Closing Bell - Closing Bell Overtime: AMD CEO Lisa Su On New AI Chip, Growing Market Share 10/10/24

Episode Date: October 10, 2024

AMD unveiled its newest chip at today’s Advancing AI event. CEO Lisa Su joins fresh off the stage to discuss the chip’s capabilities, the updated production schedule and how its improving its software to enable easier switching between competitors. Apollo Global Partner Stephanie Drescher talks the growing interest in private markets and where she sees top opportunities. Plus, a Tesla bear vs. bull debate ahead of tonight’s Robotaxi event.

That's the end of regulation. Schwab Asset Management ringing the closing bell. The New York Stock Exchange, Vistagen, doing the honors of the Nasdaq. Well, inflation and labor data weighing on markets today, but stocks got to push higher in the last few moments of trading, although it looks like we're still finishing just below the flat line. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. And coming up up a can't miss interview with amd ceo lisa sue that stock under pressure today as the company unveils new chips at its advancing ai summit in san francisco we will hear about her plans to compete with nvidia and much more plus we're just a few hours away from tesla's much-hyped robo taxi

event will be a game changer for the transportation industry and for Tesla shareholders. We'll debate with analysts on both sides of the trade. But let's begin with our market panel. Steve Sosnick of Interactive Brokers and Osung Kwon of B of A Securities. Great to have you both here. And as I mentioned, it was a down day, albeit fractionally for the major averages. It looks like, Steve, I want to start with you. You had CPI that came in,

both core and headline, a little bit hotter than expected. And then you had a jump in claims data, although many economists pointing to hurricane effects potentially in that data, followed by a lot of Fed speak, including some rather hawkish comments from Atlanta Fed President Bostick. Is that really what's moving the markets here or something else at play? Great to see you, Morgan. I think to some extent it should be actually moving it more, actually. It's a little surprising that we came in hot on CPI and the market immediately pivoted to the employment numbers, which, you know, can be very noisy because of Hurricane Helene, you know, and we'll see what happens again, you know, with what happens in Florida. But

the market's kind of taking whichever narrative fits the mood right now as whatever it wants to do. So, you know, the prices, the stable prices portion of the mandate seems problematic today. So let's focus on the employment portion of the mandate. problematic today. So let's focus on the employment portion of the mandate. But yet at the same time, there's so many indicators out there that are saying the Fed is really not in any great rush to do the markets bidding in terms of cutting rates. I think we continue to need to stay focused on the idea of a strong economy. And then if we get rate cuts, that's wonderful. But if we don't get the strong economy, that's going to be problematic for earnings and for a whole other set of set of concerns. Also, I mean, there's so many cross currents here for this market, but we do have an S&P that's trading at what?

Something like 21 and a half times forward earnings, which is which is expensive. We did have this mixed data today. And then, of course, the beginning of earnings season. Now we're going to get into the financials and the banks more specifically here in just a few minutes. But in terms of the setup going into earnings, how much now hinges on that? Yeah, I mean, obviously, the earnings season is going to be very important. I don't think the bar is very high in terms of this earnings season. Everyone knows that macro slowed in Q3. And if you look at what consensus is forecasting, consensus is implying 4% EPS growth this earning season. That compares to up 11% that we saw last quarter.

So that 7 percentage point deceleration quarter over quarter, that's going to be the biggest deceleration in more than two years. So I don't think anyone's really expecting Q3 to be fantastic. But then I also think that Q3 isn't really the big focus. I think the real big focus is about the outlook. It's about the outlook on the other side of the curve now that an easing cycle has begun. And I think, especially for banks, I think the key focus is going to be whether they're seeing any signs, any early signs of improvement in terms of activity, whether it be capital markets or whether it be IPOs or loan demand. And I think that's really going to be the key focus this earnings season. on the riskier side, a lot of big data software and cybersecurity names did extraordinarily well

today, including Confluent, MongoDB up six or seven percent, CrowdStrike and Zscaler up about five. Big rebound in a lot of these stocks since August, September. Is this sort of risk on thing that we see happening in general, maybe a sugar high driven by soft landing, China stimulus, or you think it's perhaps durable? Well, the earnings will tell us if it's durable, John. I mean, that's really going to be the key. And as Osun just said, it's going to be more about guidance as much as it is whether you beat the number. I think this is actually, in some ways, the other side of the rotation. We went from Mag7 and MegaCapTech and big tech names leading the way to taking a little bit of a backseat then to more cyclical names. It's only natural that we come around and start looking back at the tech stocks.

This is just what happens. It's ebb and flow. And I think the market is this market where we have very strong momentum. It's always going to be looking for things that are laggards. Since we don't have many true laggards, they're going to look for relative laggards and then jump on those when there's an opportunity. Because besides buying dips, the other thing that people really respond to now is chasing rallies and chasing trends. And so as the rotational trends move, this was the one that was the right one for today. Okay. Well, Steve Osang, stay with us.

Let's bring in Senior Markets Commentator Mike Santoli with a look at the banks as J.P. Morgan and Wells Fargo get ready to report earnings tomorrow. Mike? Yeah, John, the group has actually broken out to around a two-year high. It's been a pretty positive message in terms of broader macro implications, as well as leadership within the market. Although you see it's been hard fought. That was the Silicon Valley bank meltdown that brought the entire sector well below prior levels. This is when the Fed started tightening. So it's obviously been a series of challenges, and they're kind of trying to emerge out from that. You see how much left is to be regained to go back even just to early 2022 levels. Also, price to book, let's say, on an average basis for the BKX index is around 1.2

times. That's roughly average over the last decade. So you wouldn't call it particularly cheap. It's probably going to be a lot of give and take in terms of responses to earnings name by name. Take a look at, though, banks relative to the rest of the financial sector. They've been the big underperformers you might expect. Insurance, Berkshire Hathaway, stock exchanges, asset managers all doing better. Of course, Visa, MasterCard as well than the core banks. Banks themselves actually only about a quarter of the financial sector right now in terms of market cap. I mentioned in terms of what you should listen for and look for in bank results. As the Fed starts to ease, one of the questions is just how much will deposit rates go down?

Therefore, banks' costs of keeping customer balances in there. This is a history all the way back to the early 90s from Morgan Stanley of the Fed funds rate and how deposit rates have tended to track it. And the point here is that usually deposit rates give back all that they gained during the tightening cycle eventually. So if you think that they're going to let's say the Fed funds are going to go back to three percent, you're going to get deposit rates well below that. It's going to help those banks that are more sensitive to deposit costs relative to the repricing of the loans on their books. Probably going to be a theme in the coming week. Going back to, was it the KBW that you had up to begin with? And you second were comparing that with some other financials. Is it common for the banks to underperform other financials to that

extent? No, I wouldn't say it's common. I mean, it certainly would have happened, for example, around the global financial crisis when lots of banks went away. But no, I think right now what you're seeing is the economy is kind of evolving beyond banks when it comes to financial services. The banks are kind of hamstrung by higher capital levels. They have a little bit less leverage to the growth in the overall economy than they used to. So I think it's been a long-term trend, but one that's been really exacerbated in the overall economy than they used to. So I think it's a it's been a long term trend, but one that's been really exacerbated in the in the post pandemic period. Also have to point out, S&P decided to put Visa and MasterCard, a couple other things into the financial sector, and that just sort of demoted banks in their relative importance.

Mike Santoli, thank you. We're going to see a little bit later this hour. I want to go back to our panel here for some reaction as well. So we've still got Steve Sosnick and Osang Kwan with us. Osang, I want to go to you because you did do some work. You touched on it a little bit just a few moments ago. But you did do some work looking at the financials and previewing the banks ahead of earnings kicking off with them tomorrow. And one of the takeaways for me is the fact that you don't think net interest margin could be quite as big a driver for stock reaction as book value is. Why?

Yeah, so our call is you want to own base-sensitive cyclicals now that an easing cycle has begun. And I think banks really fit that narrative. Not that their earnings were hit by the hiking cycle over the past two years, but their stock reaction was still pressured by it. And the biggest reason was the banks didn't really trade on net interest margin or EPS. They traded more on book value. And lower rates means higher book value in general for the banks. So if that's the case, this easing cycle should be more favorable for the banks going forward. Also, we see that the race-sensitive side of the economy that were hurt by the hiking cycle over the past two years, those could potentially come

back in 2025. And the sectors that I'm watching are really manufacturing and housing. I mean, a lot of people are talking about how this hiking cycle didn't really have an impact on the overall economy, which is true. The economy, 70% services, 70% consumption, which was really helped by all the physical stimulus. But if you look at underneath the surface, manufacturing and housing, those really rate-sensitive sectors, they've been in a recession. And the real bull case for the banks is if those sectors start to come back in 2025, given that we are in an easing cycle, that could potentially translate into better loan growth going forward.

And if that's the case, then I think it's the real focus for the banks. OK, so Steve, you mentioned earlier that the market's been reacting to macro data kind of the way it wants based on the way things have been trending. Do you expect something similar to guidance in this earnings season? Are we going to learn something about how investors react to the guides? I think that's really yes. I think that's an absolute yes, John. I think the key here is we saw today and even something like Domino's Pizza, where they beat numbers and the stock didn't really do much because they didn't really have great same-store growth. In an environment where 75% to 80% of the companies beat their published estimates, people look beyond the estimates now. People have gotten

smarter about that. They're a necessary condition for a post-earnings rally, but not a sufficient condition because people are looking past that. And in a situation where, yes, this quarter, as Osang said, we're looking at about 4%, you know, top 4% earnings growth, that's achievable. Next year, we're looking at 15%. And anything that punctures that narrative is going to be problematic for the stocks that puncture it. The first situation we'll start to hear from are the big banks. Do they see the type of environment where their big corporate customers and their consumer customers, are they at all constrained by these rates or are

they still continuing to borrow and lend? And then secondly, as we get into more of the hard of earning season, what are companies saying? Can they achieve the robust guidance that is priced into it? Or will they have, if they pair that back, that might be very problematic for the market. It's very important that they meet and potentially exceed published guidance. All right, we'll be watching all of it.

Steve Sosnick and Osan Kwan. And to your point, Domino's, mixed commentary on the consumer from Domino's and Delta today. And certainly all of that in the market, which finished lower. Coming up, we will head to San Francisco for a first on CNBC interview with AMD CEO Lisa Su. That's from the sidelines of the company's Advancing AI Summit. As the stock makes a sizable move lower today, we will hear about the company's new chips, its plans to compete with NVIDIA, and much more.

Overtime is back in tune. Welcome back to Overtime. Is it time to rethink the classic 60-40 portfolio? Well, as public markets have become more indexed and correlated, Apollo Global Management says investors should look to diversify into private markets. Joining us now is Stephanie Drescher, partner at Apollo Global Management. Joining us here on set, it's great to have you. Welcome.

Thank you so much for having me. We've been having this conversation about greater access to retail investors, individual investors of the private markets. Apollo has certainly been spearheading this effort. So that's exactly where I want to start. Why does the traditional 60-40 portfolio not necessarily make sense, especially at a time where it does seem to be working again, albeit perhaps just here in the near term? Look, the 60-40 portfolio has, if we look at the kind of equity markets by way of example, we recognize that over time the number of public companies has actually been reduced by half. Yet when we step back and we look at the total number of companies

globally, 90% are in fact private. And the reality is that the private markets, whether that's equity or credit, have provided excess return for investors over time. So the 60-40 portfolio, as we think about advisors and clients planning for retirement and building wealth, is missing out if they don't have the private market exposure that ultimately allows them, especially given markets today, to increase their diversification, reduce their volatility, and ultimately achieve the benefits of that excess return. And I do get that historically, private markets tend to be a higher return And I do get that historically private markets tend to be a higher return than what you get in the public markets, but it comes at the cost of

liquidity, does it not? Liquidity absolutely is part of the analysis. When you look, though, through to the client's portfolio, there is a great deal of investors, individuals out there that absolutely can take a portion of illiquidity in their portfolio. In fact, we often say, let's look at how much liquidity they need on a daily basis. we have direct us to do a portion of the public fixed income and public equity portfolios having a replacement and rotation into the private markets. So if we look at the structures that are created for the individual today, it reflects a greater amount of liquidity. Certainly in the traditional kind of historic old way of looking at private investments, they were historically very long dated. Now we have a whole suite of

solutions that provide incremental liquidity and allow the excess return to be delivered to the portfolio. Here's my concern about private markets. With the big reduction that you mentioned in the number of public companies over the last couple of decades and the imbalance in the strength of mega caps versus other public companies in general, and then you've got some of these super startups like OpenAI, Stripe, Databricks. Might there be a lot of private assets that are also inflated versus what they were historically, so they won't deliver the returns that they traditionally have, but we just won't know for a while? You know, when you look at the investment rigor and discipline, certainly in our approach to private markets, there is such a strong underwriting case that comes to this type of investing. And so we have great confidence that when we are applying

our 30 plus years of investment rigor and diligence, that we're getting to a purchase price that we're extremely comfortable with in terms of entry, and then great transparency as it relates to the valuations over time. So with that in mind, then, when we are talking about the private markets and we're talking about alternative assets, are we talking about private credit, private equity, what sectors are looking compelling right now? We've been having a lot of conversations here on Overtime about things like infrastructure, for example. So look, there's a whole range of opportunities, which is what's so exciting today in terms of alternatives, private markets. Because at the end of the day, for us, the definition of alternatives is simply an alternative to a publicly traded bond or stock. So that could be everything from private IG

all the way through to your traditional private equity holding. So within the credit markets, if someone is looking to replace a portion of their fixed income portfolio, they could look to the corporate lending market, asset backed in equity, we can replace a portion of the S&P with diversified private market exposure. And then to your point, in real assets, we could look to infrastructure and other climate, real asset-oriented opportunities. So it's really across the risk-return and asset spectrum.

And what's great is that now there's so much innovation in this part of the market to deliver private exposure to the individual that we're creating tailored solutions that build off of what institutions have benefited from for decades. And when we look at the average allocation of private investments in an institutional portfolio, it's about 25%. In contrast, the individual is 1% to 3%. So there's a huge opportunity ahead to provide that type of opportunity for individuals to build their wealth and save for retirement. Which, of course, gets us into indexing private markets and private credit ETFs,

which I know Apollo is partnering up with State Street to potentially do. So you'll have to come back and join us again in the future to talk more about it. Stephanie, thanks for being with us. Stephanie Drescher, Apollo. Thank you so much. Great to have you. Up next, AMD CEO Lisa Su joins us for a first on CNBC interview, a breakdown of today's AI chip announcements and how she plans to compete with NVIDIA. And will Tesla's RoboTaxi live up to the hype or be a speed bump for the stock? We will talk about the opportunities and the risks for investors ahead of tonight's event. Stay with us.

Welcome back to Overtime. AMD shares closing in the red today after climbing in anticipation of the company's advancing AI event today. That's where CEO Lisa Su unveiled a new AI chip, the MI325X. And joining us now, fresh off the stage in San Francisco, is Lisa Su, AMD chair and CEO, along with our own Christina Partsenevelis. Christina. Thank you, John. I have to start actually by saying congratulations. 10 years as CEO running this company, it's no small feat, that's for sure. But I want to get straight into cost. Often within the research world,

you have a lot of, I guess, analyst reports that say AMD is a cheaper alternative. And I know on stage you talked about the total cost of ownership being lowered with this latest AI chip, but what does that actually mean? Does that mean that your chips are cheaper or they're cheaper if you buy a bunch of different chips from AMD? How does it work? Yeah. So first of all, Christina, thank you for being here, John. Great to be on the program today. This was a big day for us. We launched a ton of new products across our Epic, you know, fifth generation Epic, our new AI chip, MI325. We talked about our roadmap going forward, which we're accelerating. We talked about some new networking solutions. We talked about AI PCs, and we had a ton of partners on stage. So it's been a fantastic day.

You know, look, when you look at what's happening in data centers today, Christina, we want to help our customers and the industry really take advantage of new technology. And the beauty of new technology is you can actually take what was, let's call it a legacy data center, and do that same work for much lower total cost of ownership. So back to your question about costs and what it is. The new technology is much more power efficient, has more performance, gives you just a tremendous amount of capability. And one of the metrics that we talked about today is for our newest generation of server processors, our TURN generation, we actually can take seven legacy servers and replace them with one new fifth

generation Epic server. So that's just tremendous total cost of ownership. Now, what do we want to do at AMD? What we want to do is provide value to our customers. So it is about more performance. It is about better performance per dollar. It's about reducing their footprint and giving them more computing for their applications. Which is a perfect segue to talk about the MI325X, which you're comparing to the H200 for NVIDIA, which has been on the market for three years. So are you saying that there's just such a large market for that type of chip, or is it this constant game of catch-up with competitors?

Well, the best way to say it is, first of all, the market is moving very, very quickly. If I just say our MI300, which has been in the market now just a little bit less than a year, was competing against the H100, which was the previous generation. It's done phenomenally well, and we've seen tremendous customer adoption. We're very excited to have Microsoft and Meta

and Oracle on stage today. We had a number of AI developers talking about just how much performance they're Oracle on stage today. We had a number of AI developers talking about just how much performance they're getting on MI300. We're now launching MI325, which compares very well to H200. Actually, if you think about some of the most important inferencing workloads, we're going to see 20 to 40%

more performance on our new chip. And it's not just what we're doing today, but we're really excited also about our next generation our mi 350 series and what's going on after that years out no and my 350 series is next year it's in the second half 2025 and going to mi 400 and 2026 so we are accelerating the pace of innovation it feels really good to kind of see all of this stuff you know come together and the most important thing is developers love developing on our of innovation. It feels really good to kind of see all of this stuff, you know, come together. And the most important thing is developers love developing on our accelerators. And that's what we're really focused on. Hey, Lisa, great to have you back on. So I want to talk software. A month

ago at the Goldman Sachs conference, you said what you've done best at AMD in 2024 has been software. We just had NVIDIA CEO Jensen Huang on last week talking a lot about software too. I want to ask you about Rokkim, which some would frame as your answer to NVIDIA's CUDA. Can you sketch out for me how Rokkim fits into AMD's AI performance argument alongside silo AI, say, versus NVIDIA and how partnerships might increase Rackham's impact? Yeah, absolutely, John. So first of all, you know, I am extremely happy and proud of the work that we've made on software. You know, the whole idea is, you know, our philosophy is how do we make it as easy as possible for our customers and partners to adopt our solutions to really

accelerate the usage of AI? You know, Rockham is a fantastic software stack. We've made tremendous improvements in it. You know, if you just look over the last 10 months, we've actually seen our performance in some of the key workloads, like in inference workloads, we have more than two extra performance today over the last 10 months just based on software improvements. Same thing on the training side, very substantial improvements. What we actually love hearing is we have a number of new AI developers that are using our technology.

Some of the ones that were on today were Luma, Recca, we have Databricks was with us today. And what they've said, Fireworks, what they've said is it's super easy to actually take their software, their models, and actually run them on our new accelerators with very, very little tuning, with exceptional performance. So that's the power of great software. And I'm very, very happy with the progress we've made.

Lisa, it's Morgan, and it's great to have you on the show. I realize you had the disclosure about Meta's Llama, and I realize that there were cloud customers on stage, but analysts and investors really jumping on the fact that there were no major new customers announced or unveiled today. So what can you share about that pickup or that adoption by new customers,

and what does it say about the demand in this AI landscape? Yeah, so first of all, let's talk about the demand. I think the demand for the overall AI landscape is actually really, really very exciting. We actually updated our view of the overall market. Last year, when we talked at this time, we thought that the overall market size would be $400 billion in 2027. We're now extending that to 2028, and we expect the growth rate to continue to be very high, over 60% average growth rate over the next three or four years, resulting in an overall market size of 500 billion

by the time we get to 2028. So that in itself is super exciting. And then in terms of customer adoption for MI300 or our overall GPU accelerators, it's been fantastic. We've seen a lot of customers really pick up MI300, get excellent performance results. As I said, there are a number of developers and a number of new AI companies that are here. We have Microsoft, Meta, Oracle. We have all the leading OEMs. And what we found, it was the same thing that we found when we started our data center business,

is that customers adopt more, more and more over time as you go into the next generation. So super excited about the new generations of the overall GPU roadmap. And you can expect that we'll continue to grow adoption going forward. And those next generations are gonna be manufactured by TSMC, right? So would the delays in Arizona mean anything for your business, and would you consider Intel as a manufacturer?

I know that they're a competitor with the x86, but is that in the cards in the future? Yeah, so if I think about the overall manufacturing capability, I mean, the semiconductor manufacturing world has ramped so much capacity over a short amount of time. We are super happy with our manufacturing partners. They've supported us incredibly well over the past few years. As it relates to TSMC in Arizona, I think they've made excellent progress. We're going to be one of the first customers in their Arizona facility. And that's a really important part of our overall geographic

strategy to ensure that we have manufacturing across multiple geographies. And we're always looking at what's happening in the manufacturing world. The main thing I think that it's important is it's really important to have a strong and resilient supply chain And we're absolutely focused on ensuring that that's the case and just the last question was focused on inferencing because I think there was research From Bertstein that said inferencing market is actually a lot smaller than we anticipated 18 months ago Less than 5% of the market and a lot of the chips today. We're talking about inferencing and the capabilities Are you concerned that that momentum that's been put into buying chips to train large language models will not translate into that same momentum for inferencing?

Well, we are absolutely clear that the overall AI market is growing very fast, and that is both training and inference. And the truth is you need to train the models first, but then inference is really how we see return on investment from those models. So I'm really excited about some of the new models that are out there. I think what we're adding is much more capability to the new models, and what that means is that there will be more inferencing capacity as you go forward. I think most people expect that as we go forward, inference is going to be the larger market. And I still believe that.

Thank you, Lisa. Thank you. Wonderful. Great to be here with you. All right. Thanks again, Lisa Su, AMD CEO, and also to our own Christina Parts-Nebulas. Well, Netflix kicks off big tech earnings in exactly one week, and the stock has been on a massive run since the lows of 2022, up more than 300 percent. After the break, Mike Santoli takes a closer look at the comeback story and what the next chapter could hold. And oil prices jumped today, but solar stocks lost some shine. First, solar was the worst performer in the S&P 500. After cautious commentary from Jeffries about near-term supply chain and labor

challenges. The tan solar ETF closing lower by more than 3 percent over time. We'll be right back. Welcome back. Netflix trading at record highs today, marking a stunning comeback from its 2022 lows. Mike Santoli is back. Here's a look at what the Netflix pattern says about the current market setup. Mike. Yeah, Morgan, really kind of a stunning round trip from the late 2021 highs. You see here we were above 700 at that point back in November of 2021. That was also when the Nasdaq peaked, by the way, before the downturn. And here you see we've exceeded that just barely interesting kind of crossroads of analyst opinion. The average price target for the stock is actually around 720. So it's kind of

a moment of truth. Do you want to raise your price target? Do you want to downgrade the stock? There's been both of that recently. Fifty four times earnings up here. Thirty four times earnings there. It shows you how much the earnings have grown over that period. Now, take a look at a couple of other of these round trip charts from that period. Palantir is a good example from shortly after it came public. You see the highs there. It is now long, long bottoming process. And now it's exceeded it. Now, of course, it was all potential here. And now it's kind of proving out some of the business model and obviously the earnings flow to come at these at this point, a little more cyclical. Take a look at UAL. And this was one of these situations with big airlines where it was always seen as if the reopening trade and the travel boom was going to falter. And you see it's had these multiple kind of efforts to break out here. Not quite yet. We'll see if it can finally get above that late 2021 level. So this is this is really fascinating to me because as you call them the comeback kids, it raises the question to me, how much of this is a reflection of an increase in liquidity that is back in the market versus just specific companies that are now profitable, free cash flow generating and doing what investors wanted to see them do?

Here's why I ask the Renaissance IPO ETF still way off. It's 2021, 2022 highs. And we know SPACs were a big part of the equation back then. Definitely. So it's a combination of that previous setup where investors got overexcited in the near term for a variety of ideas, whether it is something like stay-at-home and Netflix or whether it was going to be, obviously, Palantir's potential. The ones you mentioned, like IPOs, even something like PayPal, for example, or Target, were big pandemic boom stocks that are nowhere near their old highs. Now, PayPal is kind of trying to make a comeback, but it's nowhere near the old highs.

So it obviously has to be proven out in the numbers. And right now, we're not just going to go on hopes and promises. It's going to have to be in the results. Yeah, some of these charts are wild. Mike, thanks. Well, Tesla is set to unveil its highly anticipated robo taxi tonight. But will this event help drive the stock higher? A bold bear debate is next. And DoorDash getting a pop from speculation that Tesla might announce a robo taxi delivery partnership with the company. We'll see. Be right back. Welcome back to Overtime. Well, in just a few hours, Tesla is expected to reveal its highly anticipated robotaxi in an event called WeRobot at the Warner Brothers Discovery Lot in Los Angeles.

But will the actual news live up to the hype? Well, joining us now is Craig Irwin from Roth MKM and Brett Winton from ARK Invest. Guys, welcome. Brett, if I can rent a ride in a self-driving Tesla for less than the cost of an Uber, why would I buy a Tesla? It doesn't matter if you buy a Tesla if they can deliver full self-driving to their fleet of vehicles. In fact, Tesla could not sell another vehicle and just enable full self-driving on its existing fleet, and it would massively increase in value. If a self-driving taxi can do 100,000 miles a year

at a dollar per mile, so less than the cost of an Uber, that could drop somewhere around 50 cents to 25 cents in operating earnings to Tesla per vehicle times 100 per year. So one time sale of a vehicle gets you maybe $5,000 in operating profit. If it turns into a robo taxi, that vehicle generates on the order of $20,000, $25,000 in operating profit per year for as long as that vehicle exists. I don't need to sell electric vehicles to people anymore if instead they're going to ride in them as robo taxis.

Craig, I'm skeptical. Rides are a commodity and I can see the price going down and down if Waymo and others succeed at this as well. But Teslas are a premium product. How does this robo taxi product and service live up to these expectations, you think? I think the expectations are nothing but lofty right here. The whole expectation around ADAS 4.0, you jump in a vehicle and it takes you from A to B with no operator input. That is years away. It is many years away. That exists today. I rode in away mode just last week. You can do it right now. Well, no. If you use LiDAR, if you're using a camera-based system like Tesla is, you need to have many more cameras. And the LiDAR-based system gives you

spatial... I rode in my Tesla this morning and I pulled out of the parking lot and then I took my hands off of it. It's not subject to optical apparition, which is the fundamental flaw of Tesla's system design. So it's not, this is not going to be mainstream. This is not going to be an app update for your Tesla fleet out there. This is just not, it's not going to be the hype and the dream that everybody has right now. Brett, what is it going to take from a regulatory approval? Assuming this is technology and capability, we know Craig believes it's not, but you sound like you do believe in this capability and the way they're building out this autonomous driving possibility. What is it

going to take from a regulatory standpoint to actually see it become reality? I think, you know, the Waymo case has shown that regulators will respond to data, and Tesla certainly has a volume of assets in field where they can deliver a big volume of data to demonstrate how safe these vehicles are. In fact, I would not be surprised, though there's certainly no guarantee, if they released in this event announced some hard empirical data on their intervention rate for safety-critical interventions. And across a certain threshold, you know, these vehicles, and Waymo has demonstrated it, are going to be safer than humans. I would rather put my kid in an autonomous robo-taxi

than trust my kid with an Uber driver, for sure. And so I think even at the same price, robo-taxis are likely to take share from existing ride hail. And we I think even at the same price, robo taxis are likely to take share from existing ride hail. And we think the size of the market increases by roughly an order of magnitude as you go from that 250 per mile down to a dollar per mile. We think that's a trillion dollar addressable market. Craig, just to play devil's advocate here, optical cameras and neural network. I mean, this is what some of the Chinese autonomous vehicle makers are building out with their infrastructure as well. And you're starting to see that capability being tested in places like China. So why don't you think it could actually come to the U.S., especially

at a time where you have a federal government that's cracking down on all that Chinese hardware and software? So I think technologically it's possible, it's doable, but the economics don't come together when you're actually burning twice as much electricity to get from A to B, right? The compute, the cost to compute is high, right? So, you know, I'm a big believer in, you know, the future long-term of autonomous, but it's not going to be an app update of the existing fleet. And these are going to be very different vehicles when they get out on the road. So, you know, it'll be something I also expect the government to be fairly conservative about, right?

You know, Waymo has a history, so does Cruise, right? Which isn't exactly pretty. And then Tesla's taken a lot of flack for NHTSA, right? For the accidents over the last several years of people, you know, using FSD. So the academics out there that look at normalized data, there's a nice Nature paper out not too long ago saying that these vehicles actually at dusk and dawn and when turning have higher error rates than human drivers.

So the reality is a little bit distorted you know i i just i'm i'm a heavy skeptic i do not see you know uh 20 000 robo cabs on the on the on the road by the end of next year running around picking people up i just don't i don't see that happening that easily i think there is a much higher regulatory and and and qualification hurdle to get there than most people appreciate. It's five years late. We were told this is coming in 2019. It's five years late. I think if we do see a Waymo-like vehicle, it'll be another five years. All right. Well, we know Elon Musk is also optimistic with his projections always. Gentlemen, we just scratched the surface. We'll see what we get tonight. Craig Irwin, Brett Winton, not to mention the fact that there's a possibility you could get a Model 2, too.

So we'll see. OK, well, thank you. Oil has been making a comeback recently. Coming up, what the outcome of the presidential election could mean for crude in your energy portfolio. Welcome back to Overtime. It's been a while since we showed you a QR code. So here you go. You can get out your smartphones, scan this on your screen. It's a throwback version of my On the Other Hand newsletter. So two years ago, just about, I asked whether IBM's long-awaited turnaround was finally happening after it beat earnings expectations, raised its guidance. Since that time, the stock has nearly doubled. So it looks like the comeback, at least for the stock, was really in the works. So to see both sides of

that argument, see whether either one holds up and join the conversation this week. Scan that code or type in CNBC dot com slash OTOH. All right. Well, up next, why there could be a major reversal in one of President Biden's key energy policies. If Kamala Harris wins the White House, and how it could affect your portfolio. And speaking of which, Delta Airlines is blaming the election for a weaker-than-expected fourth-quarter revenue growth forecast. CEO Ed Bastian telling CNBC Americans want to be home around November 5th because of election uncertainty. We'll be right back.

Welcome back to Overtime. Some energy headlines being made today in Washington. Brian Sullivan did a fireside chat with Virginia Senator Mark Warner about energy and energy security. Brian joins us now from D.C. He's got a highlight of some of those key comments. Brian. Yeah, Morgan, thanks. Listen, it's a little bit obscure, but I think it's important. So thanks for having me on. Here's the thing. So we did this one-on-one fireside chat with noted Senator Mark Warner, and I asked him about tariffs on Chinese solar panels. And his answer kind of led to an, what I think could be an interesting headline. Listen, and then I'll explain. I'm not sure how many of Mr. Trump's threats to slap on 100%, 200% tariffs on every nation, state, friend or foe alike, you know, how much of that is bluster, how much of that

is reality. I think that could have an effect because that would, you know, even on energy flows. I do think more generally, you know, I was a big advocate of moving to LNG to allowing it to be exported. I think, again, that has allowed many of the European nations to move, I believe, permanently off of Russian gas. That is geopolitically to our and non-authoritarian. Should we end the pause on certain new projects? You know, there are a number. I would take a fresh look at a lot of those projects. I think we have to have a mix.

So, Morgan, there you have one of the most powerful senators on Capitol Hill effectively saying, even if Kamala Harris is in the office, we should look at maybe maybe roll back some of these pauses on new liquefied natural gas facilities. Trump obviously would do that. But even under Harris, if that's the case, when Mark Warner says it, we have to listen. That would imply sort of a mini break from the Biden policies, which put those pauses on. By the way, if that ever got lifted, you got to look at a stock like Chart Industries, GTLS. They helped build LNG facilities for new fortress energy, potentially another one to Brian. I mean, you and I talk a lot about the fact that our worlds intersect energy and defense. This is a good example because you're talking about LNG exports as a matter of national security.

100 percent. I'll give you actually an anecdote today in Washington, D.C. There's a huge delegation from Japan. Japan is a major buyer of U.S. liquefied natural gas. Literally today they are here, U.S. Chamber of Commerce and others, they are effectively trying to not only buy natural gas, but lobby the White House to reverse that LNG pause. It's only a couple of projects, Morgan. There's still a lot that are going on, but it's enough that basically they're saying if we don't get the LNG from the U.S., we're going to have to get it from Qatar or maybe even Russia, because Russia, while the Nord Stream pipeline got blown up, Morgan, and if you find out who did it, let us know, they still produce and sell a lot of liquefied natural gas via ship.

All right. Brian Sullivan, thank you. A lot of theories about that one out there. We got university, I mean university. We've got Michigan consumer confidence tomorrow. We got bank earnings tomorrow. And we've got a market that finished fractionally lower today. Got to tune in for sure. We also had a lot of smaller tech stocks that did pretty darn well. All right. That does it for us here at Overtime.