Closing Bell - Closing Bell Overtime: AMD CEO Lisa Su On $5B Deal For ZT; FuboTV CEO On Venu 8/19/24

Episode Date: August 19, 2024

AMD one of the top performing S&P 500 stocks today after announcing it planned to acquire systems company ZT Systems for nearly $5B. CEO Lisa Su joins Jon in an exclusive interview to discuss the deal and what’s next for the company. Bessemer’s Byron Deeter on Palo Alto’s strong numbers and the future of the software sector. FuboTV CEO David Gandler on a judge’s decision to temporarily block a sport streaming service rival. 

Well, that bell marks the end of regulation. The New York City Fire Department ringing the closing bell at the New York Stock Exchange. They know how to do that. Sim Acquisition Corp. doing the honors at the NASDAQ. And the S&P 500 and NASDAQ both notching eight straight winning sessions ahead of a big week of Fed speak and a rush of retail earnings. The S&P closing above 5,600 again. That is the scorecard on Wall Street, but stay late welcome to closing bell overtime I'm John

Fort Morgan Brennan is off today we got a big show coming your way in just a moment AMD CEO Lisa Su is gonna join me exclusively following news of her company's nearly five billion dollar acquisition bid of AI data center infrastructure company ZT systems plus we're going to talk to the CEO of FuboTV as that stock jumps following a judge's ruling to temporarily block the joint venture sports streaming service from Warner Brothers Discovery, Fox, and Disney. And we're not done with earnings season yet. Results are coming in just moments from now from cybersecurity giant Palo Alto Networks.

First, let's begin with our market panel, Brooke May of Evans May Wealth and Sam Stovall of CFRA Research. Welcome, both of you. Sam, you buy this bounce back after all this volatility, S&P back above 5,600? Yes, I do, John. I actually looked on a closing basis going back to the inception of VIX in the early 1990s. And whenever we've been in a pullback mode, meaning a decline of between five and 10 percent, we've had that happen six times. The market did not exceed the 10 percent threshold four of those times. And when it did in the remaining two, we were down only 10.2 and 16 percent. So probabilities would indicate that because of the sharp sell off two Mondays ago, that that's what really sort of shook the loose hands off. But, Brooke, can you buy a stock like Apollo Alto Networks or I guess like a Netflix or an AMD with new money here?

I mean, good for you if you stayed in this market and you weren't shaken loose by the volatility, especially over the last couple of weeks. But where do you put new money to work? We still like big tech. We think big tech is leadership. And when you look at companies like Palo Alto, you can get it right now for about 10% off of the high. They've had a few disappointing earnings announcements

in recent quarters, but that's because in the near term, they've had a few disappointing earnings announcements in recent quarters, but that's because in the near term, they've had pricing concessions to be able to lock clients into their bundled offer. That makes those clients and customers sticky, and that'll bode well for them in the months and quarters to come. So we think that company by company, you can find some good deals out there right now, and it's not too late to get in. So, Sam, Fed or NVIDIA having the bigger influence over markets over the next several days? Well, over the next couple of days, it's going to be the Fed because NVIDIA is going to be after that. But I certainly believe that Fed Chair Powell is going to sort of remind us of

what he had said during the press conference before, not really add anything new, but certainly not take a more hawkish stance. I think the Fed will continue to be slower to lower interest rates. And as a result, we're looking for three rate cuts, 25 basis points each in September, November and December, primarily because they want to signal that, yes, they are ahead, maybe not ahead of the curve, but at least on top of the curve. They're not behind it. But at the same time, they don't want to be too aggressive in terms of removing the pressure before, in a sense, the fire is out. Sam, is that enough, though? I mean, I'm trying to I said next several days because I'm trying to include the video window. But there have been some people saying, well, if the Fed isn't really aggressive about signaling rate cuts, then the market's going to be disappointed.

But I don't know. It seems like the Fed's been pretty right to be disciplined up to this point. And they've done a good job, I think, of telegraphing that, having voting members and non-voting members say that they probably would be looking to vote to cut rates in September. The real question, however, is not just the timing, but the magnitude. Will they start with 50 basis points and then have 225 basis point cuts thereafter? We still believe that we'll see four more in 2025. So I think the real question is, like the sprinters in the Olympics, how quickly will they come out of the gate? And, Brooke, to the questions on Palo Alto Networks, I imagine it has a lot to do with the guide. And it's been a mixed bag in reaction that we've seen to earnings this season. What do they need to show perhaps on CRPO and how that pipeline is building?

As we've seen, earnings have been priced to perfection. And companies are expected to beat on earnings, on revenue, and on guidance. And if they're not able to deliver on all of those, it's been a disappointment. With Microsoft, for example, they had great earnings overall, but their cloud revenue was a little bit of a disappointment and the stock sold off six or seven percent. So we need to see Palo Alto come in and demonstrate that they're going to be able to take market share from CrowdStrike, in addition to some of their other competitors, and be able to grow their revenues in the quarters to come. OK. And with that, Palo Alto Networks is out. Those results, we are going through them. Brooke May and Sam Stovall, thank you both for joining us. But for now, we're going to go to the deal of the day.

AMD shares closing four and a half percent higher after announcing a nearly five billion dollar acquisition bid for ZT Systems. Joining me now in exclusive broadcast interview is Lisa Su, the AMD CEO and chair. Lisa, good to see you. It's two and a half years ago, almost to the day, you completed the Xilinx acquisition. That was huge. Multiples bigger than this. But it also dramatically expanded your total addressable market. So how should we measure, how should investors measure the way ZT expands either your total addressable market or your speed to market in the data center? Absolutely. John, great to see you this afternoon. And, you know, it's a big day for AMD. We're really excited with the announcement about the acquisition of ZTE Systems.

You know, ZTE Systems is one of the most capable hyperscale solutions providers, and they're really focused on the largest data centers in the world. So if you think about our strategy, our strategy is about high-performance computing and AI as the largest growth vector for us over the next couple of years. And we've talked about the size of this AI TAM. We believe the AI TAM and data center accelerators alone is over 400 billion by 2027. It's a huge opportunity. And we've been investing for the long run

and investing in that strategy. So it's about our silicon solutions, which are really capable, our software solutions, which are really capable. And now we add sort of the third leg of that stool, which is the system solutions that really wraps it all together. So it's a really exciting opportunity for us and a great team that we're bringing on board.

Lisa, color that in a little bit for me because a lot of people, I think, think about AI as, okay, just sell a bunch of chips. Sell as many as you can. But it seems to me more like, you know, you can't just sell couches, sectional couches. You've got to have the right color. The customer has to know that it fits within their space. How do things like cooling or even designing for specific applications fit into the capabilities that ZT is going to give you? And perhaps you imagine allow you to sell more of AMD's AI solutions into the marketplace. Yeah, it's a great point. And, you know, look, we have invested in all of the pieces.

And so when you think about the components, the chips are really important. The software is super important because it helps developers really access the capability through applications. But then when you think about the data centers of tomorrow, I mean, we're talking about data centers that have like hundreds of thousands of servers in them. And they really need to be, you know, really fully optimized from silicon to software to systems. That's what ZT Systems does for us. It really adds, you know, sort of that end-to-end capability. And, you know, I like your analogy. It's not about, you know, just the couch. Yes, the couch has to be great, but frankly, you need the entire house to be, you know, all put together with all the pieces. And when we look forward, what we're seeing is that you actually optimize each of those pieces, silicon, software, and solutions together. One of the things that's really important, John, is we love the open ecosystem. We're all about

enabling not just our own solutions, but really enabling our entire ecosystem of OEM and manufacturing partners. And so we're still going to do all that. We're just going to come with really a very, very strong foundation to build the largest data centers in the world. And when I first saw the announcement of this deal, I thought, is Lisa, is AMD going to be competing with Supermicro here? But no, you're spinning off the manufacturing business. Tell me about your decision-making process there and what the value is of a manufacturing business that has locations not

just in Asia, but in the U.S. and Europe in a very high revenue, high margin category. Yeah, absolutely. I mean, you know, ZT has really built, you know, systems and rack scale systems for some of the largest data centers in the world. So they've built a phenomenal design team, which is gonna be super important for our overall AI systems and solutions strategy. And they also have a phenomenal manufacturing operation that's gonna be really good

as part of a larger manufacturing at scale operation. So I think this is really about optimizing the capabilities of a wonderful company. And more importantly, it's building out the ecosystem around AMD solutions. So we are not in the business of competing with our customers. Frankly, we love to make the ecosystem around AMD even broader. I've spent a lot of time with our top customers over the past 24 hours or so. People are really excited about what we're putting together. They view that this is about a bet into the future of what AI systems and AI infrastructure is going to look like.

We're all about building upon the incredible ecosystem that we have, but bringing the best technology to market as fast as possible. So let's deploy these leading edge clusters and data center level systems with all of the great technology, but also ensuring that everyone gets to innovate on top of that. OK, so since you're not keeping the manufacturing business, help investors understand what the impact of ZT might be, the portion that you're keeping on the top line and the bottom line, conceivably from the moment the acquisition closes, which I guess you expect would be somewhere a couple quarters out from now. They're about $10 billion annual revenue run rate now, but I imagine that's selling a lot of hardware, which is the manufacturing part that you're not keeping? Yeah, think about it this way, John. You know, ZT is really a very strategic acquisition for us,

you know, to grow our market opportunity, our market share, our penetration in that $400 billion TAM when we talk about AI infrastructure. So there's a lot of opportunity out there. We're at the very, very early innings of this AI build-out, and we want to be a big part of that build-out, and that's how ZT helps us. As it relates to the manufacturing side of it, it is an at-scale $10 billion-plus business with great manufacturing sites, and we're going to see that continue to excel in a different environment. So, you know, for AMD, it's about, you know, how do we penetrate more of that $400 billion AI infrastructure, Tam, as fast as possible and with as much differentiation and enabling our customers to really adopt our technology across their data centers. So as you ask that question, Lisa, are you still shopping?

Is there more M&A in the future? Well, I think, you know, John, you've known us for a while. I mean, you know, we're always strategically looking at, you know, where the puck is going. And this is about, you know, technology is about making the right bets. We've made some very, very significant investments on the organic side. You've seen us really pivot our strategy to AI first, and that's across our data center market, our edge and embedded market, as well as the AI PCs. All of those are very significant growth vectors for us. And we're also looking at ensuring that we continue to position ourselves well for the future. So you started the show mentioning Xilinx. That was a great acquisition for us as we built out our

embedded business. We've made a number of software acquisitions along the way, and we continue to view M&A as a way to really position us for that large TAM in the future. Are your costs in the right position? When you look at your workforce, when you look at your facilities and you're looking at expanding and acquiring ZT systems, perhaps some other things we'll see, are the costs that you already have aligned correctly or you continue to look at that? You know, what we're doing is we're investing for the future. And, you know, that's been our mantra. You know, AMD is a growth company. You know, we are in the most attractive part of the computing market, which is around high-performance computing and AI. And we're going to continue to invest for the future.

I think we feel very good about where we are today. We're always looking at optimizing. You know us, John. We're always looking at optimizing. But today, it's really about investing for the future. It's about how do we build out our AI capabilities end to end? And at the end of the day, how do we be a better partner to all of our, you know, cloud and enterprise, you know, customers? When you look at software in particular, and that's become such a big part of the AI conversation beyond the chip level, at the ecosystem level, do you have all the pieces that you need? I feel really good about the overall progress that we've made on the software side over the last couple of years.

John, when we look across the industry, what we're seeing is the software ecosystem is moving to a place that is at higher level frameworks. And really, our strategy is around open source and adopting that open ecosystem. So we've made a lot of progress there. Actually, last week, we just completed our acquisition of Silo AI, which is another phenomenal AI company. So we are making a tremendous progress in software, and I'm very proud of what the team has done. And we'll continue to push the envelope. Well, I appreciate you taking this time with me here on CNBC to talk through this acquisition. Lisa Su, CEO of AMD. Thank you, John. Well, Palo Alto Network's earnings,

as I mentioned, are out. The stock is up better than 3 percent in overtime. Kate Rogers has the numbers. Kate. Hi there, John. Yeah, this is a better than expected Q4 for Palo Alto. Beat on the top and bottom lines. EPS $1.51 adjusted. That is a 10 cent beat. Revenue is $2.19 billion better than the $2.16 billion that analysts were looking for. The company also issuing some strong guidance for Q1 and full year. Q1 EPS in a range of $1.47 to $1.49 higher than the $1.43 estimated. Revenue is $2.10 billion to $2.13 billion. That is also better than expected. Full-year EPS range, $6.19 to $6.31, higher than the $6.19 analysts were estimating. Revenues in a range of $9.10 billion to $9.15 billion, better also than the estimates of $9.11 billion projected

by analysts. And also note here, as you mentioned, the stock higher by more than two and a half percent. The board of directors authorizing an additional five hundred million dollars for share repurchases there. And investors obviously liking that news. John, back over to you. All right. More to come for sure. Kate, thanks, especially on Jim Cramer's exclusive interview with Palo Alto Network CEO Nikesh Arora. That's coming up 6 p.m. on Mad Money. And up next on Overtime, we're going to talk more about Palo Alto Network CEO Nikesh Arora. That's coming up 6 p.m. on Mad Money. And up next on Overtime, we're going to talk more about Palo Alto's quarter, the read through for software investors when we are joined by venture capitalist Byron Dieter from Bessemer and later on shares of Fubo TV jumping today up more than 50 percent in a week after a judge temporarily blocked a competing

sports streaming service from Disney, Fox and Warner Brothers Discovery. CEO Fubo TV gives us his first comments on the ruling, what it means for his business when overtime's back in two. Welcome back to overtime. Shares of Palo Alto Networks are surging up more than 3% after beating on the top and bottom lines, giving strong guidance, announcing an additional share buyback. Joining us now is Byron Dieter, partner at Bessemer Venture Partners. Byron, always good to see you. So, I mean, a positive signal, another one for enterprise software here. But there's been a lot of difference, dispersion in stock outcomes between some of the larger

players and the smaller ones. How do you sort through that? Well, first off, great to be back, John, and congrats to Palo Alto Networks on another impressive quarter. The machine there continues to crank. They may have gotten a little bit of a tailwind from CrowdStrike and their own fumbles this quarter, but I think more of it's just their own execution. And I hope as you show their charts over today and this week that you actually zoom out and also give them a multi-year look. Since Nikesh has joined over six years ago, whether it's the one-year run here over 40% or the five-year run, which has them over 400%, it's been a heck of a story. And the crooks keep innovating out there, so security is needed.

It's also one of those first categories that's been able to adopt AI. And so they're using modern technology for organizational defenses now, and it's showing tremendous success. The cashflow generation of this company is fantastic. And you see from the prior segment, AMD and NVIDIA and the like, they're rushing to respond to the demand from the pull through of software folks like Palo Alto Networks as they continue to increase consumption. And so it's an example of this virtuous cycle that's playing out in tech right now at the front edge of all things AI. What do you think the financial legacy of CrowdStrike is going to be? That stock is, you know, off the lows from the beginning of the month, but it was smacked pretty hard. Do you think some other companies might benefit? Are security companies in general, even in the startup space, more attractive?

So on the small scale, yes. It's always this game of cat and mouse. And inevitably, there will be breaches, there will be downtime, there will be system issues. And so they took it on the chin and in hindsight could have handled it a lot better, but it's a great company. They will survive. They will recover. It created a short term opportunity for challengers. And again, it'll be interesting to parse through the notes in the earnings announcement to see if they give some credit to that. But I do think there are new vectors of attack and there are new use cases for AI in the defenses, which is what's creating the startup opportunities. And there will always be pure play opportunities that are created, but you see the continued execution from the largest that organizations want to buy from consolidated

vendors and they want a system-wide approach. And so I think the answer is this sector will continue to grow and it will benefit both the small and the large. I still remember Mount Sass and your thesis around enterprise software and the value there. Some of the medium to smaller companies, a few of them have started to perk up. I'm thinking about Shopify here, but it certainly hasn't been on the scale of the hyperscalers. But is this thing in enterprise software smaller, if not small, enterprise software finally turning around? So I think, one, the definition of what is cloud today is expanding. So coincidentally, we're actually adding Palo Alto Networks to the BVP NASDAQ Emerging Cloud Index today because they've transitioned to become a majority cloud business.

So more of the legacy vendors and on-prem vendors are coming over. But what I think we're waiting for in the Mount SaaS example and in the broader cloud index is to see if this rolls down to the mid-market companies. Right now, it's been the Magnificent Seven, the $100 billion plus entities, and the hardware vendors per the NVIDIA run-up and the AMD discussion earlier that have really been the beneficiaries of this early AI wave. And so the question that we're waiting for is, one, will challengers emerge for NVIDIA? And will that 85% hardware market share start to erode over time? And then on the software side, will the application vendors start to get that tailwind benefit from AI? We're seeing it on the private side.

We see it with OpenAI and Anthropic and Canva and ServiceTitan and Figma and a lot of these companies that are adapting rapidly to embrace AI and they're getting real sell-through as a result. We think that will also come to the mid-market public cloud companies that are quick and nimble in embracing. Well, that's kind of what I wonder about. I was talking to a CEO earlier today, the CEO of Amplitude, about that. He's arguing that, you know, for employees looking to sign on, they're a better value either than the startups with high valuations or the hyperscalers with high valuations. But might the smaller companies lose out as AI plays out at the application layer? It is a battle that's playing out faster than anyone expected. And the interesting

dynamic is someone like Amplitude's caught in the middle, where they're a challenger, but they're also an incumbent subject to some disruption. And so we're getting pitches every day from companies that are going to be a next generation of Cloud Wave 1 or Cloud Wave 2. You look at an incumbent like Salesforce, it's a 24-year-old stack right now. They keep innovating, but their core business has a lot of legacy characteristics. And there are companies that are coming at them for their marketing cloud, their services cloud, the sales cloud with leapfrog technologies. And we think the history of tech will repeat itself, but in a faster cycle now where net new companies will come from zero

to hundreds of millions in ARR over single-digit years and become the new leaders in the cycle for those who don't adapt and embrace this transition. Yeah. Keeps you guys busy on Sand Hill Road and keeps us busy near Wall Street to Byron Dieter from Bessemer. Thank you. Always a pleasure. Thanks, John. Up next, don't miss our interview with the CEO of Fubo TV with his first comments on a judge's ruling temporarily blocking the sports streaming venture from Warner Brothers Discovery, Fox and Disney. And later, Neuberger Berman's retail portfolio manager is going to join us with four names on his shopping list ahead of a big week of consumer focused earnings. Overtime will be right back.

Welcome back to Overtime. A judge on Friday temporarily blocked Venue Sports. It's a joint venture of media companies Disney, Warner Brothers Discovery, and Fox from launching their sports bundle. And this injunction comes just weeks ahead of the start of the NFL season. Fubo, which operates a streaming bundle similar to a traditional pay TV package, brought on the lawsuit claiming Venue was anti-competitive and would upend its business. Shares of Fubo jumped on the news, rose again today, and joining us now in a first on CNBC interview is Fubo co-founder and CEO David Gandler.

David, welcome. Is this Venue venture an existential threat to Fubo? Well, it was, which is the reason why, you know, we decided to file this lawsuit. But I think today the big winner is the U.S. consumer. You know, we presented a solid and credible case regarding this joint venture that attempted to deprive consumers of choice and affordability. So this is a temporary block, though. There's a pretty decent chance, it seems, that it could go forward. If it does, does it crush you? Well, you know, I don't think I'm going to talk about that right now. I think the first step is that this was a positive development.

We believe in the merits of our case. And, you know, looking forward to seeing what happens next with respect to a potential appeal. But I think at the moment, we're really focused on the start of the football season. OK, talk to me about that in the context of subscriber growth. I think your North American subscriber growth most recently was up 24 percent year over year. At the same time, though, we've got these inflationary pressures that are all the talk, not just in business, but in politics as well. You've got a free tier trying to mitigate some of that. But is that going to continue to work

long term or are there other things you have to do? Now, look, I think as it relates to our second quarter results, i think they were phenomenal as you said we grew double digit growth year over year um i think it's also important to note that we've exceeded guidance 13 of 14 quarters since being a publicly traded company uh and we've also seen six consecutive quarters of improvement across our profitability metrics and we're continuing to maintain our target of achieving profitability in 2025. And yes, we are continuing down our current path, which we highlighted before, which was our super aggregation strategy. And the free tier is sort of the first attempt at

that. And our goal is to ensure that we can attract customers at different price points along the demand curve. And that strategy seems to be working at the moment. And we're going to continue to double down on it. What's going to make the difference long term for Fubo's success as so many different streaming companies, some of which are partners of yours, seem to be trying to compete in different ways, either on the live sports, the events themselves, or on content around those. How does Fubo distinguish itself enough to continue that growth? Look, we've stated very clearly our strategy is around super aggregation.

We are not an app store. We're aggregating the world's best content in a very seamless way for our customers. And going forward, we'll look to be able to provide them with multiple skinnier bundles, attractive packages. From a value perspective, we think that is the differentiator from what we're seeing today. And what about your costs? Again, from some of the same companies that are trying to compete with you here, you have some costs. Are those controllable or manageable from your point of view? Or is there any hope of you bringing them down? Yeah, well, look, it's clear that we're bringing them down.

If you look at our operating leverage from the last quarter. Our largest cost line was our programming costs. And those, if I'm not mistaken, have come down from somewhere closer to 100 percent of our total revenue to below 90 percent of our total revenue. And so as we scale our business, you know, we believe that we'll continue to see pricing strength, pricing improvements, you know, and greater leverage across our operating expenses. And the consumer and the health, continued health of the consumer, how much does that factor in to your growth prospects the way you see it? Well, look, I think, you know, we cater to the avid sports fan. And so sports is a critical part of American life. Americans love sports. And, you know, we continue to attempt to provide a service that, you know, is able to meet the needs of consumers. And, you know, we're doing our best to keep prices down. Obviously, that's a function of league rights, not even the programmers. But there's clearly a lot of interest in sports, both upstream as

well as downstream. But, you know, we're doing our best to maintain prices and provide consumers with some flexibility. All right. David, thanks. David Gendler, CEO of Fubo. Well, now time for a CNBC News update with Emily Wilkins. Emily. Hey, John. Former New York Congressman George Santos pleaded guilty earlier this afternoon to one count of wire fraud and one count of identity theft related to his 2022 campaign for Congress, where he lied about his resume just weeks before his federal trial is set to begin. Santos won the seat but was expelled from Congress last year. The charges carry a minimum two-year prison sentence. The Georgia State Election Board passed a rule that could delay certification this year.

The rule would give local election officials additional power to investigate ballot counts before certifying the results. Officials told CNN it was a guardrail to ensure there was one vote per person, but critics argue it could delay the state's official vote count. And in California, Governor Gavin Newsom signed into law today a 10-bill bipartisan package aimed at cracking down on retail theft. The new laws make it easier to go after repeat shoplifters, car thieves, and those who run reselling schemes. Back to you.

All right, Emily, thank you. After the break, the fault in our charts. Mike Santola is going to look at something unusual happening in one economic indicator that's never occurred before outside of a recession. And a number of restaurant stocks under pressure today after downgrades from Piper Sandler, in part on macro concerns and persistent inflation. We're going to ask Neuberger Berman's consumer portfolio manager how those trends could impact retail earnings later in the week. We'll be right back. Welcome back to Overtime.

In another signal of just how unusual this economic cycle is, OneGage is doing something that's never occurred outside of a recession. CNBC Senior Markets Commentator Mike Santoli is here to explain. Mike? Yeah, John, I might have to rename this one. This is the leading economic index. It's built a set of indicators. It's built to try and forecast the direction of the economic growth cycle in the future.

It has not worked. Two and a half years now or thereabouts, it's been below zero. When it crosses below the zero point, as you see here, going in front of these shaded recession areas, it has typically led, you know, not too far after that into an actual measured recession. And then when it's inflecting higher like this, you see there's three times in these three recessions, it's only happened within at the end of a recession. Obviously, we have not had a recession right here. I guess you could explain it multiple different ways. One, I mean, the shape of this

looks pretty similar, right? It's just we didn't get below zero in terms of real GDP growth. Maybe that was the fiscal stimulus. Maybe it was the pent up demand of the pandemic. Maybe it was in an increasingly service based economy. You know, it doesn't really have the boom bust characteristics that we got used to. This is also a sort of retrospective indicator, meaning it's kind of reweighted according to what predicted past recession. So obviously, at some point was going to misfire. The big question now, now that it's going higher but still below zero, is have we kind of escaped the near term prospect of a a recession or is just delayed at this point? Obviously, this gets to the heart of that soft landing, no soft landing debate. Can the Fed come in in time, start easing and maybe prolong this expansion, John? Mike, this is yet another

chart that makes me wonder if 2020, March 2020, was kind of a Bermuda Triangle moment for our data instrument panel where things went down so dramatically and then up so dramatically that the traditional readings don't make as much sense anymore. Yeah, it's I mean, it's broken many, many charts essentially that period of time. You shut down an economy, you bring it back to life. And again, this is also, you know, it's got things like the Treasury yield curve, you know, to it where, you know, that hasn't really worked as well. And Will, is that because the Fed was buying long term treasuries yield curve, you know, to it where, you know, that hasn't really worked as well. And, Will, is that because the Fed was buying long-term Treasuries or because, you know, the Fed has never been as transparent about, hey, we're going to bring short-term

rates higher and keep them there? And so we inverted the yield curve earlier. So, yes, lots of asterisks in this cycle. We'll see if that's the case really from here on out, as opposed to just being, you know, an odd episode that's going to pass. In your storied career, Mike, has there been another moment like that that's broken the instrument panel? Not in this dramatic a way. I mean, back in the day, used to be the 1987 stock market crash really did throw things off. It was the exception that kind of proved every rule. But the other thing I'll mention is in the 90s, when we were on our way to a soft landing, that was the first jobless recovery. So economists thought things were broken. We weren't gaining jobs back as fast as we thought we were supposed to.

It was much more of a kind of great moderation of the economy in both directions. So I've seen it in the past where people had to revise their idea, for example, of what full employment was. Back then, they thought it was above 5 percent. Now we've been below 4%, and then we did just fine. All right. Mike Santoli, thank you. Up next, the portfolio manager of Neuberger Berman's Connected Consumer ETF on the spending clues he thinks will be revealed when Lowe's, Target, Macy's, and other big retailers report earnings this week. And take a look at McDonald's, the biggest boost to the Dow today. Evercore ISI hiking its price target on the stock from $300 a share to $320.

On expectations, the fact food chain will continue to improve its market share during the second half of the year. Overtime will be right back. Welcome back to Overtime. We are keeping our eye on Palo Alto Network stock. It was up just a bit more than 3% after it reported results. Then it was down a little more than 3% as we were going into commercial break. And now it's just about even slightly positive. Of course, that conference call still to come, as well as Nikesh Arora, the CEO's interview with Jim Cramer on Mad Money.

Well, now consumer discretionary ending the day near the top of the S&P 500. And consumer stocks are going to be a big focus this week as we await earnings from Lowe's, Target, Macy's, TJ Maxx, and more. Joining us now is John San Marco, portfolio manager at Neuberger Berman. John, how much is the consumer factoring into the guidance? And should we expect to see more Walmart-style guidance out of some of these names or perhaps something less happy? Great to see you, John. Thanks for having me on. Yeah, I mean, I think Walmart is at a really high bar for everyone else in retail in that they have so much momentum and this is a great environment for them. Their own quarterly report checked every box. They've repositioned the business strategically in really

impressive ways, growing a powerful advertising business and third-party marketplace business and keeping their price gaps really compelling for the consumer. That said, I don't think they gave us a head fake on the consumer or on retail. The data that we track suggests the environment remains fairly status quo, and there are some real good guys on the retail side versus consumer services, just in that there's not as much inflation there anymore. Prices have been quite stable. And some of the wallet share volatility we saw coming out of COVID, that has settled down quite a bit. So, you know, we think that the retail outlook is, I'll call it tepid. So to me, the most interesting dynamic

is between TJX, which has been a star discount retailer, right? And then Ulta Beauty. Makeup had been one of those post-pandemic coming out, got to get your face right names, but it's come back down to earth, as you put it. What should we expect? What kind of signal should we expect to get from those results that might tell us more about what's ahead. Yeah, I think both names are on opposite sides of an investment continuum suddenly. TJ has a lot of momentum. I think there's not as much pessimism in the stock. And for good reason, the data looks very positive. The consumer is

voting overwhelmingly with their feet in terms of store traffic that TJ is offering, just very compelling value, which is a great place to be in this environment. We can double click into just how good the outlook is on both the supply side in terms of getting great buys, as well as the demand side, stealing consumers from department stores and other competitors. And then on Ulta, this was a high flyer. As you reminded the audience, they had a lot of momentum coming out of COVID, and that slowed a lot. And as the category's gone from 10-ish percent growth down to three or four-ish percent growth, it shined a spotlight on some competitive weaknesses. And the biggest one to talk about is really just Sephora,

their chief competitor, has tripled the size of its store fleet over a three-year period. That can only happen one time. We've passed that peak headwind. And now I think looking forward, you know, what Ulta represents for shareholders is some exposure to the lipstick effect, quite literally named after a key product, as well as they're shifting some of their investment dollars into marketing that faces the consumer and will start to drive comp, same-store sales growth in the quarters ahead. Okay. Now, finally, tell me how much of a read-through is there from Home Depot into Lowe's, given that Lowe's doesn't have as much of that large contractor business business and given that the consumer

with interest rates being where they are is perhaps somewhat strapped? Yeah, there are some differences between the two. Home Depot's got a little more online mix, got a little more pro-contractor mix, as you mentioned. Lowe's has been picking some lower-hanging fruit in terms of addressing the contractor. But the two businesses are highly correlated. And I think that, you know, the headline for this week's earnings report will be what you alluded to. It's the ongoing, the lingering impact from interest rates, from slower housing turnover. So I don't think Lowe's will, you know, dodge the bullet that hit Home Depot's quarter and outlook last week.

Now, that said, I think both stocks very much discount a really depressed home improvement environment. So you see Home Depot stock has performed just fine despite having to take numbers down. And I think that the setup and the sentiment is very similar for going into Lowe's print. All right. We'll for going into Lowe's print. All right. We'll see how good Lowe's reflexes are. John San Marco, thank you. Thanks, John. Up next, much more on Palo Alto Network's earnings and the stock's wild moves in overtime.

And check out shares of HP Inc., worst performer in the S&P 500 today. Morgan Stanley downgrading the stock from overweight to equal weight, citing valuation. The stock had been up roughly 20 percent this year before that call. We'll be right back. Welcome back to Overtime. Let's check in again on Palo Alto Network's earnings call underway right now. Stock looking like an EKG here. Initially moved higher. Those gains went away. It was up 3 plus percent, down 3 plus percent. Now it's fractional. Well, there it goes, right?

It's just about beat on even. It beat on EPS and revenue. Also announced an additional $500 million buyback. CEO Nikesh Arora is going to be on Mad Money at 6 p.m. Eastern. Get some more signal there with Jim Cramer's interview once again. Now, a pair of housing related earnings are also going to take center stage tomorrow. We're going to give you all the names that need to be on your radar straight ahead. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast

on your favorite podcast app. We'll be right back. Welcome back to Overtime. Wall Street will get new readings on the state of housing and consumer spending tomorrow when Lowe's, Toll Brothers, Cody and Amherst Sports, the parent company of sports equipment maker Wilson, report quarterly results. Medtronic is also on the earnings calendar. And now Mike Santoli rejoins us. Mike, quite a session, quite a string of days we've had. What does it tell us or perhaps not tell us about what the Fed needs to do? I think it essentially tells us that this little seized up moment we had with the growth scare has been seen in retrospect as a little bit exaggerated in terms of the price effect to the downside. What

the Fed has to do, honestly, still be attentive to the idea that things like, by the way, housing and the consumer and the job market have softened up enough to take the edge off of whatever residual inflation readings we're getting that might concern certain members of the committee. I think that's where Wall Street's head is at going into Powell's speech on Friday. Seems like he wants to always preserve some flexibility to modify the outlook. But it's hard to see us coming out of this week without the sense that the Fed is blessing the notion of starting an easing process. And at least we have the chance of doing it from a position of economic resiliency and not weakness. Yeah. Also today, AMD, the second best performing stock in the S&P 500 after announcing its four point nine billion dollar bid for ZT Systems. CEO Lisa Su joined me earlier this hour in an exclusive interview. I asked why she plans to spin off ZT's manufacturing business and how this would build the ecosystem.

I think this is really about, you know, optimizing the capabilities of a wonderful company. And more importantly, it's building out the ecosystem around, you know, AMD solutions. So we are not in the business of competing with our customers. Frankly, we love to make the ecosystem around AMD even broader. More to the AI and even chip story than just NVIDIA, Mike. Seemingly so. And, you know, if you look at the market's response here, you have a deal that was, you know, initially has a value of $4.9 billion. AMD shares added more than $10 billion on the day and outperformed the average semiconductor stock

by 3x today. So clearly an endorsement from investors on this notion of kind of buying the smarts and not necessarily hanging on to, you know, the the manufacturing of the hardware. You mentioned the 90s a little bit earlier and, you know, all the questions about what the market was doing all the while the Internet and the Web was bubbling up. Yeah, it always was. You know, I think there's a greater awareness now of kind of paying attention to this huge build out than there was then. But it does rhyme without a doubt. Yeah, to the AI that we see taking shape right now. Mike, we'll see you again tomorrow, and we'll see what this market does as well.

For now, that's going to do it. We're here on Overtime.