Closing Bell - Closing Bell: Netflix Q3 & The AI Race 10/17/24

Episode Date: October 17, 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, guys, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with new records for stocks and new questions for investors, namely whether this market is setting up for a year end run now. We'll ask our experts over this final stretch, set you up for Netflix's numbers in overtime as well. In the meantime, let's show you the scorecard here. With 60 minutes to go in regulation, the Dow and the S&P hitting record highs earlier today. The new retail sales report showing the economy still looking pretty good. Standouts today. Taiwan Semi. They beat and raise. That's helping to chip space. It's helping NVIDIA hitting a new all-time high today on the back of that news. And it is right on Apple's heels now for the most valuable company in this market by

market cap. Blackstone surging today, too, after its own strong earnings report. Near 7 percent there. It does take us to our talk of the tape, the road ahead for stocks, which continue to reach new heights. So how high can they go? Let's ask Joe Terranova, chief market strategist for Virtus, Jason Snipe of Odyssey Capital Advisors. Kristen Bitterly of Citi is also with us. And Joe and Jason, as you know, are CNBC contributors, which is why I'll go to Chris first. So we hit these new highs. We continue to climb. And I don't know if there's like a wall of worry or whatever is out there. We continue to be resilient and just keep climbing it. Does that continue?

We continue to be resilient. I think I've talked a lot about this. If you look at the backdrop, we still have a lot of cash on the sidelines when we got that 50 basis point rate cut. A lot of that cash is now looking and considering reinvestment risk and putting it into whether it's parts of the fixed income market or into the equity market. I think we also have two things happening within the market today, both earnings resiliency. We have record profitability within the U.S. equity market right now. And I also think the last part is with that backdrop of rates coming down, disinflationary forces, could we have some volatility within the data and argue over some of the prints? Certainly. But I think for all of those reasons, we're seeing the market

continue to grind higher. And I do think there's an element today of some election odds in terms of maybe more of a Trump favor when you look at financials and other parts of the market. But I think it continues to be positive. OK, let's let's let's just hit on that for a second. The election, because the market has, for the most part, not been paying attention. Right. Although there are some out there now who say, well, this move up is trying to anticipate whether Trump's going to win or not. Dan Loeb, Daniel Loeb of Third Point, put out his most recent investor letter today in which I'm going to quote from,

where he says, we believe that the likelihood of a Republican victory in the White House has increased, which would have a positive impact on certain sectors and the market overall. Accordingly, we have increased certain positions that could benefit from such a scenario via both stock and option purchases.

We continue to shift our portfolio away from companies that will not. No evidence of recession, says Loeb in this letter. Goes on to say, quote, we believe healthy consumer spending and active levels of individual investing should provide a liquidity backdrop to sustain market levels. We think this setup is a particularly good one for event-driven investing. He obviously is referencing a Republican in the White House, meaning you have an easier path for dealmaking and the events that he is trying to look forward to in the way that he sees this market and how it may go in the months ahead. On that note alone, because he's obviously pretty positive on the backdrop, you say what? So let's assume that Dan is correct

and that President Trump wins the election. The first question for me as a steward of Capitol is does he carry Congress and Senate with him? Because in that case, then you're talking about impactful legislation that could potentially be implemented. Beyond that, look, whoever wins on November 5th is being handed a very good economy to work with. Let's be clear on that. So the question is, do you fumble a good economy or do

you accelerate the growth that we're seeing right now and expand upon that? The areas of the market that I think would benefit most, if in fact you see the Republicans have a sweep, are the areas of the market that are rallying right now. So the market is beginning to price in the potential of a Republican majority. In addition to that, I think you're looking at much lower energy prices. And I think that energy would be utilized almost as a weapon against some of the bad actors in the world who are so reliant on the high price of oil. I mean, Jason, let's just take the environment as it is today. Just take the election out of it.

Yep. Economy, good. Consumer, good. Yep. I mean, you got retail sales today. Yep. And the Fed's cutting rates. Yeah.

And you want to be negative against that? Yeah, 100 percent, Scott. So it's hard to fight the tape in that environment, right? Philly Fed was really solid today. Retail sales are strong. Claims came in lighter than expected. Good news is good news. And to your point, Scott, the Fed is very much engaged in policy.

We have Bostick and Waller. We heard the commentary from them. They're on the other side of the tape in terms of, you know, what they potentially want to do with rates. But 91 percent chance that we're going to lower rates again in November. So when you look at that, and to Chris's point, when you look at profitability and earnings thus far, it's a positive tape. It's hard to fight this. Let's just assume, Chris, that the Fed is not as aggressive in cutting as we once thought.

We still think we're going to get two cuts between now and the end of the year. Even if we were only to get one, it's because the Fed would believe that it has the luxury of a strong economy. Being in a strong economy. Inflation coming down. They have the luxury of kind of doing what they want right now. This is why I think the market isn't paying as much attention to the Fed right now. When we look at what's driving the market, it is earnings. It is election odds. The Fed, if we get one 25 basis point to 25 basis point cuts, ultimately they're looking at that balance of whether policy

is still restrictive. And when you look at the prevailing rate versus inflation, there is some room to come down. How quickly they do that, people may be over anticipating that, but I don't think that's going to drive the ultimate trajectory for equity markets right now. It really is about fundamentals, earnings, and then to Joe's point of, is the market starting to price in the potential of a red sweep? And what that could mean in terms of reflationary trades that we even saw in the 10-year today, which you could say, is that positive economic data or is that actually a red sweep? You could argue both. I mean, then on top of the economy and the consumer and rate cuts, you have a belief like what, you know, Todd Boley told me during our exclusive interview out in Beverly Hills. I think we have that soundbite on M&A. I mean, I mentioned, you know, Loeb talking about event-driven

investing. If you have a market that's going to be reopened, and for all intents and purposes, that's what it would be, because dealmaking has been so difficult that that would be helpful to the environment too. Listen. I think we're in the process of having lots of M&A get started. I think we're seeing more and more activity. I think we're seeing the process of having lots of M&A get started. I think we're seeing more and more activity. I think we're seeing people want to transact. People have to kind of get back to the transaction business. So across our portfolio, we're seeing lots of kind of merger and consolidation discussions going on. I think some of them are in their earlier days, but I think the animal spirits are coming back and people want to get back to it. I mean, you want to put that on top of everything

else? First of all, a phenomenal interview. Todd is exactly right. The animal spirits are coming back and they will intensify further with a Republican sweep for sure. A tremendous amount of M&A is kind of sitting there. You don't even need a Republican sweep. I mean, if you have the president under control by the Republicans, you don't need a sweep to have a change in the FTC or other areas of the market where you can actually get, you know, deals done. That's the view. No, you don't need a whole sweep of Congress. You're correct on that. But add upon that the potential for a lower corporate tax rate, the removal of the tax on buybacks. And collectively, that's an environment where you're going to, you know, a former President Trump wins the current election, but then you have gridlock in Congress, you maybe don't have the degree of spending that the former president's talking about in terms of tax cuts upon tax cuts upon tax cuts

upon tax cuts when we're, you know, still hearing about the deficit and interest rates, especially on the long end of trying to finance the deficit in and of itself. Markets like gridlock, we know that. 100%. I've got people still chasing targets like Goldman, their trading desk. Scott Rubner a couple weeks ago said that $6,000 might be low. So he goes to $62.70, which he thinks could happen year end. Yeah.

No, Scott. So, I mean, for me, when we talk about private equity and what's going on in capital markets, listen, we've been talking about this troughing for some time. If we look at, as an example, Goldman Sachs, their report, blowout report, IB revenue was up 20 percent year over year. Right. Again, off of terrible numbers. But we going into 25 directionally and we know what's going on with rates. Obviously, it's stimulative to the economy and it's a sound environment for private equity and dealmaking. So I like that opportunity. So we're at 58-50, we'll call it that, Chris, on the S&P as we have this conversation. 62-70 is where this gentleman thinks we can go to.

I mean, the highest target before that, now this is not an official strategist target, but nonetheless it's out there. Brian Belsky's got 6,100. What seems reasonable in your mind? Look, I think from a positioning standpoint, for all of the reasons that we mentioned, there is potential upside from here. I think there's also a healthy debate of are we pulling forward some of the year-end rally, some of once we know the outcome of the election. So I think from a positioning standpoint, you have to be really balanced. And so we're finding opportunities in areas like quality dividend growers.

That's an area of the market that is clearly lagged. It's an area of the market that when you think of free cash flow generation, the ability to return capital to investors, if interest rates stay at current levels, it's irrelevant because these are strong balance sheet companies. If they come down, there's going to be more focus on dividend paying stocks. So I think picking those spots that regardless of the outcome of the election, you're still playing the trajectory higher from here, but you want to be balanced and not go all in either way. And that's that's why they've lagged, right? The dividend. Absolutely. Because as rates were up, there wasn't really much competition for yield. You knew where you could get it. But now if you think rates are coming down that could be a game changer all right speaking of pull forward netflix which reports earnings in overtime okay both of you guys own it and there is some concern in the marketplace that

they're pulling forward a lot and that's one of the reasons why the stock has recovered as dramatically as it has it's about 700 bucks we can throw it up, that they have, because the password sharing cracked down, because the ad tier, that they've pulled forward all this stuff at a time where their revenue growth is actually slowing, and it looks like it will be slowing from here forward, and at 32 times forward, whether you're at, as someone asked today in an article that I have in front of me, peak Netflix. What do you think? No, not peak Netflix at all. I do think you have to set the expectation. This is a quarter where we're talking about high expectations. The analyst community, what are they doing? They're chasing price higher. And as they see price go higher,

they're raising price targets. So you got that all time high at 736 in terms of revenue growth. It's going to begin to moderate. I think that's being priced in 17 17 percent revenue growth last quarter. The estimate is for 14 percent on this quarter, decelerating over the coming quarters down to 10. Why do I say this is not peak Netflix? Because they still control the streaming environment and the standpoint of being able to focus on growth, investing on growth. We're going to see Christmas Day. They're going to deliver two NFL games that we're going to watch. So what does that mean to the ecosystem? What does that mean to the subscriber base? That means their stickiness. That means if Netflix turns around and says, OK, time for another price hike. Guess what? Everyone's going to pay. But

that's the ultimate degree of price. But if you're telling me that revenue growth is going to continue to decelerate, albeit still strong. No, I get it. But you don't have a modest multiple on the stock. There's some are suggesting you got 32 times forward now. That's not cheap. So even if you have a modest decline in revenue growth, that you're justifying the multiple at 32 times. That's the rub. That's the debate. elevated and some people who are value oriented are more focused on maybe Disney or Warner Brothers. But, you know, good luck with Disney. I gave the statistic on halftime yesterday. Over the last 10 years, price performance is up 13 by 9 percent. I'll pay 32 times for Netflix and I'll get the growth. So the stocks rallied a ton, as you know,

Jason, because you own it, too, as I I said and the targets out there suggests that there's just limited upside ahead for the variety of reasons that I just The variety of reasons that I just mentioned yeah, so a couple things obviously the subscriber growth is going to slow to your point Joe it's going to moderate this year. I think we're expecting a little over 4 million subs New net new additions we did eight and a half million last quarter right? So when I think about and part of it is, you know, they they're monetizing, monetizing, they monetize the existing base from password sharing. So that's that's obviously going to moderate some. But when I think about the

levers to pull and Joe, you make a great point with live sports. You know, those two major games here in December, that's just the beginning. They don't get that for free. They don't. They don't. But afford it. they can afford it. And the other thing I was going to say, Netflix is one of the few names, and there's more than a few, that does not trade on the multiple. No one cares about the multiple with Netflix just because of the many levers that they have to pull and the growth rate that they've had over the last year. They cared about the multiple when the stock was at 700. I don't know what the multiple was at that moment, but they sure as heck cared about it when they had a disappointing report

and the stock cratered. It did. Then it mattered. It did. Now it doesn't matter because the stock's back near 700 bucks? So I think it doesn't matter at this stage just because of the multiple levers that they have.

If I'm talking about the ad-supported tier, 150% year-over-year ad commitment for the stock, right? The ad-supported tier. 150% year-over-year ad commitment for the stock, right? The ad-supported tier is also another lever. And to Joe's point, price subscription, they can increase pricing. They have room there. So I think that there's a lot to like with Netflix going forward, and that's why we continue to own it. All right. So I use that as a device, Chris, to get to you on the broader idea of where technology goes from here, because I don't, you don't need to give me your opinion of Netflix. Is that what you do? But you do think about different areas of the market

that are going to do well. What about the Nasdaq? What about tech? You know, we keep saying day to day after day, S&P new high. Yeah. Dow new high. Netflix, not quite, not quite. I mean, look, we've been playing the broadening out story. and I think we've seen that come to pass. By the end of this year, we should see 10 out of 11 sectors now turning to earnings growth. Next year, that's anticipated 11 out of 11 sectors. That's a material change from what we saw last year. I think in technology more broadly is there opportunity.

I think if we just look over the past couple of days, like what is being rewarded, it has gone back to that true AI story and looking at AI is where growth is at. And I think the story for earnings right now, while we anticipate strong earnings, some of the bar is low for some of the mega cap stocks. So it's really, we expect beats, but at this moment it's, I hate to say this because it sounds really boring. It's going to be about guidance. And if the guidance is not there, you could, you could imagine some of these stocks getting punished. Well, you could have compression of the multiple for sure if the guidance doesn't meet expectations. We're just showing the best sectors. Is that what you're pointing to? Oh, absolutely.

The reason why utilities thank you, Vistra. By the way, Vistra is the best performing stock in the S&P. Yes, it is. Year to date. It's not NVIDIA. Yes, it is. It's not that far away, but it's not NVIDIA. And the whole conversation around the need for power generation and the mega cap companies, how they're going to source that. I think the utilities have a tailwind that's going to extend into 2025. But Christian is so right. The catalyst is earnings right now. And we're sitting here 16 and a half minutes into the show. And have we really emphasized what has been the highlight of the last week when you're looking at the equity market, which is the financial sector. The financial sector of the reporting season was phenomenal.

We're talking about revenue growth 10 percent, earnings growth 10 percent, the subsequent price action in all these names. Just not money center banks. It's J.P. Morgan. It's Morgan Stanley. It's Goldman Sachs. And then go beyond there. Look at Travelers.

Look at Progressive. Look at Synchrony Financial. Look at Discover. Look at some of the private equity names and the asset managers. So I think the setup for the fourth quarter, you asked before, what are we going to see as we move towards the end of the year? I think the financial sector is in a perfect position to finally realize some of the expectations of the last several years where people have said, own financials financials if there's going to be a chase watch the financial sector because i think that's where it could happen okay let's last question to chris um speaking of chases and sectors and areas of the market that people are trying to get more optimistic about maybe there's good reason to

be small caps yes do you do you like them for a big big run catch-up trade into the end of the year they're leading the week you're up two% on this Thursday, about in line with everything else over a month, but there's been fits and starts. And if we're talking at the top of the program, the top of our conversation about how good the economy still continues to be, how strong the consumer continues to look, and your cutting rates in that environment is now the moment. Heavily exposed to the front end of the curve. We've liked small caps and mid caps, but particularly the growth sector and particularly profitable. So when you look at like S&P 400, S&P 600, those types of indices that have the filter for profitability, I think that's a great place to be. I think small caps, could we see further upside?

I hate to bring this full circle to what we were talking about, red sweep and election odds. Certainly, if that's something that comes to pass, I think you will see additional capital come in, and that could certainly be a rally into year end. All right. We will make that the last word. Thanks, everybody. Appreciate it very much. We'll see everybody soon, Chris, Jason, and Joe. All right. Let's send it to Pippa Stevens now for a look at the biggest names moving into the close. Hi, Pippa. Hey, Scott. Shares of Elevents Health falling after the health insurer reported a miss on profit for the current quarter and lowered its earnings guidance for the year. The company's CEO noted a, quote, unprecedented challenge on the firm's Medicaid business as higher medical expenses continue to pressure the sector.

But shares of Travelers are moving higher. The property insurer reporting a profit beat for the current quarter. The firm saying that higher premiums and investment income overshadowed increasing catastrophe losses during the period. Those shares are up nearly 9 percent. Scott. Thank you. Pippa Stevens. We're just getting started here up next. The big interview you don't want to miss. The CEO of Perplexity AI is here.

He joins us exclusively today on the new features coming to the company's AI search engine today, how they're positioning for future growth and how they want to take on Alphabet. I'm going to hit that. I can't wait. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. We are back. Much of the talk around generative AI is centered around open AI, but there is another fast-growing player in that space who wants a much bigger piece of that pie. Perplexity AI CEO Aravind Sreenivas joins us now.

His company ramping up its efforts now to take on Google and others in search and advertising. Aravind, welcome. It's good to see you and welcome you to our program. Thank you so much for having me here, Scott. Great to be here. So you have some new features that you're introducing today, which you think will give users better and more targeted search results, correct? And also deliver them faster.

Can you tell me about that? Yeah, 100%. So today we launched our internal knowledge search. So we want Perplexity to be the central knowledge base and research platform for everybody. And when people do their research at work, they're not only requiring research for the data that is already out there on the internet on the web, a lot of research is about like due diligence documents or stuff that's particularly relevant to the company that you acquired in a proprietary way and storing within your internal knowledge base. And today there exists no one tool where you can do consolidated centralized research on both these data sources, the web and your internal company

proprietary data together, and use both of these for answering your questions or doing your diligence or deciding which companies to invest in, all those sort of decisions that you do on a day-to-day basis. There doesn't exist one single tool to do all of it together. And so far, the technology stack for external search and internal search have been pretty fragmented. They're very different.

They're completely different tools and you have to keep moving around data everywhere. It's very inconvenient to do all this. But with the advent of AI, like generative AI, large language models,

multi-step reasoning, tool use, it's almost like every single source of data is just like another API call or a data API call or integration. And these models can decide like what to use, when, depending on your query you ask. And then we're able to bring it all together in one platform through perplexity. And that's our announcement today. Do you know what I think is really interesting for our viewers and those who work in the financial services industry is that you're specifically targeting

financial services as your largest vertical here. Tell me what benefit that's going to be to those who are either in the financial services industry who are watching now and who are going to use these tools or for the viewers who are investing in the market and who are going to be better off by virtue of the tools that will be used by financial services professionals? 100%. So we, before today's launch, we also broadened the ability to query all the stocks on the market, get news relevant to any particular stock or search over related stocks and look into the 13 apps filed by big institutional funds. All that data is already being brought onto Perplexity for just generic financial searches. And now you have the ability to take all your internal data

and search over the web. So if you are deciding if you wanna invest in a particular company and you have all your diligence documents prepared by your analyst, and you want to take that and also query the web based on what people on the web were talking about the company and come up with an aggregated summary

and highlights and what you need to do and depending on your portfolio of your fund, should you go and invest in this particular stock? Does it have the right risk-reward ratio? You can ask these sort of questions. And these decisions are worth several millions or even billions of dollars, so it's completely worth using a tool to get you more clarity. And we're also going to bring in third-party data integrations, Crunchbase, PitchBook,

Faxset, these are all the kind of data sources that we're looking into, and trying to get that also onto perplexity so that you also get a sense of what the private markets are investing in, not just the public markets. Interesting. I mean, obviously we're very familiar with all of those. I mentioned at the outset, I sort of framed this about your company in part. You think that Google is vulnerable in search and advertising. Do you think that the duopoly that's existed between Alphabet and Meta truly is finally cracking and that you can have a place in that conversation that's meaningful? 100%. So it's all about what the consumers are doing, right?

Consumers earlier used to go to search engines or social platforms, and that's where advertisements were served to them. Now consumers are increasingly shifting to more AI-native apps. So there's a new consumer behavior of asking questions and getting answers, not just typing in keywords into a search engine and getting referred to another link. So that consumer behavior is growing while the existing consumer behavior of just typing in a few keywords has sort of saturated. So whenever you have a new consumer behavior that's on the increasing trend, it's always lucrative for advertisers to figure out how to be part of that and try to figure out a way to get users' attention in a very different way than what was possible before.

And every single query on Perplexity on average has 10 to 11 words. Every query on Google has like two to three words. So you have way higher intent for every query. And the user is able to ask much more targeted questions, which makes it even more easy for the advertiser to get the right user for their product. Interesting for our conversation, too, of the news of the day, really, in this area that Google's head of search and advertising is leaving that role, being replaced by a

longtime employee there. So that's something we'll continue to follow. And as you know, one of the major issues with generative AI, and I think we've seen this from many other companies at this point, is the issue of copyright infringement. New York Times sent you a letter, a cease and desist letter on that issue. How are you responding to that? Yes. So Perplexity launched a program called the Select Publisher Program. We launched it like many months ago and we invited publishers to work with us. We already

said we were going to do an advertising based revenue model and we want to share that revenue with all the publishers who get onto the publisher program. It's a first of its kind offering. Google took all people's content and never actually shared any advertising revenue they made with any of the publishers and today that revenue is so much that everybody feels like you know that would have been a better model right so publishers need to like see what unique offering we are offering even though AI is definitely different it's not giving them as much referral traffic as existing traditional search engines and again there are multiple ways in which AI can make use of people's content.

One way is in which you train foundation models on your data. That's a different argument. That is the New York Times OpenAI argument. The other thing is taking your content as sources to be able to answer people's questions, but not actually training anything on your data. And in turn, like making sure that the revenue we make on those queries reward the people who originally had the content. That's the system that we're coming up with. You'll make a deal

with the New York Times among whatever other, you know, platforms that your content pulls from? You anticipate making a deal with them

in the near term? I hope to. Well, we'll follow that. Very much, very much interested in working with everybody, honestly. Okay. So we'll follow that. I want to ask you lastly, before we go, obviously news of late is the OpenAI valuation, $150 plus billion, and the funding round that they just did.

They're still losing money. What does your road to profitability look like? You recently raised at $3 billion, a valuation at $3 billion. How are you thinking about your own capital needs? When will you go to market again and raise capital? And what kind of valuation do you think we should look for? Yeah, so there's a difference between companies like OpenAI and us, that is perplexity. We're not in the business of training really large foundation models.

So we're not taking our money and using it to build giant data centers or like paying Azure or like AWS to build extremely giant like tens of thousands of GPU data centers or clusters. So that is the biggest reason why the burn comes for those companies. And so we are much more capital efficient in terms of a business. We are a product company, right? We are trying to build products and get it in the hands of consumers and businesses and for them to see the productivity gains from searching much more efficiently.

And yes, we are not yet profitable because these models are still expensive for inference. So even if you use them as APIs, they're still pretty expensive. But the cost of these models is going down too. Every four or five months, the cost of these models is going down by 2x. So if that trend continues for another year or two, we're at least guaranteed like 10 to 100x reduction in the cost of these models. So that's a great position for a company like us to be because even though we're not profitable today, we are guaranteed that the costs of operating the business are going to go down, the COGS are going to go down. And it's a great time to go and acquire the users and keep making the product better and better for them

and figure out new business models that monetize their behavior in a much more effective way than what, you know, through advertisements, subscriptions, enterprise APIs. We're going to try all of that. Arvind, we'll talk to you soon. I appreciate your time on Closing Bell today. Thank you so much. Arvind Srinivas, again, the Perplexity AI co-founder and CEO. Coming up, finding value at record highs with Bill Miller IV, including the one name he's bullish on. It's down nearly it's down double digits today. Well, plus, we'll get with his thoughts on the Bitcoin rally of the past week.

We're back on the bell after this. Welcome back to Dow and the S&P 500 hitting all-time highs earlier today. Dow on track for another record close. That will mark its 39th this year. Here to share how he's positioning at highs is Miller Value Partners' Bill Miller IV. It's good to see you again. Welcome back. It's awesome to be here. Thanks, Scott. Let's just start there. How are you positioning as we continue to hit new highs? Well, we're incredibly optimistic. If you look at the environment, things are fantastic.

Markets hit an all time high. Bonds just had their second best quarter in 29 years. Generally speaking, bonds don't have phenomenal quarters of inflation is out of control. So inflation is under control. You're seeing central banks around the world pivot to an easing stance. The curve just un-inverted. There's phenomenal values all over the place. So we're super optimistic from a value investor's perspective about the opportunities. Are we overstating it to suggest that everything rally is underway? I mean, even on the market cap spectrum, finally, that we can seriously talk about small caps making their move? Yeah, well, they've just started a move, I think, Scott. So we believe there's a long way to go

when you look at the relative valuations and you look at what's going on in the economy and some of the momentum behind some of these smaller cap names with incredibly low expectations. And when you look at the concentration in some of the larger growth names in the market and the embedded expectations for those, we think the relative values are much better from an active manager's perspective in smaller names. Yeah. I mean, how are you thinking about the larger ones, though? It depends on the name.

So we can invest in any name. We don't have specific limits with regard to position sizes. We don't own any of the Magnificent Seven, to be honest, just because we believe the values are so much better in other things. Before I came on here, you mentioned a name that was down 10% today. I wanted to flag it because it's our largest name in our ETF. It's a company called Centene. CNC is the ticker. It's about a $33 billion market cap. These guys are the healthcare administrator, the largest administrator, as a matter of fact, for dual eligible Medicare, Medicaid enrollees. And so Elevance came out today and said there were some challenges in

the Medicaid business. Centene got absolutely whacked. And we liked it at 68. We love it at 62. Trades at nine times earnings. We think the risk-reward skew here is incredible. We think intrinsic value is closer to triple digits than $62 a share. They're going to kick off about $4.5 billion of free cash flow this year. That's their sustainable rate and growing on a $33 billion market cap with minimal debt. The health care spending chart goes up and to the right over a long period of time. We don't see that changing materially over the long term. So we think if you can be a long term investor, there are some really interesting names like Centene. MicroStrategy is another

name. I mean, I think it ties in, obviously, with your belief in Bitcoin, correct? Absolutely. MicroStrategy is the largest owner of Bitcoin in the world with over 200,000 Bitcoin. People don't contextualize evaluation on MicroStrategy all that well. They see it and they go, oh, it's worth two times its Bitcoin holdings. Well, yeah. But guess what? There's two really important things you should consider on that. Number one, if somebody wanted to go out and buy 200,000 Bitcoin tomorrow, the price of Bitcoin is going through the roof. They're not for sale. So that's one of the reasons it trades at two times the NAD.

The other reason it trades at two times the value of a supposed value of its holdings is an interesting one that I think people don't consider. And that is MicroStrategy has effectively been granted a monopoly on the fiat conversion business in public markets. We have heard that other companies are interested in pursuing that model in the U.S. and regulators are not all that receptive to it, which is interesting because it gives micro strategy monopoly status. What do monopolies do? They trade at premiums. So when shares are trading at a premium, it's actually Michael's fiduciary duty to his shareholders to be doing these deals where he's borrowing and converts that, you know, 0.625 percent. That's a lower cost of capital than nation states. OK, so it's time for people to start paying attention to what's going on. I got to run, but just quickly, new high in Bitcoin. Is that the next thing to fall?

It is inevitable in my perspective, Scott. I don't know when, but I do believe it's inevitable. All right. We'll talk to you soon. I appreciate your time very much. That's Bill Miller IV. We'll see you soon. Up next, we track the biggest movers into this close today. Pippa Stevens is back with that. Hi, Pippa. Hey, Scott. Well, investors are pulling the plug on one EV maker after a new stock offering. The details coming up next. We're about 15 from the bell. Let's get back to Pippa now for a look at the stocks that she's watching. Pippa? Shares of Blackstone are moving higher on the back of better-than-expected earnings

for the current quarter, as the asset manager reported its biggest jump in portfolio value in three years. COO John Gray telling CNBC that a recovery in debt and equity markets and the firm's focus on data centers, energy, India and private credit helped boost appreciation. But Lucid Group shares are falling after the EV maker announced a public offering of nearly 262 million shares of common stock, raising roughly 1.67 billion to use in part toward capital expenditures and working capital. The stock is down about 36 percent this year. Scott?

All right, Pippa, thank you. Still ahead, snapback in semis today after strong results in commentary from one key name in that space. Not named NVIDIA. The details behind the move are next. All right, coming up, counting down to Netflix. The earnings coming in overtime tonight. We're going to walk you up to that key report with big technologies. Alex Cantu, he's in the market zone next. We're now in the closing bell market zone. CNBC senior markets commentator Mike Santoli is here to break down these crucial moments of the trading day. Plus, Seema Modi is here on Taiwan Semi, rallying NVIDIA, hitting record highs today.

And Netflix reporting in overtime tonight, big technologies, Alex Kantrowitz on what he is watching more than anything else. But first, to what Mike Santoli is watching more than anything else today, and that is what? It's tough to quibble with the market action itself, obviously. Now, most stocks are kind of consolidating today. You have more stocks down than up, but we're able to rotate away. And you have the NVIDIA jolt that helps the indexes. I do think big picture, you know, we now have a very tight embrace and a broad recognition that the economy is better than we thought it was two months ago.

I'm now in the mode of the rally is carried to a certain point where you have to ask, are we building extremes? Is sentiment getting a little too complacent? Have we stretched ourselves in terms of expectations for earnings? It's not clear to me you would answer yes to all those things just yet. But I also feel as if if you just go to the market and say, hey, you know what? The economy is pretty good. Earnings are going to be up. The Fed's cutting. The market's answer is, I know. That's why we're here. So I think that's a little bit of a give and take in terms of heading into the home stretch of the election. It's simple for some. I mean, I quote, I've quoted multiple times today the new

Daniel Loeb investor letter. Yeah. No, I mean, among other things, no evidence of recession. Yes. We believe healthy consumer spending and active levels of individual investing should provide a liquidity backdrop to sustain market levels. Yes, I think that's absolutely unassailable. And the question is always how much of that's already priced. And I also think everyone has to remember in, let's say, early August, a couple of months ago, we were on intense recession wise. Sure. The growth scare was real. It can change a lot in two months. I don't think that we're going that direction. I just feel as if you have to be aware of the ebb and flow of economic

numbers and sentiment. All right. Sima Modi is with us because there's a significant story in the chip space today. That is Taiwan Semi. And I mean, NVIDIA and many of these other names are getting a nice boost. Yeah, Taiwan Semi now at the highest level since 1997. JPMorgan in its notes saying that this report really underscores TSMC's position as a near monopoly in artificial intelligence accelerators. If you think about it, Scott, I mean, every major chip company that designs chips, they fab with TSMC, whether it's NVIDIA, which is, yes, at an all-time high, AMD, Intel, Qualcomm. And then you think about the hyperscalers that are all trying to work on their in-house AI chips. They all fab with Taiwan Semi. One negative that Morgan Stanley analysts point out is CapEx did come in at the lower end of the range for 2024, 30 billion. The

range was 30 to 32 billion. If demand is so strong, why didn't they increase their capital spending? We'll watch for that. Wood will also point out the U.S. election, seen as a potential catalyst for this stock. Mzuhu says a Trump presidency will be bad news for Taiwan Semi. Earlier this summer, former President Trump said Taiwan is stealing America's chip sector. We'll have to see how that could pan out for the country. And of course, geopolitics, CEO did not directly address the threat of China, but he did very much say we continue our overseas fab expansions, those three plants in Arizona, one expected to ramp up here in 2025. And some chip stocks give us, others take it away.

I mean, ASML and now you get Taiwan Semi. If you can remove some of the angst of the chip space out of this market, that would be another net positive, too. Yes, and it is spotty in terms of what's working and what's not within semis. What I do find interesting, though, I mean, Nassim, as you say, a concern is that CapEx is a little bit short of the aggressive expectations. That's an interesting dynamic where basically the street wants to see heavier investment. And that, I think, kind of applies to some of the end users as well.

So that's an interesting mode where there's such belief in let's go there as fast as possible that you're not worried about too much capex spending. You're worried about not enough. Seema, thank you. Alex Kantowicz is here. Speaking of big spending, heavy investment in the NFL and some other sports too is Netflix. He's going to report in overtime tonight. I've read articles today that suggest the stock's had such a huge run. They've pulled forward a lot of stuff. Password sharing in the ad tier have meant a lot now at the expense of the future.

Maybe it's peak Netflix. What do you think? I think it's a legitimate hypothesis. And let's not discount the fact that Netflix has had an amazing run, almost doubling its share price in the past year, up 46% this year alone.

But that being said, we're about to find out what the limits are of this password sharing effort really is. And if you think about it, Netflix, they added 39 million subscribers by the first half of last year compared to the previous year. What did happen with engagement? Engagement was up only 1%, really less than 1%. What does that suggest? It suggests that over that year, over all of the additions of subscribers, what Netflix was really doing was a de facto price hike on the people that might have been sharing those passwords, and now the same households are paying double.

So I think we're going to start to see that it's going to be very difficult for Netflix to continue to increase the way that it has, and the rubber's really going to meet the road, Maybe not this quarter because they're adding 4 million subscribers this quarter, according to expectations. But as the quarters go ahead. Well, you get more scrutiny on a moderating revenue growth versus an elevated to some multiple on the stock 32 times forward. So how does one justify the other if the other is moderating in any way? Yeah, it's going to be tough.

And that's why Netflix is going to have to go with these big bets. And Q4 to me is the quarter of big bets for Netflix. We have Squid Game Season 2 coming out. That's going to juice the numbers. And of course, the NFL. I think it's going to be the best $150 million that Netflix has ever spent in its life because you have great games coming out on Christmas Day. I know the Chiefs, the Steelers, the Ravens, the Texans are going to play exclusively on Netflix on Christmas, and that's going to juice the numbers.

But you're going to need a strategy that's going to continue to have these hits moving forward for Netflix to be able to justify its price. Remember, a massive run up over the past year, and it's actually started to moderate a little bit after hitting its all time highs last week. And I think that's investors seeing, OK, there might be a limit to this. It's always hard, Mike, to gauge, sort of pull forward. You just never really know what's what. We're debating that with NVIDIA. It's true. It is true. I mean, usually the market gets it directionally right. And the way the overall market acts, the pull forward doesn't always work. Usually strong markets, they get further strength

eventually. When it comes to an NVIDIA, obviously a little bit of a different story. To some degree, people are hiding in the most reliable, cleanest earnings model out there in the space, which is Netflix when it comes to anything related to media. We'll see it just moments away. Alex, thank you. Seema, of course, thanks to you as well. Mike Santoli, as always. Bell's going to ring. It's going to ring in a new record close for the Dow.

There it is. We'll be positive, too, on the S&P fairly, the Nasdaq as always. Bell's going to ring. It's going to ring in a new record close for the Dow. There it is. We'll be positive, too, on the S&P fairly, the Nasdaq as well. We'll send it into overtime. That's Flick Looming Large.