Closing Bell - Closing Bell Overtime: Accenture CEO On Retraining Your Workforce For AI; Fifth Third CEO On The Health Of Regional Banks 3/5/24

Episode Date: March 5, 2024

A sell off in tech sinking stocks today. Vital Knowledge’s Adam Crisfulli and EMJ Capital’s Eric Jackson break down what the moves mean, plus earnings from Crowdstrike, Box, Nordstrom and Ross Stores. CFRA analyst Zachary Warring digs deeper in retail and Needham analyst Alex Henderson reacts to Crowdstrike’s strong report. Plus, Accenture CEO Julia Sweet on the AI skills gap, Fifth Third CEO Tim Spence on regional bank volatility and AeroVironment CEO Wahid Nawabi on the future of autonomous warfare.  

A lot of red on the screen. Stocks staging a late-day sell-off as the major averages close. Though off-session lows, tech really taking it on the chin. That's the scorecard on Wall Street, but the action's just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Yeah, Apple weighing heavily on the market on a report iPhone sales in China plunged to start the year. Tech is by far the worst- worst performing sector today as a result of that. And crypto investors getting whiplash today, too. Bitcoin hitting an intraday high before staging a sharp pullback. Now we are awaiting earnings from CrowdStrike, Box, HashiCorp,

Nordstrom and Ross Stores. We're going to bring you all of those results as soon as they are released. As we await those earnings, though, let's get to our market panel. Joining us now is Vital Knowledge founder Adam Crisafulli and CNBC Senior Markets Commentator Mike Santoli. Adam, we had all the major averages finish the day down 1% or greater. Just looking at your notes from earlier today, you talk about purgatory. Is this it, or is this the beginning of a sharper pullback here? So I think it is still kind of a predatory. You still have these tailwinds that are in place, these macro tailwinds of disinflation,

resilient earnings, the approaching monetary pivot. But you still have, you know, on the flip side, there are a lot of excesses that are kind of being unwound. So a lot of that today in technology. I thought it was very interesting, the outperformance, the eco-weight S&P versus the market-weight S&P. That's largely a function of the severe selling that you're seeing in tech. And it almost seems like you're seeing a little bit of a pivot back towards what occurred in November, December,

where you had Treasuries rally on back of some dovish headlines and poor economic numbers. And that catalyzed a rotation into more of the equal weight sector, so cyclical and value stocks. You did see that today. Financials traded great as tech came for sale. And so that to me was much more interesting. It's more of a rotation where the overall capitalization S&P is still kind of in this purgatory, where it's going to churn and remove some of the excesses of the last several weeks in tech. Yeah. Mike, I mean, it seems to me that one of the key debates here, not just for the bond market, but for stocks as well, is whether this repricing of Fed rate cuts that we've seen in a more hawkish

direction in recent weeks is more a function of better growth, better economic growth backdrop, or whether this is a sign of sticky services inflation, particularly in housing, particularly on a day where we just had ISM services reading this morning that was pretty mixed. Yeah. And reflecting that we remain in suspense about inflation in terms of being fully comfortable that it's going the right way. And I think that explains at least part of the shadow over parts of the market. But again, as Adam was saying, the cyclical parts of the market are working. It's not as if the market's message is somehow raising alarms about the economic expansion. Maybe it should be on some level, but it's not at the moment.

So I do think that's somewhat a part of it. I also think coming into this week, you know, my thought was we are in the belief phase. So everyone believes we can have a good economy, Fed easing, and a kind of seamless rotation from the overbought growth in semis to other stuff. And sometimes the rotation, even if it happens, ends up being just a little bit, you know, higher friction and a little messier. And, you know, the baton gets dropped sometimes when it's it's transferred Adam I thought it was really interesting the way tech fell today so Microsoft actually fell more than Apple was down closer to 3%

meanwhile Nvidia and even super micro right which has been rocketing high those were actually in the green a little bit for the today it was the DevOps software stocks you know the c3 AIs which is in the green a little bit for today. It was the DevOps software stocks, you know, the C3 AIs, which is in the AI category, MongoDB, HashiCorp even, where we expect to get numbers in just a few minutes. Those seem to suffer the most. Yeah, and, you know, you could point to some fundamentals. You have the GitLab guidance, which is a little underwhelming. You have, like you mentioned before, the iPhone data points out of China. You know, you could find

some fundamental headlines, but it just felt more like some of the excesses that have been accumulating are kind of just now, you know, there's a little bit of a release going on. And that's really what's driving tech selling. It became too crowded. A lot of these prices were extended. You don't have a lot of evaluation support. Not so much a value that fundamentals have really taken a dramatic turn for the worse. We're going to get a couple of important tech data points. There is an ad with Avago, Broadcom, and Marvell earnings, and then in a couple weeks you have a big NVIDIA conference too. So I don't think it's so much people are looking at the tech landscape and saying fundamentals have

deteriorated dramatically, but it's more, in my opinion, just kind of a technical setup of positioning, sentiment, et cetera. And this kind of shift spurred by treasuries, the move in treasuries is an important catalyst back into some of these more valuable moves as well. I guess what I'm getting at, Mike, is that some of the relationships between these stocks or even groups of stocks seem to be breaking down. And maybe that's healthy, but, you know, you've got some AI stocks on the software side that are moving way lower, but you've got NVIDIA and Supermicro still higher. It used to be that you'd see, you know, on a risk-off day that the big tech names were still uniformly higher, but you've got Apple and Microsoft off a considerable amount, while, you know, Alphabet and, again, Nvidia doing better.

And then Tesla's in its own world. It's not even getting invited to the party anymore. Right. No, I think in broad terms a positive that you're seeing differentiation among those names. Now, remember, those seven stocks got to above 30% of the market cap of the S&P. So as they fall away, it does just create more opportunity for, you know, kind of treacherous wave action in the rest of the pool, you know, so to speak. So I think that's what we're largely seeing right here. Now, Apple is pretty oversold at this level.

It's kind of funny. Sometimes you'll see this thing. It's like, uh-oh, Apple's rolled over. It's on a relative basis. It's given back years of outperformance. And then you say, well, actually, it's looking like it's been as washed out as it has been for, you know, over a year. Maybe it's time for that one to come back. So you can have rotation within those groups as well.

I'm not convinced you want to see NVIDIA up every down day for the rest of the market. You don't necessarily want to have, you know, that sense out there that this is this unstoppable thing and no price is too high to pay for it. But, you know, the market can do what it will and prove everybody, including me, wrong. Yeah. I mean, we're talking tech, Adam, but the other area we really got to focus on, and we're getting some more of these types of results here imminently as well, is retail. The fact that Consumer Staples actually finished the day positively, one of three sectors to do so in the S&P, and that was really driven by Target, which had a 12 percent gain despite the fact that sales fell for the first time since 2016.

What does that tell us about the state of the market and how it's looking through the stretchedness of the consumer towards margins in this disinflationary environment? Yeah, I mean, I think the big story about TARN was all about margins. The comp numbers, the sales numbers didn't deviate too far from expectations, but they outperformed both on gross margins and operating margins. And that's a function of a variety of things. Cost cutting, leaner inventory so there's less markdowns.

You know, they're seeing disinflation or deflation outright on certain of their supply chain cause. They had a little bit less shrink than I think they were fearing. So it's all about cause right now with Target. And if you kind of listen to their commentary on the consumer in general, you know, I would say their tone is kind of the same as it has been. They acknowledge that the consumer is facing a lot of headwinds, but they are taking steps themselves on the operations side

and then capturing market share too. That was a big theme that they talked about, throwing out a new prime-like services plan that they hope to capture more subscribers in and create a new revenue stream. So it's a lot of company-specific actions that they're taking versus, I think, a real kind of positive indicator for the consumer overall, which is still, you know, at best, mixed.

Okay. Well, speaking of retailer earnings, Ross Stores and Nordstrom are both out. Courtney Reagan has the numbers for us. Hi, Court. Hi, Morgan. Let's go ahead and start with Ross Stores. So Ross Stores is coming in better than expected for earnings at $1.82. The street was looking for $1.65. Revenue also stronger than expected for Ross Storrs' quarter at $6.02 billion. The street was looking for $5.814 billion. Comps up 7%. The company is increasing both of its dividend and its buyback plan. When it comes to the guidance, that is

mixed. First quarter, better than expected. However, the full year looks a little weak. And the CEO, Barbara Rentler, goes on to say while inflation has moderated, things like housing and food costs are still elevated, as well as gasoline costs. That continues to pressure our low- to middle-income consumer. give a more conservative forecast. So that somewhat explains that piece of it. They also do note ongoing uncertainty in the macroeconomic and geopolitical environments. You can see shares bouncing around here after hours just about flat now for Ross stores. And then let's move on to Nordstrom, of course, the higher end department store. Those earnings are coming in at 96 cents adjusted. We're not necessarily sure that this is a comparable number because there is a supply chain impairment charge of 19 cents. So we just want to note that. But earnings at 96 cents adjusted, revenues are stronger than expected at 4.42 billion

compared to 4.39 billion dollars. Nordstrom's store revenues, so not comps, but the revenues, those were down 3 percent, but the rack business up nearly 15 percent. Again, revenues, not comps there. And then calling out categories like active beauty, women's apparel, those were the ones with the strongest growth. So continuing that active and beauty trend that we've heard from so many retailers, it's sort of all ends of the spectrum. And then when you look here at the forecast, they're forecasting full year revenues to be down 2 percent to up 1 percent versus the flat expectation. So somewhat bracketing there. And then their forward-looking earnings of $1.65 to $2.05, that range, again, unclear if that is comparable because of that impairment charge.

But Nordstrom shares are down here about 2.4 percent after hours as we wait for more from their call. John and Morgan, back to you. All right. Courtney Reagan, thank you. Meanwhile, HashiCorp earnings are out. I was just mentioning that a bunch of DevOps names were down in the day's trade. Now, this one is up slightly on a beat for Q4, but the guidance, not so much. Let me first give you the Q4, fiscal Q4 numbers. HashiCorp reports revenues of $155.8 million versus $148.3

million expected. The EPS comes in. This is non-GAAP EPS at five cents versus one cent expected. Now for the guide. Q1 revenue guide is $152 to $154 million. That That's 153 at the midpoint, which is pretty much bang on, slightly better than expected. EPS guidance, though, is as a range from a loss of two cents to just nothing at all when the street was expecting just break even, no earnings there. So slightly a miss there. And then on the full year guide, slight miss here. Revenue range $643 to $647 million. That's $645 at the midpoint. The street was looking for $654. EPS guide at the midpoint is $0.06. The street was looking for $0.14. Now, HashiCorp did also authorize share repurchase up to a quarter billion dollars.

And, you know, we'll see what CEO Dave McJanet has to say. He's going to join us exclusively tomorrow right here on Overtime. Looking forward to that. We've got a couple share repurchases here, but we've got more earnings as well. Kate Rogers has CrowdStrike. Those are out and she has the numbers. Hey there, Morgan. The stock is up by more than 18 percent right now. So a beat here on EPS, 95 cents adjusted, better than the 82 cents estimated. Revenue is also a beat, 845 million versus estimates of 839 million for the quarter.

Also better than expected guidance here. Q1 revenues in a range of between $902.2 to $905.8 million. That's higher than the $899 million estimated. Sees EPS for Q1 in a range of $89 to $90 cents, higher than the $82 cents estimated. Also, full-year revenues, $3.925 billion to $3.989 billion, higher than the $3.94 billion estimated. Also, EPS range for a full year $3.77 to $3.97, also higher than the $3.75 estimated. And also, the company announcing it has agreed to acquire Flow Security, the industry's first and only cloud data runtime security solution. CrowdStrike says that with this acquisition, it will have comprehensive real-time data protection spanning endpoint and cloud environments. The purchase price will be paid predominantly in cash, CrowdStrike says, with a portion delivered in the form of equity

subject to vesting conditions. No price tag on that acquisition just yet. Guys, back over to you. All right, big move. And I got to mention Zscaler and Palo Alto Networks are up in overtime in sympathy, it looks like. Meanwhile, box earnings are out as well. Steve Kovac has those numbers. Steve. Yeah, John, and shares are moving all over the place, currently positive up about 2% here after hours. Revenue just in line with estimates, $263 million. We are not comparing EPS, though they are reporting just an EPS of 42 cents a share and also increasing their buyback by $100 million. But the other big news here, aside another announcement here, expanding their partnership with Microsoft and using the Azure Cloud Open AI service. This is going to be what's powering the Box AI product that they're going to

start selling. General availability today, they were experimenting and testing it in the prior months. So that is being announced as well. We see shares now up almost 5 percent. So bouncing around quite a bit here, John. All right, Steve, thank you. Adam Cusifulli, I was mentioning other cyber stocks that are higher, perhaps in sympathy with CrowdStrike. CyberArk is another one of them up in overtime, almost 4 percent. We just had the CEO on yesterday saying how not all of these companies are the same. They're not all seeing what Palo Alto said that they were seeing. And now we see that playing out. Yes. Yeah. And, you know, it's interesting if you go back to the Palo Alto call and then some of the subsequent media interviews that CEO out, yes? Yeah, and it's interesting, if you go back to the Palo Alto call, and then some of the subsequent media interviews that

the CEO did, he was quite bullish about the fundamental landscape and demand for these products. Every day you seem to read about some new type of cyber breach, and so this is definitely top of mind when it comes to companies and their IT budgets. They kind of are pursuing this unique strategy, this platformization strategy, but the actual underlying demand is still pretty strong. And I think in general, from the looks of it, tech reports tonight are all pretty solid,

which again, it kind of speaks to the nature of the mood that we've seen in tech today as being more technical driven than fundamental. I think that, you know, fundamentally, these companies are still performing very well. There's still healthy demand for a lot of products. It was just an issue of stocks. Some of the excesses have been accumulating in tech stocks, and that had to be relieved versus kind of fundamental shifting.

But, you know, CrowdStrike, you know, pretty strong report and guide. And it looks like demand, again, is very healthy. Yeah, I mean, you've got Box and CrowdStrike, Mike, both up both up double digit percentages here in overtime on those earnings results. This has been a tech driven market. No way around it since the start of the year and really since last year as well. Does it have room to run? I guess that's the key question we keep coming back to when you talk about earnings growth for twenty twenty four. Is this such a key linchpin in terms of where we're going to see it? For sure. I mean, I think there's less it's less about tech as a big, you know, kind of blob of companies and more about where within it. And you're seeing that. I mean, the fact that CrowdStrike was sort of backing off a little bit before this report shows there's still this sensitivity of

are they in the right places? Do they have the right end demand? Now, the stock is is in the after market trading is now at a new high. It's, by the way, I think just about one of the biggest market caps outside of the S&P 500. It's not in there anymore. So it does seem to have a little bit of, you know, of an echo effect in the in the immediate group. That's probably a net positive thing. But I think aside from, you know, even within semis, massive differentiation of the equal weight semis. It looks nothing like AMD and NVIDIA and Broadcom.

So I do think it's about, you know, winners versus losers. It's not all boats being lifted. All right, Mike, we'll see you again in just a couple of minutes. Adam Christofouli, thank you. Now for more on the tech sell-off and this overtime action, let's bring in Eric Jackson, EMJ Capital President and Portfolio Manager. Eric, it looks to me like the action is changing a bit where it's not just, hey, there's the risky tech stocks and there are the big tech stocks,

even within big tech and across how one might look at risk in the smaller stocks. Things are shifting a bit, no? Yeah, they are. And I would agree with Mike's comment just there that, you know, where are the pockets in tech that you really want to take advantage of in 2024? For me, there's really kind of three key themes. One is AI, two is crypto, and three is biotechs. So I think that those are all going to fare well as the year continues to play out. Amongst the Mag7, I really think of it only as a terrific two currently. I own Meta and NVIDIA. NVIDIA, obviously, both fall into the AI theme and have had strong 2024 so far. So definitely you want to pick your spots from here out. So you had China's parliament meeting

and you have them issuing a 5% GDP forecast, which I think a lot of folks are raising their eyebrows about whether they're going to be able to do it. And if you look at some of the biggest movers of the market in the regular session today, it was AMD, Tesla, and Apple on China related news. How much does China matter to the tech narrative in 2024 and beyond? I would say, Morgan, you know, definitely it's key for those three names that you mentioned. Obviously, NVIDIA, you know, China was a major part of the growth story before.

However, NVIDIA's moved past that and with their recent earnings doing so well without really any effects from China, they're kind of now China-free. And then, you know, if China does well, it's sort of gravy on top of the NVIDIA story from here. For the rest of the tech market, though, China, I don't see it as that big a theme obviously you know if if china starts a major global economic downturn you know

it will pull tech with it um along along for the ride but but the rest of the of the names are really focused on the us you know their international stories are mostly European stories for the most part. So I don't think it should have a big impact on the broader set of tech companies. Eric, from a practical investing standpoint, how do you get into the stocks, the themes that you like here with the major averages, sure, suffering a bit on a day like today, but still near all time highs. Well, I mean, you have to make your own judgment about valuation. I think, you know, for crypto AI biotech, those themes that I said I like a lot, I think that they they they're still in there. You have to believe, obviously, that they're in the early stages of of kind of showing continued

growth, continued success, continued proof points, whether it's, you know, some new fancy drug kind of like Viking had last week, you know, sending a shot into it or, you know, the crypto story. I think the stealth rally in Bitcoin over these last two months has been remarkable. I'm not surprised that we pull back again from the all-time highs, but I think we're going to eventually break through those and go to brand new highs. That's going to surprise a lot of people. It's going to bring in a lot of investors. It's going to benefit Coinbase, which is one of my top holdings, because they get massively more profitable as trading and interest in crypto increases, not just in Bitcoin and Ethereum, but spreading out

to the broader altcoins as well. Yeah, it's certainly been one to watch. Eric Jackson, thanks for joining us. Thanks. Oddity tech earnings are out. Kay Rogers has those numbers. Kate. Hi, Morgan. And that stock is moving lower, I believe, on guidance. We will get there. Oddity EPS coming in better than expected. 17 cents adjusted higher than the 12 cents estimated. Also above the company's guidance of 10 to 12 cents. Revenues 97.2 million. We are not going to compare that number, but we should note they are up 44 percent year on year. Full year revenue guidance of between 620 to 630 million.

That's better than the 592 million estimated. But full year adjusted EPS being guided here a bit lower. $1.49 to $1.54 is the range. That's lower than the $1.57 estimated. And as you can see, the stock is down by more than 15% right now, guys. Back over to you. All right. Okay, thank you.

Nordstrom and Ross Stores just came out with earnings. Nordstrom shares are in the red, down, let's see, about 9% right now. For more, let's bring in CFRA's Zachary Warring. Zachary, let's start with the one that's moving the most. That's Nordstrom. What's to note here? I mean, inventory levels, we're concerned about the overall state of the consumer. What is it that investors need to be concerned about the overall state of the consumer. What is it that investors need to be concerned about the most with this downward move? Yeah, thanks for having me. So, you know, with Nordstrom, it looks like it's weak guidance, honestly. They've had a 60 percent run in just a

few months here. So shares are taking a breather. And we think, you know, valuations trading at roughly 10 times if they make two dollars a share next year. And we think that's fair. So, you know, this is just a breather after a 60 percent run, probably. Well, speaking of a breather of a different sort, Ross Stores is just off fractionally. And given the run that it's had, along with a lot of other discount retailers, maybe that's not such a bad thing. How do you feel about Ross? Yeah, so it was another it was a great quarter from Ross. They announced another buyback, so $2 billion. It's pretty much in line with what they've been doing, almost a billion a year, and that's a two-year program. Margins are up. They look a little better because of the 53rd

week that they had this fiscal year. But yeah, they say the United States lower freight costs and then higher sales. So Ross is a steady grower. They're a consistent grower. They deserve a multiple, we think, between 20 and 25. And it's towards the high end of that. So it's another story of you're kind of looking at a breather here. It's interesting whether it's Ross stories, whether it's the rack business at Nordstrom, which grew double digit percentages, whether it's Target. Yes, I know we saw declining sales, but we saw strengthening margins there. You don't cover that name. The read through here is that consumers are continuing to feel stretched. Yes, maybe the pace of inflation is starting to slow. It's starting to come down, but we're still at higher levels for a number of key areas, including, for example, housing,

which Ross Storrs called out in its release today than we were just a couple of years ago. Does this mean that off-price retailers and anybody who's exposed to that are going to continue to be the winners no matter what? If you had to just buy one stock, would it be one of those? Right here, probably not not just because of valuation you know they're trading at basically their high over a 10-year period um if you look outside of you know the pandemic so probably not one of those two even though i think they'll continue to benefit as long as the economy remains stable um you know we like if you're looking in the department store since we're we're on the nordstrom train here, you know, we like Dillard's.

So Dillard's buys back a significant amount of shares. They've kind of given up on growing, but they operate really well. They've been able to maintain margins at about 15 percent even after the last few years. So we really like Dillard's. We think they continue to buy back shares and they're going to, you know, their shares will appreciate from here. OK, Zachary Waring, thanks for joining us with shares of Nordstrom down 9 percent and Ross stores down fractionally. Well, another mover today on earnings shares of AeroVironment shooting higher today after the military drone maker beat earnings expectations and raised its full year guidance. The company's CEO breaks down the quarter. And what is driving global demand?

Look at that chart. Up 28%. We'll be right back. Back to overtime. Charge point earnings are out. The stock's down about 8%. Kate Rogers has the numbers. Kate?

Hi, John. Yeah, charge point revenues amiss here, 116 million for the quarter, lower than the 119 million estimated. Note here, there was no per share figure provided by the company, but some guidance. Q1 revenues in the range of 100 million to 110 million. That is lower than the 128 million estimated. And as you said, yeah, the stock lower by around eight percent right now. Back over to you. All right. Kate Rogers, thank you. AeroVironment finished up 30 percent, almost 30 percent today. Second best day ever. The company reporting a beaten raise for Q3, which we brought to you right here on Overtime yesterday. The backlog ticked down sequentially,

but confident enough in the order pipeline to forecast double digit revenue growth out into fiscal 2025. Now, I spoke exclusively with CEO and Chairman Waheed Nawabi, and I asked him how autonomous weapons and AI are increasingly important on the battlefield. We as a company are positioned extremely well. If you look at, for example, the concept of the replicator initiative that has been launched by the Pentagon and Deputy Secretary of Defense, the concept is literally the poster chart of our solution set. If you look at the picture that I have in my background, our solution portfolio literally

speaks to the exact concept of what replicator is all about. The only thing probably missing are unmanned surface vehicles and unmanned underwater vehicles. But other than that, we cover the entire portfolio very, very well, number one. Number two, the use and the success of our products. And we now have over 11 of our products in use in Ukraine and different types of our robots, ground robots, air robots, loading munitions, et cetera, and by the thousands. And the success that our customers, Ukrainian military, is having with our systems is just remarkable. It is just remarkable. There's no other better way to say it. Now, I also asked Wahid about the picture

for international sales, which are becoming a bigger part of the overall revenue picture for AeroVironment. The demand for systems are very robust and strong across the globe. You know, the world is not a safe place or a safer place today than it was, let's say, a few years ago. And there are conflicts pretty much either currently already active or about to brew in various parts of the world. And so our systems definitely play a major, major role and will continue to play a major role because the things that the U.S. DOD and our allies are looking for is essentially what our solution value proposition

is all about. Low cost, very high volume, things that are intelligent, that they work in GPS-denied and comms-denied environments, so they work in contested battle spaces against enemy jamming and electronic warfare, systems that could work on day and night. They are very difficult to detect, systems that are made with very, very rigorous reliability and hardened for those types of environments. We are very well positioned. And the demand for systems are not only domestic, but also globally we see this demand to continue over the next several years, in my view. Can you make these products fast enough to meet the demand, especially as we do continue to recover the industry writ large from supply chain issues coming out of the pandemic?

So I'm really glad that you brought that up, Morgan, because one of the key criteria and important item for the U.S. DOD and our allies is not only that you have a very, very great technology, but the technology must be producible now or very shortly and very high volumes at the DOD's level of rigor and reliability and hardens. Air Environment is the only company I know that has the capacity and the capability to deliver and make these things by the thousands, if not tens of thousands. We've already done that, and we've demonstrated that multiple times in our history. And so, we've invested, we're fortunate to invest in our production capacity over the last several years,

even ahead of the Ukraine conflict, And we've benefited from that. And we are continuing to expand that capacity. We have sufficient capacity today to meet the needs of our customers, especially for Switchblade, for the next two plus years. Now, Nawabi also telling me that the latest short-term funding measure, the continuing resolution, that's not affecting our environment yet, thanks to the strong backlog. But if this continues longer, if we see this stretch out over coming months, that this could have an impact, not just on this company, but really across the defense industrial complex. And he's not counting on that, though. So we'll see how it plays out. I also feel like maybe a little bit of smack talk

there, shrouded smack talk against some of the defense tech startups, the enderal industries of the world, in those comments about how quickly they can ramp production versus others that are out there competing. Yeah, expect to have a little smack talk, at least. Well, time now for a CNBC News update with Bertha Coombs. Bertha. John, New Jersey Senator Bob Menendez and his wife Nad, have been charged with obstruction in a new superseding indictment. The obstruction counts in addition to the corruption charges they are already facing. It comes days after a co-defendant pleaded guilty and agreed to cooperate with prosecutors. Meantime, the Biden administration says it will revive the accelerated payments program

used during the pandemic to help hospitals and doctors facing a cash crunch after a cyber attack two weeks ago crippled United Health's change health care electronic payment system. In an update this afternoon, United Health announced that it does expect that the pharmacy side of the network will be back up and running as soon as Thursday. Back over to you. All right, Bertha, thank you. Up next, the CEO of Fifth Third Bank on how the Consumer Financial Protection Bureau's ban on excessive credit card late fees will impact the whole industry. We'll be right back. Welcome back to Overtime.

This week marks the one-year anniversary of the regional banking crisis, which began when Silicon Valley Bank imploded, leading to investors and regulators worrying about the stability of the system. CEO of Fifth Third Bank, Tim Spence, joins us now along with our very own senior banking and finance reporter, Leslie Picker. Leslie? John, thank you very much. And Tim, thank you for being here. I believe that your first appearance

on CNBC was the Monday following the Silicon Valley bank demise. So it's good to have you back one year later. I'm curious, kind of as we look back and as we reflect, has anything changed in the year since then that would prevent another sizable bank failure like we saw several take place last spring? Yeah, Leslie, hello. Thanks for having me today. And thank you for reminding me that that was my first time on television. I'm happier to be here today than I was at that point in time, I think. You know, I think given that we're a year removed, it's probably time to put a stake in the heart of the term regional banking crisis. Because if you look at what we've learned over the course of the past year, it's really the same lesson that we learn about every 10 or 15 years,

which is not that we had a regional bank problem, but rather we have a crisis of concentrated business models. That was true in the late 70s, early 80s, when you had the energy bust and Penn Square and Continental Illinois. It was true in the late 80s and early 90s when you had issues with concentrated interest rate risk and real estate in the S&L crisis. It was true in 2007, 2008, when you had concentrations in subprime mortgage. And this time around, it was concentrated funding models and potentially, I guess, concentrations in commercial real estate that were the issue. So banks like ours that run a simple, diversified business model and that are deliberate about making sure that we're funded with granular deposits and well-diversified loan portfolios are able to weather these sorts of periods of

uncertainty and market distress in ways that people with more concentrated business models just can't. And you say this, of course, against the backdrop of significant volatility in names like New York Community Bancorp, which has seen its shares really shave off about 70 percent of their value so far this year partly related to that commercial real estate exposure as you mentioned you know you said that you basically don't see a regional bank crisis currently but given some of the share price volatility do you think that we could see a bank fail this year or that's sizable like we saw last year? Oh, I don't know. I don't think that there are any large banks that are at any risk of failure. And I think actually, when you look at the large banks, most of us are

up year to date. I know we are as a particular example. I think what you do have in some pockets is you have community banks with very significant concentrations in commercial real estate and where you have, in the case of New York community, a large concentration in a single city and a single property type and then a change in the rules in 2019, you have an exposure that becomes difficult to navigate. But I think in general, the banking system is very sound. The funding bases of the companies that made it through last spring are tested for an environment where there was heightened volatility. And I think thanks in particular to the CECL reserving methodology, we're well reserved for a wide range of scenarios that

could come our way. Tim, thanks for being with us on Overtime. Your last 10K, I believe, showed a slight increase in non-pass-rated loans, more borrowers not in default but having some trouble paying back what they owe, something seen across the banking industry lately. How does this higher-rate environment, this this economy factor into that? At what point does it become any level of concern? Yeah, I mean, great question. So I'm a big believer that we always need to worry about credit. It's one of the critical risks that we have to manage. But what we're seeing across the industry and certainly what we're seeing in our particular

case is just a gradual normalization of credit. Our NPAs and our charge-offs last year were still well below historical averages. They just are continuing to normalize back to the level that they would have been at in the period immediately preceding the COVID pandemic. I think higher rates will weigh on businesses. They weigh on borrowing activity. I was looking at a survey that the CFO Alliance put out not long ago, where they surveyed CFOs of middle market companies across the country, and almost 40 percent of them indicated they're going to be undertaking an expense program this year, in part to offset the increase in debt service costs and to make sure that they maintain strong profitability

and strong margins. So it is weighing on businesses. They just are finding ways, at least to this point, to be able to offset those increased borrowing costs. And the larger companies, of course, who had access to the capital markets had the opportunity to lock in historically low fixed rates. And the byproduct of that is they bought themselves a lot of time for rates to recede back to more normalized levels. Tim, it's Morgan. It's great to have you on. I mean, we have if you have a Fed staying higher for longer, if you have, I realize maybe it's not across the whole sector, but you still have some banks or some pockets of concentrated risk in that environment. And then, of course, a regulatory backdrop that is going to usher in potentially more rules here over the coming months and coming years. What does that mean for the M&A environment? Do you think we're going to see more consolidation here?

I mean, I think that's a big question, an important question. The basic industrial logic would say yes, as you have higher regulatory costs and higher capital and liquidity levels that in order to achieve an appropriate cost of capital, there are going to be a lot of banks out there who have to consolidate in order to get overheads down. We're fortunate. We generated a 16 percent return on tangible common equity last year. We have one of the three lowest efficiency ratios of any of the large banks. So our profitability, our ability to beat our cost of capital is very, very good. But I do think you'll see a pickup in consolidation at the moment. The big question mark is the approval process. And when you have uncertainty in the interest rate outlook and a lot of volatility,

that creates an additional impediment that I think we probably have to get through before you see that much M&A activity. All right. Tim, thank you for joining us. Tim Spence, fifth third bank chairman, CEO and president. And our thanks to Leslie Picker for bringing us this guest in this interview. Thank you all. All right. Well, Bitcoin hitting an intraday all time high today, but selling off right after that. It was a whipsaw move. Up next, we've got to look at how this move actually corresponds to the rally in a key sector. Stay with us. Welcome back. Bitcoin hitting a record high today, passing 69,000 before taking a plunge. All the excitement over Bitcoin ETFs has fueled the massive rally we've seen.

But are these moves a sign that the tech rally is also on steroids? We've been talking about casino like trading the last couple of days again. Mike Santola, your take here. Well, we have Morgan. And if you just look at go back to when Bitcoin last peaked, which is right within a week or so of when the Nasdaq previously peaked in November of 2021 and see the trajectory of both of them over that period of time. Yeah, of course, Bitcoin is an exaggerated version. It's an amped up higher volatility version of what the NDX has done. But if you look, the lows line up right there.

And now we've gone point to point right around the same point. This chart was made before the intraday 8% drop in Bitcoin. But you can basically see just similar cadences in there. And then I'll just dial it into about a one year history of Bitcoin against Nvidia, because, again, you see a little bit of rhythm that looks similar between those two assets here. And of course, you know, Bitcoin, one of the few things to nearly keep up with Nvidia over this period of time. The way I would interpret it is that it just they feed off of the similar energy of people, you know, driving money toward perceived digital disruption,

just a rapid change, whatever you think the future is going to look like. And so at this point, whatever else Bitcoin might be, it's not proven that it can become untethered from what happens in the very largest tech stocks. All right. Yeah. Bitcoin miners and AI data centers literally feed off of similar energy. Meanwhile, today, Accenture announced the launch of Accenture LearnVantage, a new service they're going to use to help clients upskill their workforces in AI and technology. Accenture also announced as part of that they're going to acquire the digital education platform Udacity to accelerate the capabilities of Accenture LearnVantage. And joining us now to discuss is Accenture CEO Julie Sweet. Julie, welcome. So I wonder, is this Udacity move,

LearnVantage launch, a bet that AI is going to have an upskilling wave over the next five years, maybe similar to the hybrid work spike that we saw that was so lucrative for Accenture? Hi, John. Thanks for having me. It's not a bet. We are definitely seeing that there is a big demand for AI and other IT training. It is the top issue for CEOs. Over half the companies we surveyed have said they're now having their growth constrained because they don't have enough access to IT skills. And with AI. And so our clients are already coming to us. And this is a move to meet their needs at the scale that we're seeing. OK, so I mean a bet in the sense that it's a platform play.

You're spending quite a bit. You're announcing a billion dollar investment plus whatever you spent on Udacity. I don't think you said. But for this to work, you've got to boost productivity and scale good customer outcomes more quickly than you scale employees, I imagine. And if this works, I guess you'll get a lot more business. Isn't that sort of what has to happen? So really, this particular business line, right, is based on our clients needing to rotate their talent. So we're helping them become talent creators. It, of course, helps feed the rest of our business because clients, in order to use AI to transform themselves, need to have that talent. They can only partner with us for so much of it. So they're super complementary. And I think what's most important, first of all, we're also training way beyond AI

because to use AI, you actually have to have built a digital core. And so our training is really across the board in IT skills. And so we really see that there will be very strong demand that is strategically helping drive demand as well for our services beyond the new services. Julia, when you talk about rotation within the workforce, I just wondered, Klarna last week came on the show. They said they've got a chatbot that's doing the work of 700 full-time employees. Just earlier this week, JP Morgan says its AI-aided cash flow model can cut manual work by 90 percent. How much

of that rotation is going to be the result of job displacement? There'll be a significant part of it. Now a lot of cases it's not actually taking out roles in fact many clients are coming to us because it's augmenting workers so they're trying to figure out how do we in fact reorganize our companies because what we're seeing is that a lot of different roles save a little bit of time or are augmented as opposed to completely eliminating roles. And that's where upskilling is also really important as you think about, well, how do we use that time for higher value add? But absolutely, there is going to be job displacement from AI. And many of our clients want to make a bet on their employees and reskill them. And employees do. Our survey said that 94%

of employees want to learn about Gen AI, but only 5% of companies are actually providing it at scale. So this is a way for companies to have their great talent redeployed in higher value areas to help them grow more and make sure that they're bringing your people along the way on the journey. Well, you know, for the workforce's sake, we hope it works. Julie Sweet, CEO of Accenture. Thanks for joining us. Great. Thank you. Up next, a CrowdStrike analyst tells us what he wants to hear from the company during its call that starts at the top of the hour. Stay with us. Welcome back to Overtime. CrowdStrike's conference call kicking off in just a few minutes. Those shares are jumping in after hours, up 21 percent right now, thanks to a beat on the top and bottom

lines and better than expected guidance. Joining us now is Alex Henderson from Needham. Alex, the management also reiterating a 2030 goal of $10 billion in annual recurring revenue. And we had CyberArch CEO on yesterday. He was talking about the push toward platformization. He was also suggesting that maybe those Palo Alto comments about cyber security spending fatigue were taken out of context. Maybe some similar echoes from Zscaler when they joined us on Friday, too. What does CrowdStrike tell us here? Well, CrowdStrike's a platform. That's what the world's going to. It's been a platform from day one. And Palo Alto's problem is it needs to consolidate a lot of point products to make it look more like a platform. That's what he called

platformization. So crowds are already delivering that. You can see it in their new products, Charlotte, LogScale, Identity. There's a variety of names here in adjacencies. Yeah. I mean, when you look, Alex, at the net new annualized recurring revenue coming in at $282 million, $40 million above expectation. How much do the platforms, you know, Zscaler included, it's running up after hours as well, but so is Palo Alto. How much of an opportunity do they have right now based on these results to run ahead of some of the others? Well, architecture matters, and it's very easy to drive both revenue and margin expansion. I think the more important piece of this is the company's gone from 3 percent operating margins to over 20 in the span of 18

months. And I think it's frankly on the way to 30 to 40. It's going to grow 20 to 30 percent and double its margins from here. OK, so when you have the stock up 21 percent right now, to your point, we've had a torrid move higher in all of these cybersecurity names overall in recent months. Do you buy into this print or do you wait for a callback? Morgan, I think at the end of the day, you've got to pick your spots. This is a great company for the long term, but it needs to consolidate its gains. I would have said the same thing about Crowd, Palo Alto. These companies really have had huge runs. Nobody wants to buy a stock up 150 percent. Let it solidify the base and then it'll have a next move. OK, Alex Henderson, thanks for joining us. Thank you. As we see all of the

cybersecurity names trading higher in sympathy with CrowdStrike, as you mentioned before, John? Yeah, I think a question here is the Billings Guide on Palo Alto was light supposedly because they're trying to get into some areas for free, right? They're trying to discount, it sounded to me like, to break into some of these areas. But when you've got margins this strong from CrowdStrike, from Zscaler, they're not discounting, but they're still able to beat. Is it going to work? Yeah, that is kind of the key question there. Meantime, looking to tomorrow, you've got Powell's day one of Hill testimony.

You've got U.S. Beige Book, and we have yet more earnings. Yeah, it's a packed week. And, of course, we've got the jobs report at the end of the week, too. And a market that, you know, is trying to decide whether it can move higher from here, though. NVIDIA and Supermicro still can. Yeah. Although, to your point, it's been a bifurcation in big tech, which led the markets lower. That's going to do it for us here at Overtime. I mean, but not yet. We got it. We got to set the table for how cyber has moved us, and now we're continuing on AI. We'll send you the fast money with that.