Closing Bell - Closing Bell Overtime 5/30/24

Episode Date: May 30, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Salesforce hitting an air pocket and skewing the major averages lower today. The NASDAQ also finishing right near the lows of the session, but it was a more mixed picture beneath the surface. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Yeah, and if you thought yesterday's show was packed with earnings, today's going to be even busier. Reports coming from Dell, Marvell, Gap, Costco, Nordstrom, NetApp, and many more. We're going to bring you all the numbers and expert analysis of those results. But first, let's begin with today's action.

Stocks pulling back as Salesforce weighs heavily on the Dow and the S&P 500. Plenty of green on the screen today, though. Most of the S&P 500 was higher, even though the index overall wasn't. The rest were 2,000 climbing, and nearly every S&P 500 was higher, even though the index overall wasn't. The rest of 2000 climbing and nearly every S&P sector finishing higher. Let's bring in Samir Samana of Wells Fargo Investment Institute and bring back our own CNBC senior markets commentator, Mike Santoli. Samir, I'm looking at this overall market action and what looks to me like a lot of sales force impact, maybe in a way like we didn't get a lot of NVIDIA impact after its positive report, but the WCLD, WisdomTree's cloud computing fund, is down more than 3.5% today.

A lot of these smaller software needs seeming to react. Does that tell you anything about the psychology of this market and perhaps where it goes from here? I think it tells me that where multiples are means that you have to beat and raise, and you have to beat and raise above probably the whisper number, not the estimates that you see in a lot of places, but the real number. And if you don't, you're going to get taken to the wood chipper. And I think that's what happened to the large software company that reported last night. And I think it probably called into question, you know,

the near-term momentum for a lot of the themes that the market's been running on. Yeah, not just the woodshed, but the wood chipper. Mike Santoli, there are some names that have had some decently strong reports that also suffered in today's print. Is there a time when you recall when we had a report recently where so many others reacted off of it? In terms of Salesforce today, it's tough to actually find one where you did have that broad an impact, I guess, in recent memory. I think what it tells us partially is that the market is suffering a little bit from a scarcity of high conviction themes that investors are

willing to pay up for at these levels. In the absence of a clear sight toward rate cuts and when yields are not falling, but they're rising until today, and when you have a little bit of a question about exactly the pacing of the broad economic growth, well, all those things create doubt around everything but the hardware infrastructure investment theme and to a lesser degree, some of the industrial subsets of that. So I think it's a little bit of we have to test ourselves for our belief in exactly what the overall economy is going to be doing, and software is definitely seen as more of a victim than a beneficiary of a lot of those trends.

And today, you know, maybe it overshot in the short term, but it definitely illustrated that. Yeah, Samir, just riffing off of what Mike just said there, how much then does this market hinge on the PCE reading and some of the other macro data we get from here on out, especially given the fact that Fed talk has been leaning more hawkish lately? Yeah, I mean, I don't I still don't see what the market sees, you know, I mean, with the 10 years still as low as it is, I mean, everything suggests that we're still in a pretty solid environment with, you know, inflation kind of kind of being really stubborn. I know that some of the retailers have mentioned that the low end consumer is starting to flag. We see the same thing, but at least at the aggregate level, things still seem pretty, pretty solid, right? I mean, you've got GDP now running, you know, in the high threes, you throw in kind of either CPI or PC, you've got almost 5% to 6% nominal GDP.

So, you know, I think you could still see rates test higher levels, and I think puts a lot of downward pressure on the markets. Now, you know, it could be the print tomorrow maybe doesn't sync with that, but I think more broadly that's the trend. Okay. Well, we've got, speaking of tech, we've got our first earnings report out. NetApp results are here, and Pippa Stevens has those numbers. Pippa. Hey, Morgan.

NetApp beating on the top and bottom line during Q4. EPS coming in at an adjusted 180. That was a penny ahead of estimates. Revenue at $1.67 billion, also slightly ahead of the $1.66 billion Wall Street was looking for. Now, Q1 revenues are basically in line with full-year revenues slightly above. The company did give strong full-year EPS guidance, $680 to $7 versus the $674 that Wall Street was looking for. The stock up about 3%. Morgan? All right.

Pippa Stevens, thank you. Mike Santoli, I'll get your response to that, especially on a day where, as you just mentioned, software really did take it on the chin because there is this shifting narrative in the market, given some of the reports, including Salesforce and including some others we've gotten in the last, I'll say, week that suggests that maybe some of those legacy players will face more headwinds rather than tailwinds associated with AI, at least here in the near term. Yeah, basically, the market was on the hunt today for any software company whose model is locking you into proprietary subscriptions that's billed by the seat, by the employee. That's not necessarily what we're talking about, obviously, with NetApp. They beat by just enough, I think, in the most recent quarter. And then the guidance, if you're able to actually raise sites, this is already a name that's been moving higher pretty aggressively.

And you did have pretty good sponsorship up. So basically confirming a bullish expectation. Yeah, especially given what we got from Pure Storage yesterday in the storage space, similar to NetApp. That follows through. Meanwhile, speaking of hardware, Dell earnings are out. Christina Parts-Nevelis has those numbers. Christina.

Let's start with the Q1 results. What we're seeing is an EPS of $1.27, so a slight beat there, on revenues of $22.24 billion, which is also higher than anticipated. If we were to break it down into their categories, the infrastructure solutions group, which includes servers and networking, that came in at $9.2 billion. They said that they saw a record quarter for servers and networking, so that was slightly higher than what the street anticipated. And then their client solutions group, which encompasses hardware, PCs and monitors, that came in at $12 billion, slightly higher than what the street was anticipating,

according to FactSet numbers. And they claim that there's no company better suited to bring AI to enterprise, which is what I guess everybody wants to hear at the moment. However, there's no guidance just yet, and the stock is dropping quite dramatically, down 9%. Yeah, pretty high expectations here, Samir. And I know, actually, let me go to Mike Santoli here, because I know you don't want to talk about individual stocks. I know Supermicro might take issue with Dell's characterization

of its positioning here in AI hardware. But it's interesting contrast, I think, between how we saw HPQ move, which is more consumer hardware, even HPE, I think, with lower expectations responded better, how we're seeing Pure and NetApp move on the hardware side, and then Dell, which has had this strong run sort of pulled up perhaps by NVIDIA, at least having this initial move down. Mike, what do you make of it? I do think it's, I mean, it's all about the positioning ahead of time, the stock up so much.

With this pullback to $155 or thereabouts, it's only taking you back around a week. I mean, that's how much of a melt-up you got in the wake of NVIDIA's numbers. So I do think you have to keep that much in context. In terms of the estimate revisions that have been going up aggressively for Dell, it's mostly about kind of next year. Yes, there's definitely some enhanced growth expected for the current fiscal year. But next year is when you start to justify that run in the stock according to the valuation. So I don't know that you want to say for sure that

the market has kind of rendered its final verdict on the quarter and the trajectory for Dell just yet. Always love the Mike Santoli context. Well, we've got another earnings mover. Nordstrom results are out. Melissa Repko has those numbers. Melissa. Hi, Morgan. Nordstrom missed on earnings, but beat on revenue. It posted a loss of 24 cents versus 8 cents expected.

And for revenue, it reported 3.34 billion versus 3.2 billion expected. The company stuck by its forecast despite that miss. Interestingly, its off-price chain Nordstrom Rack was the strongest performer. Same store sales for Nordstrom Rack were up nearly 8% versus the rest of the brand, Nordstrom Stores and Website, which were up about 2%.

The company called out active wear, kids apparel, and women's apparel as strong growth areas. But interestingly, it missed on gross margins. And we'll have to wait to get a little bit more details here. It's unclear exactly what was weighing on the margins, but we'll listen for that on the earnings call. Back to you. All right. Perhaps some trading down happening there. Speaking of trading, Zscaler. Yeah, trading higher after being down almost 5% today. It is spiking on results. Julia Borsten has them. Julia. John, Zscaler beating on the top and bottom lines, also reporting guidance for the next quarter that is stronger than anticipated. The company's earnings of 88 cents per share ahead of estimates

of 66 cents per share, revenues of 553 million ahead of estimates of 536 million, and the company is guiding to fiscal fourth quarter revenues between $565 and $567 million. That's ahead of the midpoint of analyst expectations for guidance of $565 million. Now, also, the company's earnings per share, the guidance for the fiscal fourth quarter is a range of between $0. 69 and 70 cents. That's ahead of estimates of 68 cents. And the company is saying we are accelerating innovation, expanding our platform, and building a strong go-to-market team to scale our business to $5 billion and beyond in ARR.

Back over to you. All right, Julia. Thanks, Samir. I will ask you broadly about this one being in the security, cybersecurity space. We saw CrowdStrike down nine and a half percent today on this rough day for software. Zscaler was down four and a half percent before this spike higher on these results. Is there sort of a gut check happening around what to put in what bucket for investors as they digest Salesforce and now Dell and all these other dynamics? I think what you have to do is take a step back and say, you know, look, technology and tech plus,

I think, are here to stay, right? They've got a lot of secular drivers that will underpin earnings probably for years to come. But I think it comes back to multiples, positioning, sentiment, and kind of the narrative. And I would argue as recently as mid-April, you had a really great opportunity, probably in a lot of these names. I would argue over the last week or two, it's gotten really overdone, to Mike's point, right? You had both tech and comp services incredibly overbought, both absolute and relative, and an overall uptake. So you just came into this with very difficult expectations to meet.

So the question becomes now, what are those kind of undersold narratives? And I would say energy and industrials, to me, look really attractive at these levels. Again, I know they're out of favor. I know it seems like we'll never see oil prices going back up in a meaningful way. But I'm telling you, I think that's the next narrative that will eventually kind of come back into favor. Okay. Meantime, Zscaler up 11% right now, and Dell is down about 12%. We've got Marvell Technology earnings out. Christina Parts Nevelis has those numbers.

Yeah, this is a chip company that makes chips for networking, storage, and compute. So what we're seeing for Q1 earnings is an EPS of $0.24, which is less than what the street anticipated on revenue of $1.16 billion. Also a miss. Gross margins were a slight beat at 62.4% higher. The company's saying that they did provide Q1 revenues that were above their midpoint guidance, driven by, quote, stronger than forecasted demand for AI. Their data center revenue grew 87 percent year over year, yet the stock is down over 3 percent at the moment, most likely because of that miss. No guidance. Oh, here you go. Q2 revenue outlook in line, adjusted EPS outlook is a penny light. So light, stock reacting negatively.

All right. But the guidance bang on. Thanks, Christina. Ulta Beauty earnings out as well. Sima Modi has those. Sima. And John, speaking of guidance, Ulta Beauty lowering its fiscal year 2024 revenue, EPS and same store sales guidance, which is perhaps contributing to the stocks underperformance right now in overtime. Earnings did come in higher than expected, but we should point out that it did lower its guidance in early April, citing some of the competitive pressures. Now, in regards to why it's lowering its guidance for 2024, it's citing lower merchandise margins and higher inventory shrink, which is another way of saying theft.

Of course, certainly an issue that has challenged the broader retail sector. You'll see the stock has underperformed its peers down about 20 percent this year and again down just about 1 percent in overtime. Morgan. All right. Sima Modi, thank you. MongoDB earnings are out. Julia Borson has those numbers. Julia. MongoDB beating on the top and bottom line for the quarter, but it's guidance for the next quarter and for the full fiscal year coming in lighter than anticipated. That's ending the stock plummeting now down 24 percent in after hours trading. Just to dig into some of the numbers here. Earnings per share of 51 cents in the quarter adjusted. That's ahead of estimates of 40 cents.

Revenues of 451 million. That's 11 million more than estimated by analysts. But the company sees fiscal second quarter revenues in a range of $460 to $464 million versus the $470 million estimated and EPS in a range of $0.46 to $0.49 below the estimate of $0.58. The company also guiding to full-year revenues, fiscal full-year revenues in a range below the estimates and also earnings per share between 215 and 230. The estimate is for 250. The company is explaining what's going on here, saying that they delivered solid first quarter results highlighted by 32 percent Atlas revenue growth, but said we had a slower than expected start to the year for both Atlas consumption growth and new workload wins, which will have a downstream impact for the remainder of fiscal 2025.

Back over to you. That stock is now down 24.5%. Big move from MongoDB. Julia Borsten, thank you. Mike Santoli, I'm going to go to you on this one, given what we've now heard from MongoDB in terms of that lighter than expected guidance, what we've heard from Salesforce, what we heard from Workday last week and a number of others. It really is not so differently than retail where the consumer is concerned on the software and tech side. It really is a mixed bag and it really depends on the company and depends on the product.

It depends on all of those things, whether you're in the way of the big, you know, budget flush going in the direction of the of the AI and related areas, or if you're not. I do think also trends are persistent. You know, MongoDB missed it is missing in terms of revenue guidance and earnings guidance for the full year to 15 to 230. They're so OK, fine. They were expected to 50 three months ago. The estimate was 327. They said, OK, fine. They were expected to do 250. Three months ago, the estimate was 327. So in other words, a big downward revision cycle going into this reporting period and then continuing to cascade from there. So obviously, that's where the market's sort of selling first and then figuring out the details later. What I do find interesting, though, Ulta had been pre-sold into all this, down only 1% on kind of a miss, even if it was up today because people read through Sephora's numbers, thought that there were good things going on in beauty.

There was a $560 stock, you know, recently, several weeks ago, a couple months ago, let's say. So I do think that you've got positioning kind of cleaned out of that one. This is a really interesting report, I think, Mike, from MongoDB. I view it as sort of a smaller tech but up-and-coming tech bellwether. Different reasons for these guidance misses between Salesforce, Nutanix, and Mongo, but huge moves. Okay, now, Gap earnings are out. Melissa Repko, back to you with those. Melissa.

Hey, John. So a big beat for Gap on earnings, and a beat on revenue, too. It's a strong sign as the company tries to revive its brand and win back shoppers. It reported 41 cents versus 14 cents expected on revenue. Gap reported 3.4 billion versus 3.29 billion expected. The company raised its guidance, citing the first quarter and gains it posted, but it also noted continued uncertainty with the consumer and the macro environment. Interestingly, same-store sales citing the first quarter and gains it posted, but it also noted continued uncertainty with the consumer and the macro environment.

Interestingly, same-store sales were positive across all of the company's brands, so everything from Old Navy to Athleta to Banana Republic. And Athleta was actually the strongest brand with same-store sales up 5%. Could be because of easier compares. It's been challenged with the activewear category under some pressure. Old Navy also had positive sales.

Gap did as well, and Banana. So some promising signs for that company as it's under a new CEO. John. All right, I'll take it. Melissa Repko, thank you. Shares are up almost 10% right now. Samir Samana, thank you for joining us. Mike Santoli, we'll see you a little bit later in the hour.

We've got some other news crossing as well. Shares of Palantir, those moved higher today in the regular trading session after the Defense Department awarded an up to $480 million fixed price contract through the Army for the Maven smart system prototype. Well, just this hour, just moments ago, Palantir issuing a release detailing the award, but also disclosing an additional $33 million other transaction award that enables the company to make its tech available to bring on other ventures and startups faster. What all of this signals is a significant step in the Pentagon strategy to build an AI ecosystem. DoD is tapping Palantir to provide the software infrastructure to do it. So think AI used for joint fires and targeting contested logistics. For example, how do you apply AI to assess military readiness or best plan when

mobilizing in contested environments? Palantir's head of defense growth, Shannon Clark, telling me this is deploying to thousands of users from the military's combatant commands across the globe to the most senior leadership in the Pentagon. It's happening now in real time. Clark saying, quote, it's very meaningful to this company, but it's actually really meaningful for the department and the warfighter because it's DOD saying, hey, a few years ago, we had this idea Palantir built through a competitive process, this prototype. And we're now saying we want to move that prototype into production. So that is basically what has been signaled by the DOD news in regards to Palantir in the last 24 hours. So we'll continue to monitor that. In the meantime, Dell's big run

has been the talk of Wall Street as the company gets caught up in the AI hype. But the stock, as we've mentioned, it's tanking in overtime. It's now down about 13.5%. We're going to talk to an analyst about this afternoon's results that are pulling the stock lower. And later, new Berger Berman president Joe Amato is going to join us to talk about this renewed bout of volatility in the market and where he's advising clients to put money to work this summer. Overtime is back in two. Welcome back. Shares of Dell falling double digits despite posting a beat on the top and bottom line.

Joining us now is Evercore ISI Senior Managing Director Amit Daryanani. He has an outperform rating at $165 price target. It's great to have you on. And I'm just going to start right there. Why is the stock down so much? Is it just a reflection of the environment we're in here and investor sentiment and how big the expectations were going into this report? Yeah, I mean, listen, I think the last part of what you said, right, expectations were really high into the print.

The stock's up, I don't know, like 120 percent for the year, 30, 40 percent in the last month alone. It's the bogey that we kept hearing the whole, you know, into the sprint was the backlog needed to be something not the $4 billion, $4, $4.5 billion. And that number, I think, came in at $3.8 billion. It's a great number, personally, for the long-term trajectory. But that number did miss the buy-side whispers that I suspect, given the run-up on the stock, that it was really driving the reaction off the market. What to make of infrastructure solutions, which posted revenue of $9.2 billion, was up 22% year over year. They said record servers and networking revenue,

which was up 42%. We know this has a direct correlation to NVIDIA and GPUs and the build out of that infrastructure and those AI capabilities. Did it need to be stronger? I guess just how to think about the growth they're seeing there versus everything else that the company makes yeah absolutely in the way i actually part of the issue they've had this backlog number is they were able to ship a lot more ai servers than we expected them to right and so you know the expectation into the sprint was they might ship 1 to 1.2 billion of ai servers they ended up being 1.7 billion of it, right? If you take that extra 5, 6, 7 million, that would put the backlog bogey 3.8 billion in the mid-force very comfortably, right?

And so part of the dynamic, I think, is the revenue recognition from AI servers is improving very well. Could be a reflection of perhaps the bottlenecks around NVIDIA and GPU allocations that are starting to alleviate. I think that's an incremental positive sign for the entire ecosystem. You still have a way to listen to their guide for the full year in terms of what AI servers are going to do for the fiscal year for them right now. I mean, some really interesting cross-currents I see here. I mean, NetApp and Pure on the storage side of hardware, software,

have moved higher in a way after earnings, a pure loss to those gains. NetApp has them right now after its report. Snowflake is down 3.5% right now. No report, maybe just on the environment itself. How much valuation shift do you think we're going to get based on the excitement there's been over transformation, over AI, as some of these guidance numbers get get sobering maybe sobering is too strong a word no listen to this will be

a benefit reality check that this is not a you know straight line up there's gonna be bumps around the way if you may you know I listen I do think you listen to pure if you listen to NetApp and the down numbers actually stand out a bit in terms of the fact that they had no growth, storage was flat for them. Storage, I think, away from AI is seeing a really good cyclical recovery, and you're seeing this in Pure and NetApp and a few other companies. The expectation for Dell, and we want to hear this on the call, is, is there a story about a stronger, higher attached rate of storage with AI servers? Because that could certainly help the margin profile for this company.

And one of the things I'll tell you that really stands out here, in the infrastructure business, operating margins were down a couple hundred basis points to about 8.5%. Essentially telling you that these AI servers are coming in at very low 2%, 3% operating margins right now for them. All right. Amit Dharianati, thanks. I'm going to talk to George Kurian over at NetApp tomorrow, tell you what he says, if it's interesting. Meanwhile, Costco earnings are out.

Melissa Repko, back yet again with the numbers on this big box. Lots of retail earnings today. Costco beat on the top and bottom line, John. It reported earnings per share of $3.78. That was an 8-cent beat. For revenue, it reported $ per share of $3.78. That was an eight cent beat. For revenue, it reported $58.52 billion. That was better than the $58.07 that was expected. And same-store sales were up 6.6% across the company, including the impact of gasoline prices and currency exchange. In the U.S., same-store sales were up 6.2%. And online sales were a standout in the quarter, with e-commerce sales

up 20.7 percent, John. Interesting. Moderating inflation, maybe not so bad for them after all. Melissa, thanks. Thanks. After the break, Neuberger-Berman president and CIO Joe Amato, who oversees nearly half a trillion dollars under management, shares his latest thinking on this market. Plus, we'll get his take on Nelson Peltz's decision to sell his stake in Disney. Remember, Neuberger-Berman had supported Peltz's director candidates before last month's shareholder vote. We'll be right back. Welcome back. It's been a downbeat week for the Bulls, but the major averages are tracking to close out the month of May in the green. Our next guest says more volatility could be on the way. Joining us now is Joe Amato from Neuberger Berman.

The firm oversees four hundred seventy four billion dollars in assets. Joe certainly got some volatility here in overtime yesterday. It was Salesforce. Today, Dell and MongoDB are down big, but Zscaler is up 14.5%. Elastic is higher as well. What's driving the volatility that you see ahead? Hi, John. Nice to be with you this afternoon. I think the volatility that you're seeing in some of the stocks you referenced is probably more a function of the dispersion going on in the economy really below the surface. And as much as we're confident on overall levels of economic growth, first quarter

was okay. Second quarter seems to be running at a reasonable clip. Below the surface, there's still a lot of grinding that's going on. There are companies that are doing well, companies that are doing poorly. And that bifurcation, I think, is only going to continue and create additional volatility. If you look at earnings of large cap companies, the first quarter earnings, by and large, were pretty strong. They were up high single digits. But if you look at small caps, the Russell 2000 earnings were down about 9% in the first quarter. So that gives you an indication of the level of sort of bifurcation going on and dispersion going on in the economy. So in this environment, how do you decide what the fair price to pay for hypothetical future earnings or even real future earnings,

especially for smaller caps when you don't know where interest rates are going to be? Well, certainly we do a lot of, you know, bottom-up fundamental work on individual companies. And, you know, not every company is driven just by interest rates. Certainly interest rates and the level of interest rates have an effect in the tightening of financial conditions that we've seen over the course of the last 18 months or so is certainly having its effect, particularly on smaller companies. And that's a big reason why you're seeing this bifurcation. But we take a very long-term approach. And we think the direction of travel on inflation is lower, may take longer, as you

guys have certainly talked about. We think the direction of travel on rates is lower. And I think from a long-term standpoint, from an equity perspective, we think that creates a reasonably constructive environment for risk-taking. How should we be thinking about the fiscal spending environment here? Because on the one hand, you can argue that it's helping to buoy economic growth. Yes, I realize the first quarter GDP number was just revised slightly lower, but it's been a big part of that. Some of those government dollars that have gone out into parts of the economy with some of these mega infrastructure projects and the like that are starting to be carried out. On the other hand, it means a lot more borrowing. And we're seeing that impact in the bond market, too. Morgan, you raise a really important point.

The whole question of debt sustainability, I think, is going to rear its ugly head at some point. And I think right now many are sort of watching this political environment closely, trying to gauge what's going to happen in November. And then once that's decided, you'll have a better sense for, okay, what's the fiscal outlook? Will you have an extension of tax cuts? Will you have more spending? Will you have some level of fiscal discipline? And I think that's a big issue that's hanging out there and one that we worry a lot about. Right now and over

the course of the last couple of years, the fiscal spend has certainly helped, as you say, buoy economic growth, but you can't do that forever. And the debt levels as a percent of GDP, if you continue the spending trends you're seeing right now, is going to be a pretty ugly picture going out 10, 20 years from now. So it's clearly not something that we think makes a lot of sense. And the politicians are going to have to come together and figure out how to create a more disciplined fiscal picture. So the last time you were on with us, we asked you about Disney because we had that very heated proxy fight. Nelson Peltz, you know, your firm had come out and basically supported the Peltz position on Disney.

We get the news in the last call at 12, 24 hours that Peltz has sold out of his stake of Disney. Just want to get your thoughts on that and perhaps more broadly what this proxy season and what the increase in activist investor pressures on companies has meant for stocks. Well, I don't really have a comment on what on what Nelson did with with his stock. Best to reach out to him. But in I think the is, look, we take our role as owners of companies really, really seriously, right? We want to be very engaged with companies. In the case of Disney,

that issue was around, in our view, the important decision the board had to make on succession at some point down the road, who is going to succeed Bob Iger. And as has been much talked about, the last decision that board made was not a particularly good one. So we felt that another set of independent eyes and ears in the context of those board discussions as it relates to the succession plan made a lot of sense. We think ultimately choosing the CEO is probably the most important job for board of directors. I think broadly in the context of the proxy season, you're certainly seeing much more engagement from shareholders with companies and vice versa, which we think is a great thing. You know, as you've seen passive increase their ownership of companies, some most companies may

be 30 percent owned by passive investors, right? That's not really active engagement. And we think it's an important element of the efficient capital allocation process for shareholders, active shareholders like us to engage with companies. All right. Well, thank you for engaging with us and bringing that perspective. Joe Amato from Neuberger Berman. Well, it's time now for a CNBC News Update with Pippa Stevens. Pippa. Hey, Morgan, the jury in the Trump hush money trial has now been deliberating for more than nine hours and are expected to finish for the day any minute. The jurors began their second day of deliberations

after a readback this morning of jury instructions and testimony from former Trump lawyer Michael Cohen and former National Enquirer publisher David Pecker. A U.S. official confirms to NBC News that the Biden administration has secretly given permission to Ukraine to strike inside Russia using U.S. weapons. Politico first reported the news, and the permission is said to only extend to the area near Kharkiv, Ukraine's second largest city, adding that the policy to ban long-range strikes inside Russia, such as an attack on Moscow, has not changed. And Chief Justice John Roberts today declined to meet with Democratic senators

about ethics issues with the court after the recent controversy over the flying of certain flags at Justice Alito's homes. Roberts cited concerns about maintaining judicial independence as the reason. John and Morgan, back to you. All right, Pippa Stevens, thank you. After the break, Mike Santoli looks at the surprising list of hot tech stocks that are not in the S&P 500, including two of today's earnings movers. Speaking of earnings, take a look at shares of Elastic, the enterprise search company beating on earnings by a penny at 21 cents per share. Revenue also above estimates at $335 million. Guidance mostly higher as well. We'll be right back. We have a news alert on Apple.

Steve Kovach joins us by phone. Steve. This is a pretty significant one. According to a Bloomberg report just published here, Siri is going to get a big upgrade. Now, we've heard reports that Siri is going to get an upgrade before, but this is some more detail saying Siri is going to have control over individual apps, meaning in a more deeper way, you can use your voice or text to kind of go into a separate app and control things and even do multi-step tasks. This is also really interesting. Even though the report says it's only going to be on Apple apps at first,

you can imagine this opening up to developers and unleashing a huge wave of AI activity in third-party apps as well sometime down the road, but this would be a building block towards that. So really interesting thing, a report out here right now out of Bloomberg. And then, you know, we're also expecting, of course, more details on these AI plans from Apple on June 10th at WWDC, guys. All right, Steve, thanks. Especially interesting, Morgan, because Apple's invitation to its next event referenced Swift, which is their main developer tool. So interesting. AI and Swift. The expectations here are now building around this event on June 10th. All right. Well, up next, a closer look at two of today's earnings movers, Dell and Marvel and why Marvell, I should say,

and why those large cap tech names are not in the S&P 500. Stay with us. We have breaking news on the trial of former President Trump. Let's get to Megan Casella in Washington. Megan. Hey, John. So the jury has said there is a verdict in the Trump trial and the Hushman trial that's going on in New York. We're expecting that within 30 minutes. We do not know what's coming, but this is, of course, what they have been waiting for. Six-week trial, and we should get a verdict within 30 minutes. We'll bring that to you as soon as we have it. Okay. Megan Casella, thank you. We've

got 30 minutes before we get that news. So let's talk a little bit more about the tech universe. Dell and Marvell are falling on the back of their first quarter results. Those two names are among the hot tech stocks not included in the S&P 500. Mike Santoli is back. He's got more on that group of companies. Mike. Yeah, so that group, Morgan, it's actually known as the S&P Completion Index. It's everything in the U.S. stock market aside from the S&P 500. It's tracked by this Vanguard ETF, the VXF. I like to track it as a kind of risk appetite tell.

Some speculative energy in the equity market is often manifest here. Now, this is the pandemic period, that bull market phase when it was very speculative. You had unprofitable tech, SPACs, other IPOs, meme stocks, everything working almost at the expense of big established companies within the S&P 500. What we've seen recently is quite the opposite. The NVIDIA represents this, right? Profoundly profitable companies that are also huge and kind of impervious to a lot of the macro pressure. So you see this completion index has been lagging. Now, there's a big cluster of tech market cap outside the S&P that's at the top of

this index. These are not the biggest holdings in the index, but they are representative of some of the top, let's say, couple of dozen stocks right here. Dell, as you mentioned, by far the largest of these. This is, by the way, before the 10% drop after the market closed. But you see here, all these stocks are two or three times as big as the largest stock in the mid-cap.

So basically more than big enough to qualify for the S&P. Various reasons they're not. Sometimes they don't meet the profitability standard of the S&P 500 or there's an ownership structure issue, voting rights, things like that, that maybe has kept them out to this point. Yeah. And I'm glad you have Palantir on there, which is actually up about one and a half percent right now. We brought that news about the DOD and Palantir and the contract earlier in the show. But to your point, it does seem like there's quite a pipeline of prospective tech names that could make their way into the SPX

here in the future. Yes. Assuming a lot of these eventually qualify by S&P standards, I guess the question is, you know, how much of an appetite does S&P, the committee, have to load up more tech? There's about $800 billion worth of what we would define as tech companies at the top of this completion index that are not in the S&P that theoretically could be in there. I mean, there's 3,500 stocks in this index. So most of them are just small caps and such. These are the outliers, John. All right. Mike Santoli, thank you. Up next, the CEO of a major company in the industrial and defense space on why his company is an under-the-radar AI and weight loss drug play. We'll be right back. Welcome back to Overtime. Two of the big trends driving outside stock performance this year, AI and GLP-1 drugs.

Jacob Solutions is one company with its hands in both of these trends and more. It is one of the top players in advanced facilities, helping design factories for production of GLP-1s. It's involved in chips, power and cooling for data centers and more. Shares are up more than 20% in the past year, recently hit an all-time high. So joining us here on set, Jacob Solutions CEO Bob Pregata. Bob, it's great to have you here. There's so much to talk about, but let's start there. The fact that you're very well positioned for these secular growth trends

and specifically the designing and engineering of these big, what are essentially infrastructure projects. They are. They are. You know, it's interesting. I was listening earlier to the show and that kind of AI lifecycle, everything from the storage and that kind of AI lifecycle, everything from the storage and the enterprise AI component where the hyperscalers will play with the data center. We do the design and the consulting around that space. And now with the power requirements that

are really, really putting some new capacity needs in the country. In fact, I think I just read a document that said that in 2028, almost 7% of the country's power consumption will be by these data centers. But there's also a big cooling requirement as well. So that's where Jacobs plays, especially from a water perspective. So what are you seeing in terms of incoming demand? And when we talk about all of this infrastructure build-out that needs to happen for this AI era to be fully realized, how quickly can it happen? It's in real time right now, Morgan. So then we're the recipient of the use of AI in enabling our services and kind of all the intellectual horsepower that we have in the company. And so we use AI around everything from operating and maintaining water treatment plants.

We use AI in predictive analysis around floods and flood modeling. It's a tool that we have called Flood Modeler. And then we use AI in the engagement with our clients, review of plans, review of specifications, stakeholder engagement. So AI is kind of enabling our entire business as we deliver solutions to the market. Solid year to the market. Solid year for the stock. If I pull back more broadly, you're trading about where you were three years ago, which in a way is surprising because of all that we've seen happening in AI,

in GLP-1s over that period. So how should investors think about when they start to see a revenue impact for you of those changes in cooling, liquid cooling, GLP-1s? We just had Lily saying that they're going to spend $6 billion in Indiana. Are you going to get to build that, and when does the money come in? Right now, we design pretty much every GLP-1 facility, both in Europe as well as in the U.S. We do play in it. I'd say, John, over the course of that same three years, we had some offsetting movements in our company. One side of our company, John, over the course of that same three years, we had some offsetting movements in our company. One side of our company, infrastructure, advanced facilities. Other side of our company, a government services business.

Both two great businesses. So the growth that we were seeing in all the things that you just mentioned with regards to infrastructure and advanced facilities was being muted a bit because you've got another side of your business that's growing at a slower pace. Now, spinning that out, merging it with the pure play in government services, and having the investment requirements that we need for that business is really going to unlock the value on our infrastructure business. And so that growth, in fact, the growth of that business already has been strong. Yeah. It's what I've been calling portfolio simplification. It's been a trend that we've actually been seeing really across the industrial space and beyond. Investors, I think,

more happily wrapping their arms around more pure play, straightforward narratives with companies in the market right now. In terms of the government services business that is being merged with another company will spin out and be realized come September. Leidos, Booz Allen, these are some of the direct comparisons. How big is the opportunity on the government services side, especially as we do talk about, even just earlier this hour, Palantir winning a contract with the government to start enabling all of the AI software that's going to be needed for the military of the future? I think it's a tremendous opportunity. If you look at the three main areas that now the new merged entity will be, are focusing on,

talking about aerospace and defense, weapon sustainment, which is where Palantir also plays, as well as nuclear remediation and nuclear new builds. You know, those three areas, Amentum and Jacobs, our CMS, our government services business,

are number one players. And they're a pure play services provider rather than having an equipment component to their portfolio. So kind of being agnostic to the equipment really ends up allowing them to be a real advisor to DOD and other government agencies. It's really going to unlock value on the other side, too. So it's exciting. It's an exciting time to be a shareholder. All right. Bob Purgato of Jacob Solutions, thanks for joining us here on set. Thanks for having me. We didn't even talk about water infrastructure, so you have to come back so we can have that conversation. That's the biggest

part of our business. All right. Well, thank you. Still ahead, how a key inflation reading tomorrow could impact the market and your money. And before we head to break, cue the QR code to sign up for the latest installment of my On the Other Hand newsletter. This week's debate was as college graduation season winds down, should commencement speeches avoid controversial topics? Just focus on inspiration? Well, scan that code on your screen or type in cnbc.com slash O-T-O-H to join the conversation. Be right back. Welcome back to Overtime. Some huge stock moves happening right here, right now in Overtime. First, on the downside, Dell sinking. Despite topping estimates, the stock had been up nearly 120 percent this year heading into this print. As you can see, down 12% right now.

MongoDB is sinking as well. Guidance came in well below expectations, down about 24%. Now to the winners. Gap shooting higher after beating on both lines, raising full-year guidance. Those shares are up 20%. And Ambarella is higher on upbeat second quarter revenue guidance as well. A lot of double-digit moves. Indeed.

And looking ahead, inflation is going to take center stage tomorrow. Investors in the Fed will be closely watching the April personal consumption expenditures price index, which is expected to increase 2.7% year-on-year. The core PCE is seen rising 2.7% as well. Also on the economic calendar, the April personal income and consumer spending reports. So all that being the case, going back to what we saw here in overtime, lots of guidance misses on stocks that have been bid up a lot, but for different reasons. Yeah. Yields took a breather. Russell up 1%.

Yeah. And of course, there's a lot more coming. The Trump trial verdict, just a few minutes, up on overtime. That's going to do it for us. Fast Money begins right now.