Closing Bell - Closing Bell Overtime: Andreessen Horowitz Co-Founder Ben Horowitz On AI, Investing In America; Big Tech Earnings Kick Off With Alphabet & Microsoft 1/30/24

Episode Date: January 30, 2024

The first two of the big tech names reported today: Alphabet and Microsoft. Investors are still digesting results but Vital Knowledge’s Adam Crisafulli gives his take. Evercore analyst Mark Mahaney on what he makes of Alphabet while DA Davidson’s Gil Luria digs into Microsoft’s report. CFRA’s Angelo Zino takes a look at AM and Stephens’ analyst Joshua Long breaks down Starbucks. Other earnings include Skyworks, Mondelez and EA. Plus, Morgan Brennan has an exclusive interview with Andreessen Horowitz co-founder Ben Horowtiz talks investing in America and the national interest.  

Mixed picture for your scorecard on Wall Street, but winners stay late, especially for big earnings. Welcome to Closing Bell Overtime. I'm John Ford, along with Morgan Brennan from Washington, D.C. Well, the Dow rallying today thanks to strength in financials, but the tech sector is dragging down the Nasdaq ahead of a trio of huge earnings. We are getting this hour coming up. Instant analysis of today's headliners, Alphabet, Microsoft, and AMD. We will also break down results from EA, Starbucks, Mondelez, and Skyworks. Now, while we wait for those earnings, let's bring in our market panel. Joining us now is Adam Crisofulli from Vital Knowledge and our own senior markets commentator, Michael Santoli. Guys, welcome. Adam, Alphabet has the Q4 numbers that I'm most curious about across Search, YouTube, and Cloud

because they cover so much, but they don't guide. AMD and Microsoft together are going to tell us a lot about potentially AI demand and the PC market, right? Yeah, absolutely. You know, all indications so far with Supermicro and Taiwan Semi this season have pointed in the right direction when it comes to AI. But you're right, AMD is going to give us some very valuable insight not only on the overall market, but to the extent there's any share shift between them and NVIDIA. And then with Microsoft, unfortunately with Microsoft, we're going to have to wait until about 5.45 p.m. tonight for them to really give guidance.

But we'll get a good look with the Azure numbers in the December quarter about how their cloud business performed. And then as well as if they're really starting to see any big financial benefit, especially from the new CoPilot product and if that's helping the office. So you're going to see some signs within its report about how AI is benefiting them or not. Speaking of which, those numbers are crossing now. We are going through them and we'll bring them to you as soon as we've got a good read. It's down about a percent fractionally at the moment.

Mike Santoli, these numbers, particularly in cloud, the commentary around AI, I mean, the market's been kind of treading water near highs. Hold on, we got those numbers ready. Microsoft, Steve Kovac, how do they look? Market's been kind of treading water near highs. Hold on. We got those numbers ready. Microsoft. Steve Kovac, how do they look? Yeah, this is a beat, John, here on the top and bottom line for Microsoft and a beat on those Azure cloud growth numbers. Let me give you the top and bottom line here.

EPS, $2.93. Street was looking for $2.78. Revenues, we're seeing $62 billion versus the $61.12 billion Stuart was expecting. And here's a dynamite number here on Azure growth, also beating expectations. We're seeing 30% growth for Azure versus the 27.5% expected by the street. That could point to some increased AI activity. Of course, they get a benefit there on the Azure cloud because of all the relationship with OpenAI and all the activity going on there.

Still digging through, looking for some reasons here, but we're seeing the stock off about three quarters of a percent or so there, John. So we'll see what else is going on here. I'll be back soon. Okay, yeah, a lot left to read in. Of course, the call ahead, Mike Santoli. This reminds me, in a way of service

now, you know, some of these stocks, could it be that they've already been priced to certain good news? Yeah, there's no doubt that people were generally expecting a beat just based on what the stock has done in three months, up 24 percent or so, when you didn't have any movement in the estimate. So, you know, that lines up. That's fine. This is a win if you have just a modest profit-taking move on the number. As Adam was saying, of course, you've got to wait for the guidance. Okay. Well, we do have alphabet earnings as well. Those are out.

Deirdre Bosa has the numbers. Hi, Dee. Hey, Morgan. The stock is moving, and it's currently down by about 4%, but the numbers look pretty good. On the top line, revenue coming in at $86.3 billion versus $85.3 billion expected in terms of EPS. Coming in, again, a beat, $1.64 versus $1.59 expected. Cloud looks pretty good too. And if you remember last quarter, this is kind of what sunk the stock

afterwards despite beating expectations. But it's a beat here as well. Eight point nine four billion was expected in the cloud unit coming in at nine point two billion dollars. Again, the stock, though, is down five percent. We'll bring you more color as we get it. OK, Deirdre Bosa, thank you. Adam, I'm going to go back to you on this one, because, yes, we can talk about how high the hopes were coming into some of these mega cap tech earnings. And just want to get your thoughts when you see it, when you see Alphabet down as much as it is, when some of these key metrics are coming in better than expected, what it signals. Yeah, we'll have to look at some of the details about the advertising businesses that really drive earnings for that company. It's not so much cloud. Cloud's important more from a narrative perspective.

But, yeah, the bar was very high for all these many cap tech names. So having a knee-jerk move lower isn't necessarily the end of the world. A lot will come down to the qualitative tone that management has on the conference call. For them in AI, it's not so much a consumer facing product. It's more using it internally to help automate a lot of their advertising businesses. So it's more using it internally to help automate a lot of their advertising businesses so it's more of a cost a cost initiative on their front versus kind of a huge revenue generator at least right now so it'll be interesting to hear them on the call talk about how AI is being used more internally again to kind of automate the advertising process lower

costs you know drive up pricing on some of those areas of their business okay Mike I mean we talked about the heavy lifting that these magnificent seven names have done in this rally recently and really honestly through the last couple of years. How important then is it going to be for some of these more consumer-facing names or other 493 stocks to really hit the mark as well? And I ask that knowing that we've had some mixed results, UPS being kind of key, one to focus in on today. Yeah, everything else so far leading up to this moment with the big tech stocks has been almost offsetting. You've seen some beats. You've seen the American

Expresses and the visas give some encouraging signals about the consumer. And then you have the whirlpools and the UPSs that have pulled away from it. I mean, that's the moment we are in a kind of mature economic cycle with some industrial weakness and some cost pressures throughout corporate America. So I do think in terms of the absolute gross tonnage of dollar value being produced in profits, this is where you want to look just to see ultimately after, let's say, next week, where we're tracking for overall S&P earnings to have a modest single digit percentage year over year gain. All right, hold tight. Mike, Kate Rogers has Starbucks numbers.

That stock is down by a couple percent initially. Kate? Hey, John, as you mentioned, Starbucks out with its first quarter results here, reporting misses on the top and bottom lines for Q1. EPS coming in at $0.90 adjusted versus estimates of $0.93 adjusted. Revenues of $9.4 billion. That's up 8% year-on-year but below estimates of $9 adjusted, revenues of 9.4 billion. That's up 8 percent year on year, but below estimates of 9.59 billion. Comp store sales also lower than expected across the board.

Global comps up 5 percent versus estimates of 7.2 percent gains. North America and U.S. comps increasing 5 percent, lower than the estimates of 5.8 percent. Analysts have projected here that was driven by a 4 percent increase in average ticket, 1 percent increase in comp transactions. International comp store sales increasing 7 percent. That is far less than the up 13.2 percent projected. That was driven by an 11 percent increase in comp transactions and a 3 percent decline in average ticket. China, an important market here. Comp store sales increasing 10%, driven by a 21% increase in comp transactions and a 9% decline in average ticket.

Starbucks rewards members in the U.S. increasing to 34.3 million. That's up 13% year-on-year. As you can see, the stock is just fractionally lower at the moment. We look forward to finding out what went on in the international market there, guys, at the call at 5 tonight. Back over to you. And we know you'll be monitoring it. Kate Rogers, thank you. Mondelēz earnings, speaking of consumer-facing names, those are out as well.

Kate Rooney has the numbers. Hey, Morgan. So we've got a beat here on Mondelēz at EPS. It's a 6-cent beat on EPS. That's the adjusted number, 84 cents for EPS there. Revenue was in line, 9.31 billion, right in line with what the street was looking for. Asia and North American growth looking a little bit light here. Organic growth in Asia was seven point nine percent. Street was looking for nine point five percent. Volumes were down point two percent there. North America also a bit lighter than expected. It was up one point nine percent. Street was looking for 3.7 percent there. And volumes were down 5 percent, more than 5 percent in North America, actually 5.5 percent, to be exact. And then you got gross margins a little bit above expectations at 38 percent.

Operating margins right in line at 15 percent. Company does give you full year guidance, but we're not going to compare that due to some of the currency fluctuations. Stock down here slightly after hours. Morgan, back to you. I will take it. Yeah, Kate, thanks. Something that's down a little bit more, at least initially, EA, about 4%. Steve Kovac has those numbers. Steve? Yeah, John, Electronic Arts, some mixed results here. It looks like impacting the stock. Let's do the top and bottom lines here. EPS, $1.07. Now, we're not comparing that to estimates. We can't compare revenues. Just a slight miss here, $2.37 billion adjusted versus the $2.39 the street was looking for. And I think what's impacting things here is the revenue guidance for the fourth quarter that we're in right now.

They're guiding between $1.6 and $1.9 billion in revenue. Street was looking for $1.8. So a little on the low end there that could be impacting. I would also note, they say EA Football Club, that's the new FIFA game or new version of their soccer game taking over from FIFA. They said 7% growth in net bookings year over year for that compared to the same game a year ago. But let me move over to Microsoft, John, because I did, I was picking through the release and some interesting stuff here to talk about as we see shares are falling about, oh, a little over a percent now. Office and commercial products, those, that revenue is up 15%, they say, and they said that's driven by Office 365 commercial revenue growth, which is up 17%. That could be Copilot. We're going to have to get some color on the call, though, guys, because they don't really break out Copilot numbers,

nor do we expect them to. But we do want some commentary on how well it's selling and how much of that growth we're seeing in Office 365 they can attribute to sales of Copilot. I'll also note Xbox. This is the first quarter that represents Activision after they completed the transaction last fall. So we see Xbox content and services revenue just skyrocket over 60% there. Again, mostly driven by the representation of Activision there. And then let me give you a quote from CEO Satya Nadella, just talking about AI and all the excitement around there, expecting more in the call, but really making a declarative statement here, guys, saying, quote, we've moved from talking about AI to applying AI

at scale, end quote. So that's really this theme we've been talking about this whole earnings season. Which companies now, after we've kind of gone over the hype cycle, which companies are actually going to start making money off of AI? Sounds like Microsoft is one of them, guys. Perhaps. Yes, indeed. And we're just a couple weeks away from the one-year anniversary of their big coming out moment with Office and AI and OpenAI. Steve Kovach, thanks. Now, Microsoft, a big name reporting in overtime today. Adam Crisafulli, Alphabet is another one. And I believe Alphabet right now is still down about four and a half

percent, roughly. Looking at these numbers, I notice it's really Google Cloud that came in a little better than expected. But that core business, Google Advertising, you know, Search and Other and YouTube Ads, both of those just in line are actually a little bit under the consensus expectation. I wonder how much that has to do with it. Yeah, that definitely, I think, the knee-jerk reaction. You know, I think for a lot of these names, if there's anything wrong, especially in the initial, you know, the initial reaction up to the first few minutes after the press release, you know, I think the reaction would be to sell the stock in this type of environment when the names have rallied so much. You know, the core moneymakers for that company, especially is our YouTube and the core search

business. And so to the extent they're falling a little bit short of expectations, I think that just gives people an excuse to put profits. You know, at least so far in Microsoft, now we have to get the guidance, really nothing to complain about. And even on Alphabet, it's hard to really say that, you know, there's really anything horribly wrong with the numbers. I think it's kind of just, again, a knee-jerk reaction lower in some of these stocks after a big run.

But, you know, I think the calls will be very important for a final verdict. Yeah. And, of course, shares of Alphabet are down 4% right now. Microsoft basically at the flat line, EA lower. But Starbucks is actually trading up 2% higher despite that big miss on international comps. Well, Skyworks earnings are out as well. And Kate Rooney has those numbers. Hey, Morgan. Yeah, so Skyworks here looks like earnings is a two cent beat. This is the adjusted number, $1.97, better than expected on EPS. Revenue pretty much in line, $1.2 billion there. Looks like Q2 revenue guidance is in line,

slightly light here on EPS guidance, $1.5252 versus $1.54. So slightly light there. We do have some comments from management in terms of the smartphone market. They first start here talking about good execution, robust profitability in light of the ongoing macroeconomic volatility. They say they've delivered record quarterly free cash flow, and they talk about strong working capital management and managing CapEx. They do say here, though, in terms of the mobile business, they say it's going to be down seasonally and sequentially, consistent with historical patterns. And then in broad markets, they do anticipate modest growth in December. They do say the Android smartphone market is recovering.

So some commentary there on the mobile market. But you can see shares up more than 5% here after hours. Guys, back to you. Okay, Kate Rooney, thank you. Mike, I mean, it's pick your poison, right? You can talk about any of the mega cap tech names, whether it's Microsoft or Alphabet and the moves we're seeing there so far, or Skyworks, which is shooting higher, and then, of course, some of these consumer names like Mondelez and Starbucks.

And it does seem to be a bit of a mixed picture, at least in terms of how investors are digesting these initial reports. For sure, which is what you want to see. I always say this about earnings season. You want companies to go their own way. It kind of nets out to a relatively low volatility reaction market-wide. Now, if I look at Microsoft barely backing off to its $3 trillion level, it's where it finished last week. That's a pretty decent reaction to hang on to most of those recent gains. As everyone's saying, we need to hear the guidance on Alphabet.

Yeah, modest disappointment again, going back to a price where the stock traded a week and a half ago. Margins look OK. I'm not sure exactly people have more aggressive expectations of how much margins can widen out in the quarter. But what they could control seems to be, you know, in line, even if, again, the stock did have a little bit of a sprint to the all time highs just in the last week or so. So so far, I think on a market wide basis, you can live with these sorts of reactions, even though it's a little messy in the short term. And Adam, Chris, a fully that makes me wonder about AMD and what we're going to see there, given that Microsoft overall is pretty strong. It used to be you couldn't have a ho-hum PC

quarter and have a great Microsoft quarter, but Microsoft is much different than it used to be. Yeah, absolutely. You know, if anything, you know, PCs are still a big part of the financial story, but not really a meaningful component of the narrative. And that's really becoming the case with AMD as well, you know, whereby if they really performed well on those new AI chips that they launched,

it would more than make up for any shortfall that they're seeing in the PC business. So, you know, they just launched that new big AI chip in the last few months. They provided rough guidance for it in Q4 and then for this year. So I think an update to those figures, I think it was $2 billion for 2024 as far as AI revenue from that AI chip. If that is updated or increased, that obviously is going to receive very well. But AI is really driving the narrative around these names and accounting for a lot of the multiple expansion that they've enjoyed. Okay. AMD results are out. We're going through those results too. We'll bring you those momentarily here. In the meantime, Mike. Oh, actually we have them. Christina Parts Neveless has those results. Christina. I do. So let's start with earnings per share adjusted at 77 cents. So

that's in line with what the street was anticipating with revenues of 6.17 billion, to be precise, let's call it 6.2 billion, which is slightly stronger than what the street was anticipating. I'm just looking quickly at the guidance for this upcoming current quarter. We're in Q1, and they are anticipating revenue to be $5.4 billion, plus or minus about $300 million. So $5.4, which is in the middle range, a little bit lighter than what the Q1 revenue guidance was at 5.7. So I'll come back with some more details, but it seems like data center revenue for last quarter was strong at 2.3 billion, but I'll have more soon. Okay. Sounds good. Shares are down about 3% right now. Christina Parts and Eveless. Thank you. Don't miss a First on CNBC interview with AMD CEO Lisa

Su. That is tomorrow at 9.30 a.m. Eastern on Squawk on the Street. Adam, I'll go back to you. We got shares of the chip maker trading lower, still going through, looking for some more details here. But I mean, it's all about AI, right? It's all about data centers. It's about PC recovery.

It's about taking market share from Intel. But at the end of the day, it's really about how are they going to ramp production, get this new chip out on the market and take on NVIDIA, which we know has such a huge lead and was such a huge story last year. No, exactly. And AMD is a company where they'll put guidance in the press release, but they usually do give a lot of important detail, especially around AI for the last few quarters. Matt comes on the conference call, so I'd be careful to kind of just draw a conclusion from the text in the press I'd be careful to kind of just draw a conclusion

from the text and the press release. I want to hear what management has to say on the call about this new chip launch. Is it ramping? Are they signing new customers? You know, et cetera. I think that really will determine how this thing trades tomorrow.

All right, Christina Partsenevelis has more on AMD. Christina? Yeah, the stock reaction that you're seeing right now has much to do with the guidance for Q1. The reason for that is the range that they provided is about $5.4 billion. I mentioned that just moments ago, which is a little bit light. And more specifically, they say, and I quote, AMD expects data center segment revenue to be flat with a seasonal decline in server sales offset by stronger data center GBU RAM. So keep in mind a very similar situation that we saw from

Intel. They guided lower for their PCs and data centers in this current Q1 quarter. And the only difference here is AMD is, you know, talking about their data center GPU RAM, which is going to be happening more so in the second half of this year. But no update on that $2 billion revenue number for 2024 in regards to their AI chip revenue. I know that's what we're waiting for on the call. Yeah, Christina, that's a great comparison to call out. Intel was short on its revenue guide by about $2 billion. Of course, it's got bigger revenues overall. AMD is short, I guess, by about $300 million at the midpoint, right? Because the high end of their guide is where the street was looking for the midpoint to be. So in a way, that's comparable. Yes, you're 100% right if we're talking about the range. So the only thing I can see right now from

this is just the concerns that data center revenue is going to be flat for the quarter and a warning of seasonal declines in server. But so far, it's not majorly disappointing to what you just pointed out for that guidance, which is $300 million less than what the street wanted. All right. Christina Parts Nevelis, thank you. And our thanks to Mike Santoli and to Adam Crisafulli. Well, Alphabet shares in the red, despite beating on the top and bottom lines. Let's bring in Evercore ISI's Mark Mahaney. Mark, shares are down 4% right now. We talked about the fact that cloud revenue came in a little bit better than expected.

But Google services, it looks like also slightly better than expected. Advertising maybe a little bit light. And YouTube ads, it looks like, largely in line. Why do you think the stock's down as much as it is right now? Well, Morgan, I think you set it up right. The results came in better than expected, but not from search revenue and not from YouTube revenue. And there were a lot of expectations, Chad, on the market that both of those were very strong going into the holiday. So expectations were high there. I don't think there was a dramatic miss, but, you know, this was a high expectations part quarter where they did positively surprise me and some other

investors, but definitely me, was their margins came in better than expected. There's a $1.2 billion charge. You take that out. Margins were very solid for the company. I give them credit for that. My guess is that overall, you know, numbers will probably go up on the street on this, on these results. But, yeah, the expectations were high on the advertising side, and they just met them. They didn't exceed them. That's why the stock's pulling back. Yeah, I'm glad you called out margins, too, because we know OPEX costs, cost cutting,

that this was going to be in focus with this name as well and what those ongoing efforts look like. And we did get the commentary of, quote, we remain committed to our work to durably reengineer our cost base as we invest to support our growth opportunities. What does that potentially mean? And I guess, how do we know yet? Or I guess, what are your expectations in terms of what that balance looks like versus what the street would like to see? Well, I don't want to be too critical, but there was a cost religion memo that went around Silicon Valley, and it almost seems like Google sent it back. I'm being too critical when I say that, but what the market would like to hear is, will you make a commitment to running your OPEX growth at a lower level than

your revenue growth, i.e. expand margins? And the company's not willing to do that. They have a lot of good reasons for not doing that, but in this day and age, companies get rewarded for really managing much more aggressively their costs. That's what happened to Meta this last year. It happened to a good number of other stocks, Amazon too. So the market's willing to reward real good cost discipline, more aggressive cost steps. And it doesn't seem to me, I listen to that language, it's the same language that Google has made over the last couple of quarters. There's nothing wrong with it, but it's not what the market really wants right now. Mark, about that, I wonder, because you mentioned Meta and Amazon.

Both of them got themselves into major trouble on the cost side. Amazon, when it comes to building out the warehouses, Meta, with its Metaverse emphasis for a while, still spending on that, but not emphasizing it much. Google doesn't guide. So what's it going to be on the call that's going to convince the street one way or another how to interpret these inline numbers in, as AMD has described it, a mixed demand environment?

Well, I do think the demand environment is actually improving for advertising. So Google's got that in its sales this year. Don't forget, you know, the Olympics, the elections, you've got easy comps in the first half of the year, and there are a lot of AI improvements that are occurring across internet land, but you're definitely going to see it at Google, and I think at Meta too. So there's a lot of sales here. I'm not worried about the demand environment. I'd like to see a little bit more aggressiveness on the cost side. But that line that Morgan read, you know, from the company, I think that's kind of Google's stance on cost. You know, we're going to make long-term investments when we want to, when we think it's necessary. Look, they've done a very good job

with these investments over time. I give them a lot of credit for that. It's just that the market's a little bit more fixated on cost than these days, especially as these companies get older and the growth kind of becomes a little bit more pedestrian. You know, it's still, that's not, it's not 20% growth. We're 13% growth and that's good, but it's not super great. And so in that environment, you need to be a little bit more judicious with your costs. And I just don't sense that. I don't think the market does from Google management. Maybe that will change with the new CFO, but I don't have great hopes for that. It's at this point. Yeah, I guess we'll see if the stock market is willing to make a long-term investment in Alphabet at 150 a share. Mark Mahaney, thank you.

Thanks, Scott. Well, this wild hour of earnings continues next when a top analyst reacts to Microsoft's results as we count you down to all the conference calls. Plus, my exclusive interview with Andreessen Horowitz, co-founder Ben Horowitz, on where he sees the biggest opportunities in AI right now. Stay with us. Welcome back to Overtime. Shares of Microsoft now fractionally in the red, despite initially moving higher after the company's earnings report beat estimates. Let's bring in Gil Luria of D.A. Davidson. He's got a buy rating, $415 price target. Gil, we're not far from there. As I look through these numbers on the different

business lines, they beat in productivity and business process, intelligent cloud, and more personal computing. But it's interesting, they mostly beat in the cloud areas. What does this say about Microsoft's operational prowess, especially given what we heard from AMD and from Intel about data center and about PC demand? Well, they're executing extraordinarily well. As you pointed out, they beat on every single line and justified very high expectations, considering, as you've been pointing out, they're up 24 percent just this quarter. Expectations have gone very high. They were able to execute and meet those. And in terms of what AMD and Intel said, let's not forget

that all the oxygen in the room in the data center is being sucked up by GPUs right now. Microsoft is probably spending $2 billion a quarter on GPUs. That doesn't leave a lot of room for buying whatever it is AMD and Intel are selling these days. So I would look more at what Microsoft reported and what Google Cloud just reported in acceleration in their cloud business as pretty good signs. We'll wait to see what AWS says. If AWS is reporting anything more than 12% growth, that's very good news for the software space. Yeah, the bar is kind of set, I suppose. Now, if I were worried about something with Microsoft, I guess it would be margins, right, given that they just got done with this acquisition of Activision Blizzard. But right

out the gate, they cut almost 2,000 workers there, and they're delivering these margins. What do you need to hear on the call to remain confident that they're keeping an eye on the bottom line? Well, that's what they've been communicating, and we need to hear that again. They've been communicating that they can still improve margins, even from these high, high levels. And if we continue to hear that, if we continue to hear that they think they can keep this Azure growth growing at 28 to 30 percent, I think the stock keeps going up from here. I think the stock is pausing right now to wait for guidance. If that's what we hear from guidance, more cloud acceleration, more margin expansion, stocks should be even up more.

How should we think about the opportunities in gaming? And, of course, the intersection of that with everything else that Microsoft's involved in, including all of its applications and rollout of AI. This was the first quarter where you did see Activision Blizzard folded into regulatory scrutiny. The good news is it allowed them to plan the integration and they were able to get the costs out, as you pointed out, right away. They're integrating the revenue. There's some revenue dis-synergies in the short term. Those didn't seem to impact results very much. Longer term, there'll be the revenue synergies as they really are able to expand within cloud gaming specifically, which is what's really important for them right here. Okay. Galuria, thank you for joining us. Shares are down about half a percent right now.

Let's get back to Deirdre Bosa for more on Alphabet's results. Deirdre. Hey, Morgan. So I just got off the phone with Alphabet's CFO, Ruth Borat. She's going to be moving into the CIO and presidential role, but she is still CFO for now. And my first question to her, of course, was, can you break out generative AI products, a roadmap, monetization? She said that she would be, her and Sundar Pichai would be talking a lot more about this on the call. It's going to be a focus. So we will be listening eagerly. I also asked her sort of their approach to the workforce this

year, because you'll remember that they've had a bunch of rounds of layoffs this year. And she said that they would be taking a judicious approach to workforce. And a lot of that involves reallocating or marshalling resources towards their investment in generative AI across the company. I also asked her about other bets, right, because Alphabet has been on this sort of efficiency drive so far this year. And she said that they continue to sharpen their focus on where to invest best. But certainly the street is going to want to be on that call that kicks off in about 30 minutes to hear all those comments on generative AI. I asked her if we're going to get actual numbers.

She said color. OK, well, that's better than nothing. And certainly you give us a preview of what to expect. And we know you'll be monitoring all of those headlines with shares down about 3.5% right now, Deirdre Bosa. Thank you. AMD shares have been volatile after reporting a slight sales beat. Up next, an analyst with a buy rating tells us what the results mean for the rest of the chip makers. Stay with us. It's overtime. Welcome back. AMD shares initially falling after reporting earnings that were in line with estimates and beat on revenue.

And then they were up and now they're down again. Joining us now, Angelo Zeno of CFRA Research to make some sense of it. Angelo, guidance short of expectations at the midpoint, projecting on the positive side, sequentially flat data center revenue. I say that's positive because Q4 is usually big and an AI launch is going to help them with that. But then you've got semi-custom revenue declining by double digit percentage, and it sounds like PCs are weak. Is it good? Is it bad? What do you think? I mean, I think it's good. So, you know, I think if we kind of break it down, it all does come down to the guidance here. Right. I mean, and what what

the data center is going to look like. So when you kind of look at the results, it implies at the midpoint in terms of the guidance, about a 12% to 13% sequential decline. That's still better than what kind of Intel guided to at about a 17% or 18% sequential decline. You kind of look at really where the strength is for AMD. They kind of cited the data center business, right? And that's important. I mean, you kind of look at the mix. About 43% of their revenue is going to come from data centers here in Q1. And when you kind of look at what that

essentially implies, it's clearly the strength we think on the GPU side of things. Clearly, they just launched their MI300. The indication was probably about $400 million in revenue for Q4, similar level in Q1. At least that's what they got it to in late October. But all indications are there's probably greater than expected strength on that side of things. So I think that, you know, you saw a big sell off early on. I think it came back here because my belief is the commentary on the call is probably going to indicate greater than expected strength, I think, on that GPU side. So, Angelo, bigger picture. We've got Supermicro now trading above 500 bucks a share. And that's data center. It's

a lot of AI because they do high performance metal for the data center. But a lot of that's NVIDIA. So how much is this a three tier thing that we're talking about when we talk about Intel, AMD and NVIDIA? Yeah, I mean, listen, I think you think about kind of what's driving all those companies. It is kind of what's driving all those companies. It is kind of greater compute right on the accelerator side of things as we have kind of more AI workloads out there. And it's all about kind of the trajectory of that as we kind of go into 2024 and into 2025. And, you know, our view is NVIDIA will continue to win the race here. But right now, without kind of NVIDIA really ramping up on the GPU, Intel ramping up on the GPU side of things until 2025, AMD has the potential to kind of be a clear

number two player in terms of GPUs here in 2024. It's all going to be about what the run rate is going to look like exiting 2024 as it kind of extrapolates into higher revenue potential as we go into 2025 and beyond, right? So when we think about AMD here, a company expected to generate only about $26, $27 billion in revenue here. There's a lot of variability here from the GPU type side of things. So depending on what Lisa Su kind of guides here in terms of 2024, if the upside $2 billion into something closer to $4 billion or $6 billion, that's got a lot of potential upside, we think, potential longer term for AMD in terms of their revenue and EPS trajectory. I mean, obviously, you've seen shares of AMD move strongly higher in recent weeks and recent months. I mean, stocks pulling back slightly right now ahead of that earnings call. You have a buy rating. Are you sticking to it? I mean, we're sticking to it as of now. I mean,

clearly we want to see what the company has to say here on the call, but it is going to be all about kind of that AI trajectory here and our view here over the next three to five years, specifically what Lisa Suve said just back in December in terms of their outlook for the accelerator space here over the next couple of years. We think there is still significant upside potential here, specifically on A&D side of things, because they are just now starting to ramp up on that GPU side of things. Okay. Angelo, thanks for joining us as we await that call for AMD. Starbucks shares higher despite an earnings miss. Up next, a top analyst tells us what he wants to hear from executives on the call, which begins in just a few minutes. Stay with us. Welcome back to Overtime. Starbucks posted a

top and bottom line miss. Comps, same store sales, were lower than expected across the board as well. But those shares are popping right now in the after hours up about 3 percent. Joining us is Joshua Long from Stevens. Good to have you on. And I'm going to start right there. Why are shares moving higher? Because we missed with North America stats. We missed with international comparable store sales. It does look like margins continue to expand. I mean, is that the driving force here or is it something else? Morgan, thanks so much for having me. That's right. At the end of the day, you look at the just the underlying strength of the brand. They did the results did miss expectations, stocks up after hours. I think that kind of shows you one, just the power of having positive

traffic in today's environment, but then also perhaps just how beaten down some of the expectations were. So even though they missed, they were better than feared. Okay. I guess walk me through what that means then in terms of the North America picture. They obviously, you know, grew with their loyalist applications or signups as well. But then going to the international side of it as well, China up 10 percent too. We know that's been obviously a key market of growth for them. Yeah, that's right. So, again, this really is a North America story here for the near term. That's really where revenues margins are made and really what moves the needle.

So great to see that they have continued that strength with their core consumer. There's still a lot of consumers out there for them to go after as well. Coffee is a growing category, very habitual, a lot of exciting opportunities for them to go after and tap into the transaction aspect and the loyalty piece that they're so good at. When you think about the international piece, I think the key item here is China has been a little bit slower to start for the year, but that transaction data really underscores the power of the brand internationally. In China, some of the conversation that we'll hear today on the call is really around what the competitive environment looks like and kind of how Starbucks is positioned to really fend off what is still a growing category there as

well. But I think that underlying transaction growth really shows the strength and the starting point that they're at. Okay. So, Joshua, among the things that Starbucks can control, what does it take for them to get and stay above 100 a share from here? Yeah, that's a great question. So, I think a key piece of that is going to be on the operational side, finding ways to unlock what is amazing throughput and amazing brand equity, but maybe getting a little bit lost with all those lines at the drive-thru. They've got some systems in place, both operationally and then tech-driven, to really forecast demand better, get the basics right in terms of staffing, but then also

sales forecasting. So I think hearing more about that, and no small feat for sure, but I think over the next several quarters, there's an opportunity there to both unlock sales and further margin upside. And Joshua, what are they doing, Starbucks, with this olive oil infused coffee drink that seems to be getting mixed reviews? What can we sort of believe or understand about management for the fact that they're moving ahead with it? Sure, certainly. So having tried to myself, I certainly can see some elements that, you know, recall back to where Starbucks was earlier on, where they were

giving us some products that we didn't necessarily know that we wanted or needed. You know, jury's still out in terms of the ramp and the pace at which everyone's going to get on board with Oliotto. But at the end of the day, this management team and the brand overall has a strong history in terms of product innovation and really trend setting. So too early to say, but I think at the end of the day, it's a small piece of the puzzle right now with longer term opportunities. Didn't sound like a glowing endorsement from somebody who just tried it. I'm still a latte guy at heart, so it's going to take a little while. didn't sound like a glowing endorsement from somebody who just tried it i'm still a lot to die apart so it's going to take a little while i would you try john

uh... you know i'll try to simple many things i like olive oil cooking back you know what i don't know about drinking all right we'll say or they said joshua long shares are three percent i tried to say this caffeine starbucks has all the caffeine and keep me going All right. We'll see. Well, our thanks to Joshua Long. Shares are up 3 percent. I tried, especially if there's caffeine. Starbucks has all the caffeine, man. Keep me going. All right. Well, up next, venture capitalist Ben Horowitz weighs in on where the U.S. stands in the A.I. race with China and where he sees the biggest A.I. investing opportunities. And check out shares of Commvault Systems popping today after beating Wall Street's earnings estimates.

Thanks to strong data backup and recovery demand and forecasting better than expected subscription revenue. You might recall I spoke with the company's CEO earlier this month for our timeout segment. And if you scan that QR code on your screen, you can catch an interview I did with him today post earnings on our LinkedIn page. Overtime. We'll be right back. We have a news alert on Elon Musk's pay. Kate Rooney, what are the details? Hey, John. Yeah, so we're getting some details out of a Delaware court. The Delaware judge today ruled in favor of an investor plaintiff who challenged Elon Musk's $56 billion Tesla pay package. We're getting this based on a court filing. Judge saying the plaintiff who challenged Elon Musk's $56 billion Tesla pay package. We're getting this based on a court filing. Judge saying the plaintiff is entitled to a rescission and says here that

they're directing the parties to confer on a final form to implement that decision. But this has been voiced by a judge. They are ruling in favor of the plaintiff here. And again, this has to do with Musk's $56 billion pay package that we're just getting here. We'll get you any details as we read through this, guys. But the filing is just out here and the judge ruling in favor of the plaintiff. We'll get back over to you guys. Okay. Kate Rooney, thank you. Venture capital firm Andreessen Horowitz hosting its American Dynamism Summit here in Washington today. I sat down exclusively with legendary co-founder

and billionaire tech investor, Ben Horowitz, to discuss the global race to develop and deploy AI technology. America's ahead in AI, but the American government is behind the Chinese government in its deployment and use of AI, particularly in a military context. And this is why the conference,

this is why David is doing what he's doing, this is kind of how we got here, is that exact thing. And so I think we have tremendous, like, we are amazing at technology as a country, and the thing that we have, the gap we have to bridge is connecting that to what we do as a government. A16Z General Partner David Ulovich leads the firm's American Dynamism practice, investing in startups aimed at advancing U.S. interests. It's a big focus amid rising geopolitical tensions, defense tech. We also see there's a lot of tailwinds. The world has gotten to be a little bit of a spicier place,

and so we want to make sure that we have the most advanced technology. We want to incorporate the best software, the best AI capabilities, we want to have the most enduring and reliable energy capabilities to support the defense industrial base. So there's a huge amount of opportunity as we talk about moving into this information age that applies to energy, to defense, to space, to communications capabilities. So we think it's a huge opportunity and we think it's also just critically important. If software is eating the world, as the famous Marc Andreessen quote goes, I asked Horowitz, what will AI do? This opens up a whole new world and particularly, you know, very interesting areas like a human computer interface that understands humans that speaks English. So that's probably, you know, that's the first big breakthrough, but we're going to see breakthroughs in areas like robotics.

And maybe the most exciting for us is in biology. And the way we talk about it in the firm is if you look at physics, you know, we've been doing physics for thousands of years, but it didn't really get interesting until we had a language for it. And that language was calculus. We've never had a language for biology until now, and that language is AI. AI is the first tool that we've had that can fully describe a human. And this is going to be unbelievably exciting for breakthroughs and, you know, cures of

disease to diagnostics to everything. And we're really, really fired up about that. For the full interview, head over to CNBC.com. It was a wide-ranging discussion. John, we also talked about, and particularly at a time where around AI and the debate around regulating AI, you've got the so-called accelerationists versus the doomers in terms of the impacts on society and what responsible implementation looks like,

whether it needs to be regulated, how it needs to be regulated. We talked a little bit about that. A16Z is definitely on the accelerationist side of the spectrum, and we discussed some of that and why the case for that as well. So a lot to digest with somebody who's been in this industry for a very long time. Great stuff. Yeah, I know the people at Andreessen Horowitz, particularly Andreessen and Horowitz, you know, are critical of many in the press for being too negative on technology when there's so much that it's brought us. Well, up next, all the earnings movers that need to be on your radar as conference calls from Microsoft, AMD, and several other big names get set to kick off. We'll be right back. Welcome back to Overtime. Here are a couple of earnings movers outside of big tech.

Imagine that. To watch Stryker, the medical device maker, topping street estimates for revenue while reporting organic growth over 11%. Those shares moving higher right now in overtime. Maybe the flip side of that, UnitedHealth and Humana, bad news. And Match Group bouncing around, now fractionally lower after its report. right now in overtime. Maybe the flip side of that United Health and Humana bad news and match group bouncing around now fractionally lower after its report. Strong beat on earnings, but revenue guide coming in lighter than analysts expected. Morgan, a little like AMD, but different. So much to talk about, John. I mean, it's been such a busy earnings hour again. And then tomorrow,

of course, we get the Fed and we get that meeting. We get more macro data and then more earnings after the bell in our hour, too. Yeah. AI, a dominant theme here, not only in your Andreessen Horowitz interviews, but also what we saw out of Microsoft and sort of the good is disappointing, the AI, you know, GPU-driven ramps that they have coming in the current quarter, allowing them to report or expect to report guide to sequentially flat, which people might not know, that's pretty good for Q4 for a chip company. That's why I love anchoring with you, John, because you always have the context around some of these big mega cap tech names that we talk about so often and can sort of dive below the surface in terms of that in terms of that nuance. I also think it's worth taking a look at some of the commentary we're going to get out of the calls, whether it's Starbucks or Mondelez, in terms of the consumer and what we're seeing there right now, because these are companies that were able to outpace inflation with their pricing.

And what does that look like now in 2024? Yeah. And of course, Alphabet, right? They don't guide. So the commentary that Deidre Bosa told us to look for, particularly around AI and how we can expect to see that show up, that's going to be important. Morgan, we'll see you back here tomorrow. That's going to do it for overtime. I'm coming back. Fast Money starts now.