Closing Bell - Closing Bell Overtime: AMD CEO On The Company’s New AI Chip; CrowdStrike CEO On Its New AI Bot 6/13/23

Episode Date: June 13, 2023

Another day of gains for the major averages. Vital Knowledge founder Adam Crisafulli breaks down the market action. After unveiling a new AI chip, AMD CEO Lisa Su joins to discuss the opportunity for the chipmaker. CrowdStrike CEO George Kurtz discusses the company’s new cybersecurity tool, a chatbot for clients named Charlotte AI. Morgan Stanley hosted its Financials Conference; Leslie Picker discusses the market-moving highlights. Signifyd CEO Rajesh Ramanand on the state of the consumer and inflation on the back of a cooler CPI print. RBC Capital’s Amy Wu Silverman on what the options market says about tomorrow’s Fed decision. 

We got your scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Ford on the other coast in San Francisco. And I'm Morgan Brennan at CNBC headquarters in New Jersey. Coming up on today's show, a can't-miss interview with the CEO of AMD, Lisa Su, fresh off today's AI event. Her company's stock has doubled so far this year. We're going to talk about, of course, the latest efforts in AI, data centers, much more. Plus, we'll be joined by the CEO of CrowdStrike as that company makes inroads into the world of artificial intelligence to combat cyber attacks as well. But right now, we are less than 24 hours from tomorrow's crucial Fed decision.

Joining us now is Vital Knowledge founder and president Adam Christofouli. Adam, seems pretty clear they're going to be able to pause after the CPI number today and the market's sigh of relief reaction. But I wonder, when you look at the NASDAQ, it's at those high levels from January through May of 2021, where it bumped around before shooting up to 16K. So might this level here actually be reasonable? I think it's reasonable. I think the, you know, what I'm focused more on is the discrepancy or the dichotomy between the tech outperformance and NASDAQ outperformance and certain other pockets of the market. I think overall, the fundamental backdrop is relatively

favorable. And so the tech rally is justified, But I do think it is threats versus the rest of the market. So my view is that there's going to be more of a catch-up trade in some of these other groups, like the equal weight S&P or banks. You know, some of these groups have lagged behind tech. But, you know, tech had a decent earning season. You do have a lot of excitement around this new technology with AI. Some of it might be a little bit ahead of itself in the near term. But like I said, I think it's more of a catch-up trade that's more appealing. Well, but if it's reasonable here, that doesn't necessarily mean I would imagine you want to rotate out of it. That's what I'm wondering. No, I don't think, you know, I wouldn't necessarily

short tech. You know, I wouldn't commit incremental money to it up here. I mean, you kind of see the price action, something like an Oracle today, you know, I wouldn't I wouldn't commit incremental money to it up here. You kind of see in the price action something like an Oracle today. Terrific earnings, terrific guidance, very strong fundamentals. The stock faded in today. The AMD AI events, you know, the products are very important. They're going to be important for the company going forward. You're going to speak to the CEO a little bit later this hour. But, you know, as far as the near term story, a lot of it is priced in. So it's more just, I think, committing new money to some of these other areas of the market that have lagged behind, that don't have as much enthusiasm, that have more appealing valuations. So, Adam, what is that? What do you think is compelling in terms of a catch-up trade? You

had the Russell 2000 today rally, 1.3 percent. You had materials and industrials and some of the other more economically sensitive sectors within the S&P leading the gaze today, too, I'm sure, in part because of the China stimulus chatter and some of the news we see coming there. I mean, are these areas that you'd be putting money to work or somewhere else? I think some of those, but I think more banks or energy or Chinese stocks themselves that are really underperformed. You know, there's been a lot of enthusiasm around China the last several days with stimulus actions. We're going to have Blinken visiting Beijing in the next week or so, according to reports.

But Chinese equities themselves, so Hong Kong, mainland China, have lagged behind a lot of what's happening in the U.S. So I think Chinese equities have more potential to catch up. Bank stocks are still big underperformers. Energy has catch-up potential. So to those areas that I think are a little bit more appealing than the overall S&P or tech. Yeah. And just to go back to the CPI print that we got this morning, the fact that we have seen headline inflation now halved from the peak of last year. Is disinflation still a good story for the market and for equities

here or are there risks? So I think for the time being, intensifying disinflation still a good story for the market and for equities here, or are there risks? So I think for the time being, intensifying disinflationary forces is certainly positive. I think it will stay positive. I do, I'm a little bit concerned if, you know, a quarter or several months from now, I think that disinflation is going to create some obstacles for certain companies in terms of earnings. And so there definitely could be some issues as we get more into the fall and prices continue to drift lower that you start to see companies have earnings problems because of that. And then it's going to create some hiccups for the market. But I think for now, it is a tailwind in general. But again, if you get into

the fall, if it hurts earnings more than it drags yields lower, it's going to create some obstacles for the overall market. Got it. Adam Crisofulli, thanks for joining us. The S&P finishing the day up seven tenths of one percent, 43.69. Pretty meaningful on a day where we usually talk about Fed drift ahead of the FOMC decision tomorrow. Well, making moves in the AI space, we just touched on it briefly, but chipmaker AMD announcing today that its most advanced GPU for AI will start sampling to some customers later this year, making it the strongest challenge to NVIDIA so far, which dominates the market with 70 percent market share, according to B of A. Shares finishing the day down today a little more than three and a half percent. But keep in mind, they have nearly doubled year to date.

Joining us now in a first on CNBC interview, AMD CEO Lisa Su and our own Christina Partsenevelis. Christina, take it away. Thank you, Morgan. And thank you, Lisa. Congratulations on today's event. There really was a crowd. You saw the excitement when you mentioned AI. You had everybody lean forward and snap some photos. And you said, I love this chip. And you also said, we love this chip. But you said, I love this chip. And you were referring to the next generation GPU. Can you just elaborate on why this chip is so important in this period of time and the whole sampling thing? Only in Q3, so is that a little slow?

Tell me about that. Oh, well, look, Christina, first of all, thank you for being here. In person, right? Yes, it's been a tremendous day for us. We're super excited with all that we talked about for data center and AI. And look, as you said, I mean, AI is the defining megatrend for technology right now. Like everybody's talking about AI. We've been working on this roadmap for many, many years.

You know, MI300 is our newest generation chip. And, you know, frankly, it's incredible. I mean, the amount of technology we have on this, 153 billion transistors. It's really designed, you know, everybody's talking about chat GPT and large language models. MI300 is actually designed exactly for this use case. And so we're really, really excited about it. We've been really, you know, customers are super excited about it. And, you know, we're working closely with them. We will sample in the third quarter and we'll be in production by the end of the year. Who is them? You said it. Well, first of all, we had a number of partners here today.

I know, I know. We saw AWS, Meta, Citadel. There's a list of VPs here, but who are your customers for that particular chip? What we see is there's a tremendous demand for GPUs in AI space for both training and inference. We work with all of the largest cloud manufacturers as well as many of the largest enterprise guys. And so, you know, the key is let's get these products to market as fast as possible. We're actually a very differentiated, Christina. So when you think about what you need on this, not only do you need a lot of computing, but you also need a lot of memory and a lot of memory bandwidth. And that's what MI300X does. It actually brings best in class. So best in class capability for inference of large language models. And everybody

wants more GPUs. Everyone wants more GPUs. And this is it. And you won't tell me the name of the customers. That's OK. But for the total addressable market, that's impressive. You said it's $30 billion right now in 2023. You plan to grow that to beyond $150 billion. It's really an incredible time for technology. And what we've seen is, and we've all seen it, right? The AI has now kind of changed the way we perceive what we're doing in every industry, in every market, for all of our productivity and business applications. So yes, today we believe

it's about a $30 billion-ish market. And we think it's going to grow over the next three or four years more than 50% a year. So we see like $150 billion by the time we get to 2027 for just this incredible technology. Yes. Right. And I know I want to bring in Morgan and John, too, just for this conversation. Hey, Lisa, it's John Ford. Good to see you.

Tell us more about your AI software strategy, because the right software tools kind of accelerate demand, make your chips easier for developers to work with. What's going to make your strategy different? When can we expect to hear more about it? Are you going to acquire on your way there? Well, John, first of all, great to talk to you again, always. And you're absolutely right. I think as important as AI hardware is truly the AI software ecosystem. And we had some great partners on stage with us today.

So we had the founder of PyTorch. We had the CEO of Hugging Face, who was really working on some of the largest language models. And what we see is the world for software is really about, number one, we've developed a really comprehensive software capability that's optimized for our hardware. We call that the Rackham ecosystem. But on top of of that we have all of these folks in the market really developing these frameworks and the purpose of these frameworks is actually to make it fairly easy and transparent to move between different hardware ecosystems and then there are lots and lots of open source folks developing the models on top of that so when you see all

these pieces we think it's a fantastic time to really bring the ecosystem together. We've put thousands and thousands of engineers on our AI software, and we have a great overall ecosystem that is really coming to life right now because we're all trying to get AI deployed as fast as possible. So do you go by industry in working with some of those models? We had Jensen Huang from NVIDIA on with ServiceNow's CEO just a few weeks ago talking about developing those models with a partner. So I'm wondering if you're looking for major software companies to develop with. I know Arvind over at IBM has talked

to us about Hugging Face as well. Are there areas where you think that you can make more progress than others we absolutely see John the opportunity here to partner deeply with our customers and partners and that is you know the largest cloud manufacturers that is you know model developers like hugging face that is the framework developers you know overall and this is about deep partnership across the entire ecosystem. So when we see how this comes together, you know, one of the things that is very, very important is because we're also a GPU technology, there are really only two GPU technologies out there in the ecosystem. Things just run on AMD hardware. And we've spent a lot of time optimizing our software to, you know,

to these frameworks and models. Lisa, it's Morgan. Great to have you on the show. Look no further than Oracle earnings yesterday to see how many different companies right now are going to great lengths to disclose their relationships with NVIDIA and sort of get some street cred in terms of how serious they are about building out their own AI applications right now.

I wonder what you think it's going to take for that type of dynamic to start playing out where companies are flexing their muscles to really race and say that they're working with AMD on this too. What is it going to take, I guess, essentially to really meaningfully take out more market share? Yes, Morgan, great to talk to you. And we're really, really proud of our customer relationships. We had AWS on stage together talking about new EC2 instances with our fourth-generation Epic. We had Meta on stage talking about our relationship and what they're doing with our newest Bergamo cloud-native processors. We had Citadel on stage.

We had PyTorch. We had Hugging Face. We had Microsoft Azure on the HPC side. We love partnering with our customers. Oracle is a fantastic partner. Actually, they just announced that they're also adopting our fourth generation Epic processor. And so the way we think about this is this is an entire ecosystem. We do partner very deeply with our customers. And you're going to see a lot more from us as we talk about AI.

And the thing about AI that I want to mention is we're at the very, very early stages. It's an incredible market. I think this is a market that's going to really need technology over the next few years. And we're very proud of what we're bringing to the market and also the partnerships that we have to bring those things to the market. There's a narrative in the market right now, or at least among investors, that AI is a secular growth story, regardless of the macroeconomic climate right now. Do you see it the same way? I absolutely do. I absolutely do. I think AI is helping to make all of us more productive, more capable. It touches every industry. So I do believe it's a secular growth driver. I also believe it's a market where you're going to have multiple winners and that it's going to play out over the next few years.

And it's all about partnership and co-innovation and co-development. I just have two quick last questions. One is, should we see an influx in orders with TSMC, given this big push forward and your TAM of $150 billion? We definitely really appreciate our partnerships with our foundry manufacturers. I think we've done very well in terms of overall supply in the supply chain, and so we're going to continue managing that well. Okay. Well, speaking of just the supply chain, China, are you concerned of just removing presence

in China? There might be more bans coming. Any thoughts on that? Well, I would say, you know, first and foremost, you know, we are very cognizant of the dynamic and the geopolitical environment and, you know, all of that. That being the case, China is an important market for us. And, you know, we do have a lot of our consumer facing products going into China and we'll make sure that we evaluate it as we go. Lisa, thank you. Thank you so much for having me. Appreciate it.

All right. Thanks to you both, Christina. And after the break, we will talk much more about artificial intelligence when we're joined by CrowdStrike CEO George Kurtz, whose company is using generative AI to help fight cyber attacks. Overtime's back in two. Welcome back to Overtime. Stocks are gaining ground ahead of the Fed decision. They're dead today anyway. But has the recent rally gone too far too fast? Mike Santoli's at the New York Stock Exchange with a look at the charts. Mike. Yeah, John, that's always the question, right?

Just when people get comfortable to say, hey, we're in a new uptrend, be worried about if it's gone too far. I think a two-year framework on the S&P 500 helps to answer that question to some degree. Now, that last little burst higher has been fairly steep, but it shows you that on a two year basis, we're only up less than three percent, a little more than halfway back. One thing I'll note is that you do have this sort of trend that's running, connecting like the late, late November and the February 2nd high. So we've kind of stretched up to that level. So it seems as if the trend has grown more friendly, but not necessarily that it can continue at this pace in the short term.

Also would point out we're at the same level in the S&P as two years ago. Nominal GDP in the U.S. is 15 percent higher. So there's nothing particularly bizarre about being at these levels. Now, focusing in on the Nasdaq 100, it's been the leadership area of this market. It has been running substantially hotter than the broader S&P 500. So we plotted here against what's known as the Bollinger Bands. It's basically just tracks the deviation of the index from its underlying trend. It shows you when it's getting a little bit overheated. So it has crossed above here. It's hard to see, but it's crossed above

that upper level. This happens once in a while. You see it happen, you know, back there. Here is interesting, too. That's before COVID. And that's September 1st, 2020. So it was after we had basically an eight or not or let's say six or eight month run off the lows. We got a little overexcited, but then just kind of chopped sideways for a bit and resumed high. My point is, it's not so much saying it's at a peak. It's saying it's probably got to slow down, cool off. It can do that easy, either the hard way or the easy way, John. So it actually kind of goes back, Mike, to what we're talking about with Adam Christofoli a little bit earlier on the show, this idea that maybe there's a rotation afoot. And this is what you maybe perhaps want to see happen if you want the leadership to not be so narrow and you want more of the market to

participate. Right. And more of the market to participate. Right. And more to the point, Morgan, I would say it has been happening not every single day. But today, the majority of stocks up consumer and industrial stocks were outperformers. So it is happening. I think one of the things you're wishing for when you hope for that is that perhaps the S&P 500 itself, the broad benchmarks maybe don't do a whole lot as stuff catches up in the large cap weights in the index, maybe have to settle back a little bit. So things don't always go according to what majority would wish. But that is essentially where the consensus is thinking right now. Got it. All right. Mike Santoli, we'll see you later this hour. CrowdStrike shares up 17% in the past month. The company recently unveiling its newest AI tool, a generative AI bot named Charlotte,

aimed at helping customers with cybersecurity. Stock finished higher today as well. Joining us now, George Kurtz, CrowdStrike CEO and co-founder. George, great to have you on the show. Talk to me a little bit about Charlotte, the details of this bot that you've rolled out and why and why now? Sure. Great to be here. And when we think about Charlotte, we're really excited about this because it's way more than a bot. It's really a virtual security analyst and a SOC operator, if you will, security operations center. And it takes the collective knowledge of what CrowdStrike

has been doing over the last decade. And it basically empowers our users to be able to leverage that knowledge, ask questions, get deep expertise from our AI that we've harvested over the last 10 years. And really the end goal is to stop breaches faster, drive down costs, and create operational efficiencies for our customers. It's in private beta right now. I've seen it.

I'm pretty impressed and amazed by what we've been able to put together, and we're excited to get it to market. How quickly is it cutting down? I realize it's in beta, but how quickly is it realizing these results? Well, when we think about what a security analyst does, and let's just maybe take you through a quick example. Someone comes in the morning. They may look at our console, they may look for some alerts, they may try to figure out what's happening, get situational awareness, look at security intelligence, write reports. That could take an analyst a full day to kind of go through their workflow to track things down and sort things out. Obviously, we have to protect these things in real time. But when you go through the details, it can be laborious.

So we think that a day's work is going to be cut down to five or ten minutes with Charlotte AI to be able to actually do all of that work for you. Understand what the threats are, how they might apply to your environment. Take any remediation steps, even write a report for your boss. That may take somebody a day. It's going to take us five or ten minutes. Hey, George, it's John Ford. Good to see you. The bad guys are using AI too, right? And that's creating more threats, probably more moderate quality threats that would have been low quality before. To what extent is a tool like

Charlotte that it sounds to me is going to raise the level of response and protection perhaps more quickly than you would have been able to in the past. How much is that going to counter the AI that's being used to attack? Sure. And it's something that we've been dealing with in the security industry for some time. As you probably know, CrowdStrike, it was founded on AI 10 years ago. A generative AI is just a newer technology that we're employing. But when we think about adversarial AI, the adversaries have been using AI to try to defeat systems that are out there across the board in security. We see it all the time. And really what we're focused on now and what we think generative AI will do is really compress that time frame from the discovery of some exposure to the exploitation of it.

And that used to take days or weeks. It may take hours now. It may take minutes with generative AI. The second piece of that is it actually democratizes this small community of experts who can exploit these vulnerabilities, like Patch Tuesday comes out with Microsoft. Those vulnerabilities get exploited. So the ability to compress that time to minutes rather than hours or days is something that is very scary and something that we're tracking closely with the adversaries we're working on. And George, data and real-time data is so important in this cyber equation. At this point, across across different companies certainly in the u

s which you can go global if you want is there enough shared re real-time knowledge about the nature of attacks so that you and others can use a i to respond more quickly well i think uh... you do i mean this is the sharing mechanisms uh... like something called a g c d c which which comes out of the U.S. government. Those are great. But in terms of how systems work, and this is one of the benefits of CrowdStrike, the crowdsource in the name, CrowdStrike. We've been doing this for over 10 years.

And what's important is, and, John, you'll hear a lot about data advantage, how much data organizations have. We collect 7 trillion data points a week. That's great. But the beauty of what we've done over the last 10 years is we have human validated content. We have something called Falcon Overwatch, which is our managed detection and response service. And we've been able to validate these attack chains for the last 10 years where our competitors haven't. They've created software. But now in order, as you've probably seen with chat GPT, you have to be able to validate the results or you get what's called a hallucination, which is a wrong result. So that human validated content for 10 years is a huge barrier to entry and a data mode for us.

And we think that's going to be a real advantage for us in terms of the data wars and training these algorithms. Yeah, you mentioned government. You recently received impact level five provisional authorization from the Department of Defense. It's it's one of the highest security levels you can have as a tech company. I guess just walk me through how you're thinking about future opportunities for defense contracting or working with the government in general versus the commercial part of your business. Sure. So obviously, we've been very successful in the commercial part and in the government. And in government, there's really a couple of different areas, state, local, and federal government. And then it applies even outside of the U.S. So when we think about the federal government, we've been very successful working with CISA,

which is a big part of helping shape the cybersecurity landscape in the government. And you have to have different levels of certifications to be able to go deeper and deeper into those classified areas. So impact level five essentially gives us a broader license to hunt in the federal government into some of the most secretive places of government. So we see it as a huge opportunity for CrowdStrike. That's a many, many year opportunity in front of us as the government takes a while to transform the technology but uh... what's going on right now in the government is exciting because they see the problem in the problem and embracing new technologies like crowd strike smarter defense would be a good thing george kurtz

c a crowd strike thank you up next manchester united stock scores a win. GameStop gains ground and Y13 is a lucky number for Tesla. We're going to round up the biggest market movers that should be on your radar next. And as we head to break, check out some of the names hitting 52 week highs today. Walmart, Netflix, Delta, Oracle after earnings, and Adobe. All making the list. We'll be right back. Welcome back. Let's get a check on some of today's biggest market movers. Manchester United scoring big gains on a report a Qatari suitor is going to be named the preferred bidder for the famed soccer team.

That bid reportedly worth more than $6 billion. And shares of GameStop surging after executive chairman Ryan Cohen disclosed he's purchased another $100 million worth of shares. This just days after the video game retailer reported weaker than expected quarterly results and fired its CEO. And check out Tesla finishing in the green again today for a record lucky 13 straight days of gains. Tesla is up 40 percent in that stretch and now up about 110 percent, Morgan, for the year. All right. Time now for CNBC News Update. For that, we turn to Contessa Brewer. Hi, Contessa. Hi, Morgan. Former President Donald Trump just left a Miami courthouse following his arraignment. A short time later, he made an unannounced stop

at a famous Miami bakery for less than 15 minutes. He ordered food for supporters. They sang him happy birthday a day early. Today, Trump pled not guilty to the 37 federal felony counts against him in the case of the classified documents found at Mar-a-Lago. The judge released Trump on his own recognizance and ordered a no contact list, which includes Trump's co-defendant and personal valet, Walter Nata. Trump plans to travel to New Jersey tonight, where he's scheduled to deliver remarks. Denver police say a drug deal likely led to a mass shooting overnight as fans celebrated the Denver Nuggets winning their first NBA championship.

Ten people, including one of two suspected shooters, were injured. Police think that everyone will survive that shooting. And U.S. Transportation Secretary Pete Buttigieg promised today the federal government will help repair a section of I-95 that collapsed Sunday. Buttigieg said he expects disruptions in the trucking routes from the accident will put upward pressure on costs along the East Coast because truckers will be forced to travel longer, pricier routes. We'll keep our eye on that one, Morgan. Yeah. Add that to the to the growing list of supply chain bottlenecks that seem to be materializing right now, at least in the in the near term around the country.

Contessa Brewer, thank you. Coming up, a tale of two banking systems. We're going to tell you what executives from both the big banks and the regional banks said at a financials conference today. That's coming up next. 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. Top executives at some of the nation's largest financial firms making headlines at the Morgan Stanley U.S. Financials Conference.

Leslie Picker is here on set with me. She has the details. What have we been hearing the last two days? Hey, Morgan. Yeah, there's been a wide range of outlooks actually on bank profitability, in part based on the size of the institution. Take Wells Fargo, for example, seeing tailwinds in the current environment. CFO Mike Santamassimo reiterating guidance for a 10 percent boost in net interest income. That's a profitability metric. He added that due to relatively low deposit rates, he sees upside in the second half depending on where those rates end up.

Wells Fargo shares ended the day about two percent higher on the heels of those remarks. U.S. Bancorp CEO said he expects NII to be fairly neutral, thanks in part to higher cash levels from debt ceiling uncertainty. He said those were coming down now that the debt ceiling issue has been resolved. And as we work our way down to more regional names, Key Corp expects softer net interest income than it initially guided thanks to funding mix. Citizens Financial also lowered its NII guidance as well. Now, overall, it appears that deposits at regional banks have stabilized, but the banks are paying up to keep them. Larger banks aren't facing the same pressures. The tale of the two banking systems continues, even as stock prices have

stabilized in recent weeks, Morgan. So it's really, I mean, particularly look at the trading action today. It's sort of forecast from banks that are not as bad as feared. Yesterday, it was a much more negative reaction. You talked about this tale of two banking systems. I mean, any sense that we're going to see more M&A or more consolidation, which we've been talking about? Or are there other areas where banks are focused on making investments? It's a really big question in the industry right now, Morgan. So you're right to bring that up, because as you look at what's going on with regard to the various funding mix dilemma that some of the regionals are facing, if you did bulk up and kind of try and scale up to reach the level of the universals,

you could kind of combat some of the pressures you're seeing both on the top and bottom lines in this current environment. The challenge, though, and this is a really, really big deal, is just overall regulatory uncertainty. Nobody knows the appetite for regulators to allow more bank mergers to take place, whereas historically that was very much frowned upon, this idea in the political environment. You know, do you really want a banking system that's in the hands of few versus the 5,000 banks we have now? It's actually a really big question, both in Washington and Wall Street and beyond. Leslie, it's so interesting, those CEO remarks.

So big picture for us here. Technology fueled fear in those bank runs that we saw that got the market into this regional bank mess. Now, is it not fueling greed as much getting people to switch to places that are offering higher rates? Is that part of the lesson here or too soon to say? No, it's a good question because online banks have a much higher deposit rate. They're paying a much higher deposit rate, around 5 percent relative to what large brick and mortar firms, regionals are paying less than 1 percent on their deposits. So there's a huge gap there between what online banks are paying versus what these brick-and-mortar banks are paying. And it's surprisingly sticky in this current environment.

Consumers aren't necessarily willing to take their cash out of the brick-and-mortars, put them in online banks, even though they're just as FDIC-insured as, you know, your large universal banks, your big money market centers. But people say that, you know, people are more likely to get divorced than they are to take their deposits out of banks and switch their banks. And so it's just surprisingly sticky, despite what we saw in March. Well, people are quite likely to get divorced, fortunately or unfortunately. But you're going to need that money from the interest when you do. That's right. Leslie, thanks. Up next, Mike Santola is going to look at what from the interest when you do. That's right. Leslie, thanks. Up next, Mike Santola is going to look at what easing inflation pressures could mean for the Fed. And take a look at shares of Logitech, the stock falling in overtime on

news that its CEO is resigning. Bracken Darrell will stay with the company for about a month as part of the transition, while a board member fills in as interim CEO. Shares are down 3% right now. Stay with us. Welcome back to Overtime. Let's get over to Mike Santoli again at the New York Stock Exchange with a closer look at the inflation picture in America following today's Consumer Price Index report. Hi, Mike. Hi, Morgan. Yeah, today's CPI report did reinforce the confidence of the market that we do have inflation on the downswing, especially the components that are holding the CPI around that 4% level seem like they have downside momentum in future months. So it did seem to essentially seal the deal for the Fed,

perhaps to pause tomorrow. But the bond market has already been on board with this idea that inflation is well on its way to becoming under control. This is the implied five-year inflation rate that's based on the pricing of Treasury inflation-protected securities. You see, it's right back to where it was about five years ago and really much in the normal zone. It's just over 2%. That's the Fed's long-term target. It doesn't mean the market's got it right. This is going to be the exact inflation rate over the next five years. But it says the expectations component is already on board with this idea. So we can kind of set the Fed's aggressiveness aside as one of the real big challenges to the market. Perhaps other element of this, John, is that the five-year Treasury

yield today closed above 4 percent. That means the implied real yield on top of the expected inflation rate is 2 percent. That's substantial. That should be a restraint on economic activity and potentially financial risk-taking, but you wouldn't necessarily know it based on how the other markets are behaving right now. Mike, a lot of people were saying that the Fed was way behind the curve, which I think was true,

and that the Fed was overdoing it with the hikes and they were going to destroy the economy. Does this kind of put, I don't want to say the lie, but it sort of looks like conditions have shifted, no? There's no doubt that the market has said the Fed is on the right track and well on its way to meeting its obligations. But when we were here, I have to say that would have been late 2021. That was a generational high in implied inflation expectations. That's when we weren't sure the Fed was going to be able to get things under control. So the aggressiveness of 10

straight rate hikes over 10 straight meetings, 500 basis points total, maybe more to come. Maybe they're going to have to hold it here. All the rhetoric and the action together have come down to convince the markets that, yes, we're back where we're supposed to be, at least on track to get there in terms of longer term inflation. Fed's been playing a mean game of poker. Not a lot of people thinking they could do this. We'll see what happens from here, especially with commercial real estate. Mike, thanks. Up next, the CEO of Signified, a company that helps e-commerce outfits fight fraud on how online shopping is being impacted by the latest sign of easing inflation.

Plus, a top strategist is going to tell us how the market is positioned ahead of tomorrow's key Fed decision. We'll come right back. Inflation coming in at 4 percent in May, moving in the right direction, but still above the Fed's 2 percent target rate. To help us get a read on the consumer, let's bring in Signified CEO Raj Ramanand. His company helps e-commerce outfits detect and eliminate fraud using big data and machine learning. Raj, great to have you. I want to sort of contrast what's happening in brick-and-mortar retail with shoplifting becoming this huge issue and business, almost industry? And what's happening in e-commerce and your customers?

Similar forces trying to to thieve in both places, right? Absolutely. First of all, John, thanks for having me on the show. I think there's a couple of things that are happening in the market right now. First, consumer fraud, if you will, consumer abuse fraud is up 200 percent. This is a massive number when you look at it from a risk perspective, because retailers, as an example, if you think about what this could be, people buy something and then claim that they never actually bought it. And from a retailer's perspective, they've actually made the sale, assuming that they've got the sale, and then they come back and are completely liable for the return of that money so that the consumer is made whole.

And so what's happening in this space right now is that things are looking good, but ultimately the retailers are liable to be able to identify these goods and bads. And that difference or that push and pull is causing a lot of good people to be declined in the mix. In the macro environment, what is it that's caused this intensified fraud? Is it inflation? People are just out to get more when they don't have more? Yeah, I mean, there's two things here that I think are super interesting. If you look at the consumer index that just got released in the market today, at a macro level, when you look at the high numbers, it's 4%. If you look at it just on the core, it's 5.3%. But if you go back and actually look at the e-commerce

version, Signify builds this massive index today, which looks across 700 million plus wallets. You can see e-commerce is down 1.3% May over May, which is a phenomenal number because it's actually deflationary instead of inflationary in the mix. And so from a positive standpoint, that means consumers are getting really good deals online, especially in certain verticals. Take, you know, leisure and outdoor goods and luxury goods. These are all great deals online. And so from a positive standpoint, consumers are back and they're buying more online. But what's also happening on the other side is retailers have committed post-COVID to this massive rise in numbers where they're saying, hey, e-commerce is going to grow 8 percent, 12 percent, but they're actually growing at about 4 percent right now. And so what they're doing is they're cutting prices

to be able to drive more sales. And in the process, consumers are buying all these things, but then getting buyers remorse sometimes. Sometimes they just want to do wardrobing, where they try something out. And so the impact of that means just remorse, or it's, hey, I shouldn't have bought what I bought. Are retailers trying to change that culture of, let me buy eight things and then send seven back for the one? Because it seems like that's really expensive. And it's one thing when you're going through a huge top line growth period. But when you start paying attention to the bottom line, maybe not so much. It is. It's getting expensive. You've

probably seen all the latest headlines around how people are trying to start pricing for returns, effectively saying, look, if you buy something, I don't want you to return it. I'm going to put a cost to that. But what people don't value is the ease of making that return happen would actually drive more sales online. And if you actually dive deep into the issue, the heart of the issue in returns today is that when somebody buys something, let's say you buy a pair of Nike shoes and you decide to return it, it takes seven to 20 days for you to get your money back on your card. It's not because the payment rails don for you to get your money back on your card. It's not because the payment rails don't exist to put the money back. It's because they want to know if John actually returned it. Did he return a brick or an old pair of shoes? And then they say,

put the money back on John's card. And effectively what they're saying is, is this person abusive? Is this person going to return something incorrectly? And that's where solutions in AI become so valuable, like Signify, where you come in and you tell the retailer, hey, this is a good person. John's going to return the shoe. Don't put that friction on him. All right. Thanks for vouching for me. CEO of Signify. Morgan. Great stuff, John. Up next, a top strategist on what the options market is signaling about tomorrow's interest rate decision by the Fed. Stay with us.

AMD revealing several new chips today, including one in AI. Shares slightly higher in overtime after we spoke with CEO Lisa Su earlier on the program, where she talked about the partnerships in the future of the AI market. This is an entire ecosystem. We do partner very deeply with our customers, and you're going to see a lot more from us as we talk about AI. And the thing about AI that I want to mention is we're at the very, very early stages. It's an incredible market. I think this is a market that's going to really need technology over the next few years. And we're very proud of what we're

bringing to the market and also the partnerships that we have to bring those things to the market. Yeah, Morgan, software is going to be an important part, even of the chips equation in AI. And it's not yet clear who's got the better partnership with Hugging Face, right, or who's making acquisitions in software that are going to matter strategically, that software getting more expensive if it's got AI attached to it, of course. Yeah, and I think that's such a key part of the discussion with Sue earlier in the hour, given the fact that NVIDIA does have the lion's share of market share thus far, in part because of that software component that NVIDIA is able to offer out to the marketplace.

I mean, she talked about a $30 billion addressable market now, but that that's going to grow to $150 billion. And I also thought it was very interesting, not necessarily surprising, but affirming for her to talk about the fact that this is very much a secular growth trend and that companies are going to be making investments here regardless of the macroeconomic outlook more broadly. Yeah, and AMD knows how to do software. I mean, any kind of chip you're putting out there, the graphics processing that AMD has a long legacy of doing, you need to have software tooling to help developers make the most of those.

I just think AI is different, and in ways it's hard to be sure of. Right now, everybody's talking about generative, yes, but inferencing is coming. Those workloads after generative inferencing will come. So who's positioning themselves better in that? Who's setting up the smarter models even by industry to work better with their chips? Investors sort of need to think about that kind of thing now, but it's hard to get an actual answer on it because the companies don't know. They all think they're great until somebody else turns out to run a little faster. Yeah, I'm going to infer that we're going to be doing more discussions on this hour in the

future about inferencing. Well, we're going to shift gears here. We're 21 hours from the Fed's next interest rate decision, but the options market is pricing in a less than 1% move in the S&P 500. That's smaller than average. So is the Fed pause pretty much fully priced in? Well, joining us now, Amy Wu-Silverman, RBC Capital Markets Head of Derivatives Strategy. Amy, is it? Pretty much, yeah. You know, look, in post-debt ceiling, we've really had this crash in volatility as well as this decline in demand for hedges to the downside. I'd say if I had to tag where the options market sentiment right now, it's much more about the fear of missing out on the upside than it is concerned at all about downside heading into tomorrow.

OK, so I'm looking at your notes here and you talk about the fact that with low levels of option prices, there are two opportunities that are attractive right now. What are they? Yeah, you know, I think of this two ways. Whenever you get this kind of down crash in option price levels, if you are worried, if you think, you know, there's any chance that Powell maybe doesn't say anything about a rate hike tomorrow, but may indicate some more hawkishness, then, you know, you're getting a bargain in terms of downside hedges right now. Now, on the flip side, if you've been missing out, then the options market can help you leverage into positions to get to that momentum on the right tail a little quicker. We see that through using calls for stock replacement, for instance, or using call

spreads as a way to leverage upside more quickly. What's going to cause volatility, if anything, whether there are pauses or rate increases in the future? I mean, we saw in short-term rates such volatility earlier. Should we think that's gone? Yeah, it's an interesting question. Look, one thing is just data. And, you know, the options market, similar to the Fed, is quite data dependent. And I will tell you, seasonally, when you look at VIX levels, seasonally, VIX just tends to be higher in August. So we've got this interesting point where I think a lot of this is relief because debt ceiling just kind of came quicker and easier than people anticipated. And so a lot of these

hedges folks did have on. You know, unfortunately, that premium burned away. They're not really willing to reinitiate after just being burned. But that doesn't mean that data in the future couldn't be a catalyst for options. And that's usually what causes volatility to pick up. But what's left? I mean, we had debt ceiling. You know, we wrung our hands about that for a while. That's gone. Where's the Fed going to go? We were wringing our hands about that for a while. But it seems like, OK, we probably get a pause now after the CPI print and maybe some gradual increases in the future. But that seems unlikely to cause volatility. What are your big questions left for 23? You know, obviously, where the path of inflation is. But, you know, the one thing I'll tell you,

because I remember the weather in New York City on Wednesday when the sky was blood red and the point just being, you know, you never know where your left or right tail is going to come from. You know, that could be geopolitical. It could be something that's just simply an unknown unknown. I think those are interesting. But in terms of what is left, I think just each data point that comes out, if it surprises, I don't think that's baked in right now. Right now we're baking in an options market, which sort of says slow and steady is the course. And, you know, as we have seen in the past,

that's not always necessarily true. Indeed. Indeed. Amy Wills-Severman, thank you. Morgan, there's always Russia and China. Can't forget that. There's Russia, there's China, and there's those unknowns that she just discussed there. I mean, it's just it's even interesting to see how quickly investor sentiment has flipped in this market, John. I mean, in the last two weeks, you had this major shift from most bearish to most bullish readings and least bearish readings since November of 2021. It happened so quickly. It doesn't. Coming into this year, so many people were coming on our estate all stay away from tack stay away anything unprofitable stay away from it now that is a i wave right and and unprofitable tack as long as it's gay

they are attached to it and frankly that's how it should be because all software is unprofitable until it is was already continue to monitor that we get p p i tomorrow we do get that fed decisions marlowe's again when our earnings after the bell that does it for overtime