movements are justified or not? I think we're going to have companies report, sprinkle here and there throughout the summer. So I do think we're going to have some clues on how the tech sector is doing. But I do think there's other plays here. There's other companies like Qualcomm, for example, that haven't had a lot of media attention on AI. But despite that, it's one of the few companies that have a partnership with Microsoft right now in terms of powering their sort of co-pilot technologies. So I do think we're going to have some clues here and there about how the overall trade is doing.

It's funny, I'm looking at a Qualcomm chart right in front of us as our viewers are, and you can see their dramatic move from lower left to upper right. And it just makes me wonder, obviously, about some of the stocks that have gotten the so-called AI halo effect, but the jury is still out as to how we should really view these names. We've seen some names in software, for example, that have pulled back dramatically because maybe they got ahead of themselves and were given a little too much benefit and credit because of AI. What's the danger here, if any? I think the biggest danger, I think, is enterprise spending and whether, you know,

cloud spending, for example, gets sort of pushed out because enterprises are focusing more on AI spending, sort of getting that crowding out effect, that could potentially happen. And we've seen that from recent earnings from Salesforce. That being said, the overall aggregate spending on technology continues to be extremely strong. And for that reason, I think you've just got to know where to pick your names. Would you buy a software stock that has nothing to do, and I put that in quotes, nothing to do with AI? I think it would be hard for us to find a company

these days that are not talking about how AI is somehow influencing their business. Would we buy one? Sure. But it's going to get very difficult for us to find any company that's not going to hang some of their future optimism on AI. But if the earnings growth is there- Well, no doubt. Whether that optimism, though, turns into real profits, I guess, is where I'm going to, right? I think the premise of my question is that everybody is suggestive that AI is going to

be some level of transformative for their own businesses. But we're going to find out who the real winners are. And I mean the, you know, the top tier winners. A lot of stocks have gotten a lift as though they are just that. And some will not end up being that. You're right. And I do think from that perspective, sticking with the majors, you know, the mega caps is really where the play is. Once you're looking at the smaller cap names and the mid cap names, it's going to be harder to find the winners versus the losers. And I think that's the reason why still, despite all this talk about how small caps will rebound in 2024, we still haven't seen that yet because it's the smaller players that are going to be more sort of uncertain in terms of their success.

I was purposeful in leaving Apple, excuse me, to the very end. I wanted to get through those other names, but you've had a chance as a shareholder to digest what happened behind me here. What do you think? You know, what we were most impressed with coming to the end of the presentation, the one thing that caught me about what Apple's AI strategy is, what they said at the end, which is AI for the rest of us. So a lot of us who are starting, what is Apple's strategy in terms of AI? It's to humanize AI. It's something that the company is extremely gifted at.

So it's a focus on usability and privacy. And I think that's really where the company has an edge. King, we're going to leave it there. I appreciate you joining me on this big day out here in Cupertino, California, King Lip, Baker Avenue. Up next, we track the biggest movers. As we head into the close on this day, see if we can set some more records. Seema Modi is standing by with a look at the stocks moving. A big deal in the energy space and a warning from a key regional bank will have those stories for you on the other side of the break. All right, we got a little more than 15 minutes to go before the closing bell. Let's get back to Seema now for a look at the key stocks that she is watching. What do you see?

Scott, shares of both Diamond Offshore Drilling and Noble trading higher this afternoon as Noble announces a deal to buy its smaller rival for roughly $1.6 billion in cash and stock. It's the latest merger in a sector that's been undergoing massive consolidation. And then there's Huntington Bank shares sliding after the regional bank lowered its full year guidance. Huntington now sees net interest income dropping as much as 4 percent. That's stocked down nearly 6 percent right now. That's weighing on other regional banks, including names like Triumph, Independent and Valley National. Scott. All right, Seema Modi, thanks so much for that.

Still ahead, your big Fed setup. New York Life Investments. Lauren Goodwin is back with us today. She'll tell us why she thinks the Fed is, quote, on a tightrope and how she's predicting stocks could react to Wednesday's big decision. That's coming right up. The bell is coming right back. A quick programming note for you. Please don't miss Altimeter Capital's Brad Gerstner. That's tomorrow on the Halftime Report, 12 noon Eastern. We're going to be live from our bureau at One Market in San Francisco. He was on campus here today. We'll get his big takeaway from WWDC

tomorrow when we speak with Brad. The S&P and the Nasdaq are trying for records today. Up next, New York Life Investments. Lauren Goodwin joins me to break down the final moments of this trading day. That and much more inside the Market Zone next. We're doing a remote Market zone today on closing bell live here obviously apple park cupertino california our cnbc senior markets commentator mike santoli and new york life's chief market strategist lauren goodwin here to break down these crucial moments of the trading day by the way guys it's great to see you both a day in which we could actually get yet another, Mike, closing high, a new closing high on the S&P 500.

Yes, it could be close, but we are in grind mode. I mean, this is a kind of low momentum market that does just enough to keep an upward bias. I'm looking today. It's 1330 stocks up on the New York Stock Exchange, 1390 down, not new highs and lows, almost even. But again, just enough on the larger cap stocks. And then just a little bit of laggards working like utilities and energy from last week. The market doesn't allow any part of itself to stray too far from the path because we have this kind of calm at the index level, this sense of macro stability, at least for the moment. And earnings are good enough.

But then it's about where are we going to get the incremental catalyst or the incremental conviction to move further? We're lacking it at the moment. Unless, Lauren, this is the week in which we do because it's the Fed meeting and, of course, the CPI report on the same day of the decision. Is that the long awaited catalyst that perhaps Mike is alluding to? Look, I think that what we're likely to see from the Fed and from inflation on Wednesday is just more of the same. Data has been reasonably strong. It's fueled by strong economic activity. That's one of the reasons why the market's been able to look through challenges or even more hawkish messages from the Fed over the past couple of weeks. So even if the more hawkish scenario for the Fed of pricing

in one cut rather than three for the rest of the year, I fade that news. I expect that the market can look through that type of threat because both the risks of overheating and the risks of an imminent slowdown are not so much on the radar. Mike, I don't know, maybe more of the same means that tech continues to lead. Is that more of the same means that tech continues to lead. Is that more of the same as well as we see the Nasdaq maybe fall short of a new closing high today? It's in sight, obviously, as we're showing you on the screen here. We're awfully close, and it's because NVIDIA has been doing quite well. Apple has, too.

Now it's pulling back a little bit today, but this has been the space to be yet again. It has been, or at least there's been enough within tech, again, that has been working that's actually kind of carried the weight. And NVIDIA has been the key swing factor. When you're trading around the flat line all day, that's the one that sort of jumps around enough among the mega caps that essentially makes the difference between a red and green day. So, you know, we're talking about measuring things in pretty, you know,

small increments right now, and I think that's fine. In terms of the Fed and how it relates to tech, I think yields are in an acceptable zone for almost anything right now. You don't want to see them go back to the highs too quick on the 10-year necessarily. But we don't need a lot of help on that front because the economy is OK. I do wonder how long the leash is in terms of the market relative to the Fed's patience. Because at some point, if the Fed keeps rolling forward this idea that they're going to have the clearance to cut rates at some point, the market's going to get a little bit antsy about the fact that you have some slowdown fears,

even if they're exaggerated, even if it's not a real growth scare. I do think that you can have these bouts of, oh, no, the Fed has it wrong. And then you maybe get an excuse for a sell off. Or for that matter, if we get a really tame inflation number on Wednesday, that's going to be seen as a green light. Guys, bear with me a moment. I have more breaking news regarding the FDA and that Eli Lilly news. We were bringing you a short time ago. Angelica Peebles back with an update. What do we know now? Yeah, Scott, the FDA advisors are voting unanimously that Eli Lilly's Alzheimer's drug, that the benefits outweigh the risks. Remember, that drug slowed the progression of the disease by 29 percent in a phase three trial. But it did come with the risk of side effects that include

brain swelling and bleeding. And those side effects can be deadly but the advisors today saying that they feel like the benefits outweigh those risks and that these risks can be managed with close monitoring so they're talking now about those decisions and we're going to tune in and we'll be back with anything else we hear out of that scott angelic all right i appreciate that very much thank you for the update angelica people's back to the conversation we are having lauren, where Mike left off. The idea of the market, its patience or lack thereof, when it might become lack thereof at the Fed dragging its feet before it has that first rate cut. I think that Mike is absolutely right, because the tightrope that the Fed is on is that data

have been relatively resilient. But we're also starting to see signs that some of the staples of the last two years' economic environment, including the inverted yield curve, are really weighing on bank lending. They're weighing on the real economy. And so the question for investors becomes, at what point does the policy mistake of a potential overheating, keeping rates tight to avoid that, become the potential policy mistake of a prolonged slowdown. And it is our expectation that this Goldilocks period of stability, even a little bit of boredom among investors over the course of this summer, is likely to turn into a slowdown.

Challenge for investors, the labor market doesn't turn until the very, very end of that. And so I don't expect that we'll see a definitive recession signal until unemployment claim clips pick up. For the two minute warning there as we approach the close here and what looks to be yet another record closing high, Mike, for the S&P 500, 53.60 is where we are now, 53.54, the old level to watch. So we are nicely above it as we approach the close here. We're talking about the patience of the market absent a spike in yields, which is really what you were talking about earlier. Is that where the impatience is going to be reflected if we have another spike in yields? I think that would be most immediate. Yes, that seems to be the pressure point. Again, it doesn't have to be at some magic level. We don't have to have bonds rally much from here.

But, you know, we were recently up around in the 460s. Market had a little bit of a wobble, not that big a deal. We have a lot more Treasury supply again this week. It seems like we're absorbing it OK. So, you know, I think we're alert to all those risks. I think the issue is much more about, OK, presuming the Fed comes out and they cut from three projected cuts this year to two. That's pretty much what everybody expects. That's not a big deal unless, again, if, Lawrence, as the data start to come in in a way that makes you feel as if that they're going to be a little bit later,

they're going to be slow to react to signs of a slowdown. You know, they use the unemployment rate in their projections. The unemployment rate has been migrating higher. Yes, payroll growth has been strong, but if they care about the unemployment rate, and maybe they give lip service to that, that might kind of comfort the market in terms of them being alert to those risks. All right. I will see both of you guys in San Francisco yet again tomorrow at 1 Market. It's a big day in what is a big week. Some calling it a historic day here at Apple Park. That does it for us.

I'll send it into overtime with Morgan and John.