Closing Bell - Closing Bell Overtime: Apple Reportedly In Talks To Invest In OpenAI; Google Cloud CEO, Accenture CEO On Client Needs For AI 8/29/24

Episode Date: August 29, 2024

Investors digest earnings from Nvidia during the trading session, sending the Nasdaq ultimately lower. Earnings today from Ulta, Autodesk, Dell, Lululemon, Marvell and MongoDB. Bernstein analyst Aneesha Sherman breaks down Lulu’s numbers. Google Cloud CEO Thomas Kurian and Accenture CEO Julie Sweet join in an exclusive interview to talk their expanded partnership in generative AI and cybersecurity, plus what their clients want from their offerings. 

Well, that bell marks the end of regulation. Curtis Wright Corporation ringing the closing bell at the New York Stock Exchange. Nixoa doing the honors at the NASDAQ. And it is a record close for the Dow, but gains across the averages faded late in the session. The NASDAQ giving up a big early pop, closing fractionally lower.

The S&P just about flat. That's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort. Morgan Brennan is off today. NVIDIA's numbers are behind us, but there's still plenty of earnings action on the way, including results this hour from Dell, Marvell, Lululemon, Ulta, Autodesk, and more.

Plus, a big interview you don't want to miss. Google Cloud CEO Thomas Kurian joins us, along with Accenture CEO Julie Sweet with a look at how their partnership is helping enterprise companies scale their AI offerings. Perhaps some ROI there. As we await those earnings, though, let's bring in Barbara Duran. She is CEO of BD8 Capital Partners and Senior Markets Commentator Mike Santoli. She's going to be with us in just a moment. Barb, happy Thursday. So NVIDIA did well overall, but the stock was down, dropped to levels from two weeks ago,

which, given what NVIDIA's been doing, isn't so bad. S&P ended up about flat. Put this NVIDIA result together with the Fed and the market action, what's the message? Well, I think we're in a seasonally very slow time, which is August. I mean, I think a lot of traders are on vacation. You've always got volatility, choppiness, low volume. And I think there were such great expectations going into media that, you know, because the last three quarters that they reported have just surprised everybody. So I think it was a pretty high bar to meet. And I think what you're seeing

today and you'll probably see follow through tomorrow is a lot of momentum traders getting out, people who aren't there for the long run or the fundamentals on NVIDIA. And so I think the market is just going to be swishing around a little bit until we get after Labor Day and people start to really gear up. We've got a CPI and a PPI report coming out. And, of course, the all-important nonfarm payrolls number next Friday, which hopefully will give the line to the July number that it was just a one off aberration. And of course, then the Fed meets in a couple of weeks. I want to mention Autodesk's numbers are out. We are going through them. That stock initially moving a bit higher in overtime. It's a good time to bring up software since we're talking about Autodesk. We're also expecting MongoDB numbers soon.

Autodesk has rallied off the lows from earlier in the spring and early summer. MongoDB is about half where it was a few weeks ago. And so questions about software, Barb, and what kind of signal you're looking for to indicate to you whether it's worth buying dips, where the value is in software right now? Well, you know, I think you have to look at each of these companies separately. Like, you know, Autodesk, you know, has been selling at a discount, even though it's the standard of the industry, because they've had they've had a real problem with their operating margins.

They had an accounting issue where they had to have their board accounting committee look at this, didn't find any serious irregularities. And now you have Starboard, you know, on board, which is a very successful activist investor saying, look, we want to get these margins up by a thousand bips. Because interestingly for Autodesk, gross margins are like 10 points higher than their competition, but their operating margins are lower. So there's lots of room for, you know, for movement there. Well, hold on for just a moment. We do have those Autodesk earnings numbers. Want to get to those? Kate Rogers has them. Kate? Hey there, John. Yeah, and the stock is climbing by more than 4% on this report for Q2. Beat on the top and bottom lines here. Q2 earnings, $2.15 a share adjusted. That's better than the $2 analysts were looking for. Revenues, $1.51 billion, also higher than the $1.48 billion

that analysts were looking for. It also has some guidance updates here for Q3 revenues and EPS. Q3 revenues it sees in a range of $1.55 billion to $1.57 billion. That's better than the $1.55 billion to $1.57 billion. That's better than the $1.54 billion estimated. And EPS in a range of $2.08 to $2.14 adjusted versus $2.12 estimated. One more metric here. Total billings, the company says, increased 13% to $1.24 billion. Once again, the stock is nearly up 5% on this report. Back over to you. Yeah, good initial move. Once again, the stock is nearly up 5% on this report. Back over to you.

Yeah, good initial move. Thank you, Kate Rogers. Let's bring in Mike Santoli now. Mike, you've been working all day. I saw you this morning on Squawk at the NASDAQ, and now here we are after the bell. So we're expecting lots of numbers to flow through, including some interesting numbers perhaps on the consumer, both mainstream and high- high end from Lululemon and from Ulta Beauty as well. So I kind of want to look ahead to that. Margins in particular have been a concern on all these consumer names, including the higher end now. Yeah, margins. And I think in those two instances, too, you're talking about some questions about market share and brand franchise and whether, in fact, you know, they have really decelerated from what were once, you know, kind of heady growth stock growth rates. So I think all in the mix, plus the dollar general, you know, report and a warning today about their fundamental trends and the fact that they're seeing real stress at the low end of the consumer.

I think it just has us on alert. I don't think there's reason to panic. You had really strong weekly jobless claims number today. The overall macro picture continues to hold together, but consumer is not really driving in an aggressive way, and I do think that's why we're going to need constant kind of validation to be okay with the consumer here. All right, let's see if Lululemon can stretch into those pants. The earnings are out.

Leslie Picker has the numbers. Leslie. Hey, John. Lululemon reporting a miss on the top line, a beat on the bottom with comparable sales up only about a third the level that the street was expecting. The athleisure maker generating $2.37 billion in revenue, just shy of consensus.

The bottom line beat by 22 cents per share. Gross margins came in stronger than the street was expecting there. The Americas region was a weak spot, with comparable sales declining 3 percent. CEO Calvin McDonald saying in the release that, quote, in the U.S., our teams continue to optimize our product assortment and remain focused on driving forward our opportunities in the market. International comparable sales, more of a bright spot here, jumping 19 percent, contributing to international revenue growth of 29 percent. Men's revenue up 11 percent, while women's revenue growth about half that level. And digital revenue contributing just a fraction of the revenue that people generated in stores. The latter was up 11 percent. That was for in-store shopping.

Full-year revenue guidance coming in lighter than expected, with the high end of the projected range still about $140 million lighter than consensus. The company is holding a conference call at 4.30 p.m. to discuss further, but in the meantime, shares down about 4.6 percent, more than 5 percent now on these weaker than expected numbers here guys all right leslie thank you i'm going to avoid following through on the pun there on how those results turned out but the stock is lower dell earnings are out now sima modi has those sima john this is a strong beat from dell a dollar 89 adjusted versus the estimate of a dollar 71 revenue surpassing street expectations.

But the clear standout for the company is servers and networking revenue of $7.67 billion. Estimate was for $6.3 billion. CEO of Dell referencing the momentum in infrastructure solutions group and how that is a significant tailwind for the business. We're expecting guidance on the call, which begins at 4.30 p.m. Eastern. Of course, Dell in a highly competitive market in the AI server market with Supermicro and HP Enterprise looking at Dell shares up 4% in overtime. John? All right, Seema, thanks.

We've got another name moving higher as well, MongoDB earnings out. Kate Rogers, how do those numbers look? Hi again, John. Yeah, you can see that stock is higher by around 11% on this better-than-expected report. Q2 earnings, $0.70 adjusted, higher, higher than the 49 cents that analysts were looking for. Revenue is also a beat, 478 million, higher than the 464 million that the street was looking for. Also raised its guidance range here for Q3 revenues, now in a range of 493 to 497 million, better than the 479 million estimated. Also sees EPS of 65 to 68 cents.

That's also higher than the 60 cents estimated by analysts. The company's CEO says, we believe we are incredibly well positioned to help customers incorporate generative AI into their business and modernize their legacy application estate. The CEO will also be on money movers tomorrow for much more on the quarter. But as you can see, that stock is higher by more than 11 percent. Back over to you, John. Sounds like that Atlas database is back. Kate, thanks. Barbara Duran, now full circle.

I want to come back to you. We were just talking about software. And I think maybe you were about to get more to MongoDB, which has suffered over the past several months. But this is perhaps a decisive beat here in this quarter, both on the top and bottom line. Strong guide. Yeah, I don't think this was expected. I mean, they had the company had lowered guidance just, you know, on the last quarter on weak business activity, on weaker usage and other metrics. And so this was the the street, the street was expecting this was probably temporary, but it would be a long recovery. So it's going to be interesting to

see if this is, you know, how much is new products getting traction, how much is demand for their older products. You know, we don't know the mix because they do benefit and they are considered the industry standard in the, in the computer aided design, but it's going to be, we have to hear the conference call and see where the growth has come from, because this was not expected. And this is good news for them. Yeah, strong results. They're big on those databases for these new AI uses. Ulta beauty earnings are out. Angelica Peebles has those numbers. Angelica. Hey, John. Ulta missing on the top and bottom lines and cutting its guidance for the rest of the year. EPS coming at $5.30 a share versus the $5.46

that analysts were looking for. And for sales, those came in at $2.55 billion, and analysts were looking for $2.6 billion in the quarter. And for the rest of the year, they're also trimming their outlook. And they're saying that they are not satisfied with their performance here in the second quarter, primarily their miss on same store sales. Those were down one point two percent. And analysts were expecting those to be positive one point two percent in the quarter. That's docked down about six point eight percent right now. And we'll keep an eye out. John? Angelica Peebles, thank you. Mike Santoli, I mean, this is ugly from Ulta. And it's weird because for a while there, the makeup business seemed kind of unflappable. People wanted to get back out.

They were outside. They were buying makeup. Now, you've got to wonder, you're seeing the spotty performance. TJX on the lower end did really well. Dollar General did not. Here we have Ulta Beauty stumbling where it used to be strong. What's the takeaway if there's any through line here on consumer behavior? Yeah, it doesn't seem like it's the overall category.

Sephora is apparently really stealing market share from Ulta at this point through Kohl's, the partnership there. And, you know, Amazon, everybody seems like, you know, there was a former category killer, which was Ulta. And it's just broken stride. And both Ulta and Lulu acting exactly like the busted growth stocks that that they were set up as where they kind of, you know, missing estimates, having to guide down on comps and guidance. And, you know, even though the multiples look cheap relative to where these stocks used to trade, they still have just a lot to prove in these instances. So I'm a little hesitant to take a macro influence from what Ulta had to say in particular about makeup without knowing if it's just these competitive dynamics. Yeah, maybe more of an issue kind of like Lulu unto itself. Meanwhile, back to the chips,

Marvell earnings are out. Seema Modi back with those numbers. Seema. John, numbers from Marvell basically in line with expectations. 30 cents adjusted. That was exactly in line with what Wall Street was expecting. Revenue of 1.27, a slight beat of 1.25. Revenue guidance for the third quarter, 1.45 billion. The street was looking for 1.4. We have comments from Matt Murphy, the chairman and CEO of Marvell, talking about how strong demand for AI really helped the company drive quarterly revenue. And that next quarter, they're expecting combined enterprise networking and carrier end markets to return to growth, while our data center end market growth accelerates, looking at the stock up about 4%. It's been an underperformer this year, John.

All right, Seema, thank you. Barbara, looking at Marvell here, this is one of those names where they're in data center, they're also in autos, and the idea that the telcos are rebounding for them might seem hopeful across a number of fronts. It's sort of been the stock stuck in neutral for a while. Yeah, I think it's because they've got a mixture of the cyclical businesses, the networking, the enterprises, the auto, which have really, and the question is when it would bottom. And a lot of investors are expecting this could be the trough border.

And it sounds like management is saying, hey, we should start to see a pickup. It's stabilized. And, of course, the growth area, the more secular related, is the AI area, which is only 22 percent of sales. And it should increase, but it hasn't been enough to offset the growth. So if they are troughing in their cyclical business, this stock could now have legs and could do a lot better in the second half. I wonder, Mike, I mean, Marvell is up a little better than 4% so far right now in overtime on a day when NVIDIA was down. And granted, NVIDIA has been a story unto itself. But you wonder if NVIDIA is still doing well,

perhaps not as well as some had hoped. And other stocks in the semiconductor space, even the software space, seeming to do OK. I'm thinking about MongoDB, which just came out as well. It's going to cause investors to take a different look at maybe just the big guys being worth paying attention to. A little bit of a microcosm of what's been going on in the overall market to a degree. I mean, the average semiconductor stock has actually been lagging and really hasn't done a lot in the last, let's say, you know, six months or something like that. So there's been these kind of mini cycles and other parts of semis and definitely software. Software seems to face a pretty high burden of proof here.

I mean, if you look at the way Salesforce traded, I know it's a totally different business, but, you know, indicated higher at the open and then it sells off throughout the day. So, you know, I don't know that there's a way to sort of declare that we've made a turn in that regard, although I think Dell is interesting here responding positively. And if you look at a longer term chart of Dell had the huge shoot higher. Everyone said, hey, it's an AI play earlier this year. Well, that's what it was at 12 times earnings there shot up, came back down back at 12 times forward earnings. And it really is just a continuous uptrend with that crazy eruption to the upside kind of getting in the way there. So impact story, but slower and steadier than the market thought just a few months ago. Yeah, and unlike Supermicro, no shorts right now after Dell. We'll see how they compare. Mike, thanks. Barbara Duran, thank you. And, of course, we'll see Mike in just a little bit. Much more on today's After Hours. Action is ahead. Up next, we'll break down Lululemon's

quarter and the read-through for the consumer after big swings for other retail names today, like, as we mentioned, Dollar General and Best Buy. And a real-time read on the deployment of AI. CEO of Google Cloud, Thomas Kurian, the CEO of Accenture, Julie Sweet, going to join us with stats on how enterprise customers are using Gen AI in the real world. Overtime's back in two. Lululemon shares falling in overtime,

down about 4.5%, off the lows, though, after the company posted mixed results for the second quarter. Missing on the top line, full-year revenue guidance was lighter than expected. Joining us now, Bernstein's Anisha Sherman, who has a hold rating and a $345 price target on the stock. Anisha, what do we learn here about these sort of unique struggles that Lululemon is going through? And maybe how much this leggings problem might affect them?

I think this is a longer term problem than just the new leggings line. I mean, this is the sixth consecutive quarter of decelerating sales growth, the sixth consecutive quarter of decelerating America's sales growth, particularly the U.S. business, which didn't grow at all this quarter. And the comp was negative for the first time, I think, ever in the company's history for the Americas. So it is a continued struggle that we've seen for now a year and a half. And, you know, it's not about a particular franchise. It's just this is a mature company. This is a company that has grown well above the sector for years and years and is now facing a consumer that's pulling back. And they don't have enough

innovation to attract younger consumers to try to command those premium price points they're charging and so they're seeing the pullback that we're seeing across the sector that they didn't see earlier because their innovation was stronger and their product was working and now it's not as much anymore so i understand that this is an an individual story that lulu has its own. But I wonder what you're seeing here play out with some of the higher end consumers. I'm thinking about Abercrombie as well. Overall seems to be doing well, but it's mentioning its margins getting pinched going forward, heading into the back half of the year with logistics costs and whatnot.

And I guess maybe there's some pricing pressures involved in there, too, perhaps. I don't know. What's the difference between those who are continuing to do well and those like Lulu that are not? Yeah, it's a great question. So the middle to higher income consumer has been pulling back for the last several quarters. I mean, this was a consumer that was in pent up demand mode in 2022, but now they are out of pandemic savings, their credit card debt is up, they're repaying student loans, inflation keeps creeping up, so they're pulling back. And what they're investing in is differentiation. So when we see companies like Ahn, like Deckers, like Coaches, some of their new innovation is working with consumers, driving double-digit growth.

But where there isn't new innovation, the consumer doesn't need it. She has enough aligned leggings. She doesn't need another pair. And that's where you're seeing them pull back, because they're just having a more value mindset now than they did two years ago. All right. The stock off the lows in overtime now down about 3%, Anisha Sherman of Bernstein. Thank you.

Well, Google Cloud and Accenture announcing today they're expanding their investments in generative AI and cybersecurity. That's after 45 percent of the joint projects so far they've worked on have moved from proof of concept to production since their alliance launched just in December. Joining us now in exclusive interview is Thomas Kurian. He is the CEO of Google Cloud and Julie Sweet, Accenture's chair and CEO. Great to see you both. Thomas, there have been a lot of questions about the ROI in all of this spend that we see reflected in some of these results, namely NVIDIA. What can you tell us about the ROI that you've been able to achieve so far with Accenture in about nine months?

So we built a portfolio jointly with Julie and her team of hundreds of solutions based on generative AI. We've trained roughly double the number of people at Accenture on bringing these solutions to customers. We're working with hundreds of the Fortune 500 companies, 45% of those solutions, whether it's at Radisson, changing how we do customer experience, helping people at Best Buy change how they understand customer needs

and change how they replan deliveries and logistics for customers to improve customer service, or if it's Banco BV, one of the largest private banks in Brazil, where they've changed the way and logistics for customers to improve customer service, or if it's a Banco BV, one of the largest private banks in Brazil, where they've changed the way that their core private bank works and delivers products and services to their clients. They've worked on, and 45% of these are going from pilot

into production, showing the real business value that Accenture and Google are able to deliver to clients using generiv AI. Okay, Julie, if you will compare, contrast this for me with the work that you guys did on remote work through the pandemic, because you guys focused on that as well. You touted the results that you were seeing. How does that compare with the uptake now from Gen AI and the legs that this might have? John, I would say it's quite comparable. You'll remember that at the time we went,

because of the needs of the pandemic, we went really fast and everybody ran to being remote. And that was an incredible time. What we're seeing with the adoption of Gen AI is that CEOs are listening to the advice that debate at your peril. Let everybody talk about is it real or not, but get on with it. And so the advanced business leaders are actually getting on with it. For example, just like real examples are healthcare coverage. We've all had to get approval for some kind of a procedure. It can take days, weeks even, because there's so much involved, codes and documentation. We're live together with Google with a leading coverage, where it's gone to minutes, right?

That's affecting thousands of people. It changes the experience. It makes them more competitive and it gets patients to getting the care faster. So I'd say very similar in terms of speed, but the impact is even greater because it's actually getting at solving real world problems now at scale. Interesting. Thomas, you mentioned Radisson Hotel Group, I believe. You're saying that by using AI, the productivity in their ad teams has been boosted more than 50 percent. Tell me, if you can, about that measurement and how long that can continue, because that seems like an awfully large boost. Yes, most importantly, the ads that the team used our platform to build, along with Accenture, are seeing 20 percent higher conversion. So the

business value came to them from two dimensions. One, when they placed the ad, they saw a 20% lift in conversion. Second, when they created the ad, because the tools are now so effective at creating an image, generating the image, creating the copyright, like the documentation, the print that goes with it, translate it into many different languages. And because you can run many experiments, you can find the right creative content that improve the speed with which they can do it by 50%. So it's a hit on the improvement on the productivity and improvement on conversion. We see that in many, many other domains, whether that's in the back office, how we're helping cybersecurity teams improve the speed with which they can find threats,

meaning scaling the productivity of the teams, but also protecting against risks. There's many things like that that we're seeing across our clients. Julie, when you see these kinds of results, both for Accenture itself and, I guess, more importantly, for your clients. Doing work faster, the work that they do is more effective. What is the therefore? What's the next step? Is it we don't need as many people to do this work? Is it that we're taking on additional products, projects now to gain share, perhaps? Or does it sort of depend on what the macro environment is telling them actually john if you just take a step back i'm more excited about what it tells you about the future in terms of what you can do really strategically so the examples we're giving you right now are many are pretty much table stakes right they're changing experience they're

changing productivity all super super important. But the promise of the technology, if you fast forward three, four, five years from now, is that this technology is only going to get better and you're going to start producing new medicines, new types of materials. You're going to create chemicals and ways of changing the climate change and things you're going to do in oil and gas and in renewables, technologies that don't exist today. And so it's really important as a CEO that you're looking at there's table stakes. And the way I win is I go faster than everyone else. I'm in the cloud. I've got my data and I use AI. And at the same time, I look forward because I realize that the therefore

is that I've got an opportunity to actually change the core of industry. And that's what we're talking to boards about. That's what we're talking to CEOs about. Thomas and I are saying, like, this is real now. And if you are the first, you'll get an advantage. And even more importantly, you're going to be able to actually change industries. OK, finally, Tom. And that's, by the way, is why we work together. It's business and tech. Yes. OK. So on that note, Thomas, for those who are first, are there ways in which people are important in a different way as you kick this off the people who are either doing the training or maybe the ones who are assessing looking at this data measuring what the effectiveness is how has that role of how the people in the technology

interact at this early stage how has that changed I mean it's changed the the projects we do the technologists who do it with us, they need three core pieces. They need their data organized well. They need that cybersecurity protection around the data to keep that data secure. And then they need the models interacting with the data. So there's new skills we're seeing technology teams build as they learn to use these generative AI tools and changing the nature of the work they're doing to deliver these applications.

That's one piece. Second, when we talk in a customer service scenario or in a new wealth management offering that we work on with financial services clients, there's a change in defining what's the nature of the product you want? How are you changing the customer experience process? What kinds of things could you not do before

that you can do now? And that's what when Julie said, strategically thinking about it, that's when we help organizations redesign some core element of their processes, of their market opportunity to get the new technology to give them long-term competitive advantage. All right. Looking forward to more updates on how the rubber

meets the road. Thanks for joining me exclusively on Overtime. Thomas Kurian from Google and Julie Sweet from Accenture. Well, in this week's edition of my On the Other Hand newsletter, I look at whether or not the AI boom trade is winding down after NVIDIA's results. Is the ROI there? Those results from NVIDIA broadly beat expectations, but might not have been as stellar as the most bullish analysts and investors had hoped. You got a QR code there you can scan to get both arguments in your inbox pretty soon. Well, a couple more movers to tell you about. Elastic just reporting

first quarter results. The stock is falling off a cliff. It is down about 24 percent. Search software company beating on earnings at 35 cents per share versus estimates of 25 cents. Revenue also beat at 347 million dollars versus estimates of45 million, but revenue guidance was weak for the second quarter and for the full year. And check out NXP Semiconductor announcing an additional $2 billion stock buyback on top of its current repurchase program. Shares initially got a lift, now unchanged. Well, Pure Storage giving back some of its big gains for the year today, despite earnings and guidance that largely topped estimates. We're going to hear from the company's CEO about the quarter coming up next. And is Apple about to make a rare investment in a private company?

Details on new reporting about a potentially game-changing move that's ahead in overtime. Time for a CNBC News update with Kate Rogers. Kate. Hi, John. Robert F. Kennedy Jr.'s name will remain on the presidential ballot in North Carolina, the state's election board deciding it was too late in the process to withdraw. Kennedy suspended his campaign last Friday and endorsed former President Donald Trump and has been trying to withdraw his name from the ballot in states where the race is expected to be close, including North Carolina. Steve Bannon is asking a federal judge to release him from prison early.

Bannon's lawyers cited his pending request for the full D.C. circuit to review his challenge to his contempt of Congress conviction. Bannon reported to prison earlier this summer to serve a four-month sentence for defying a congressional subpoena from the January 6th committee. He's currently set to be released in October. And federal regulators found bugs, mold and mildew in a boar's head plant in Virginia linked to a nationwide recall and a deadly listeria outbreak that killed nine people and hospitalized over 50. That's according to records obtained by CBS News, which also say the plant had over 60 violations flagged over the past year.

John, back over to you. Wow. Awful stuff. Kate, thanks. When we come back, Mike Santoli looks at one part of the market on the cusp of reaching new highs as the Dow sets a record of its own today. And later, Apple is reportedly in talks to make perhaps a rare outside investment. And none other than OpenAI will discuss how that move would play into the AI chess match between grandmasters Microsoft, Alphabet, and Apple in overtime

returns. Welcome back. The Dow 30 closing at a record high today as another market gauge, an ETF, nears a record of its own. Mike Santoli is back to explain. Mike. Yeah, John, tantalizingly close. This is the Russell 1000 equal weight ETF, EQAL. So it's essentially the large cap universe equally weighted here. It reached its high. It's just about there. It's around 48. Way back in late 2021, right before we started, Fed started tightening right before that bear market got going. And also when the NASDAQ and small caps peaked together. So you can see it's been this long convalescence period. You probably would look at this and say it's been trapped.

Although there's some folks who would say that if it breaks out, that's actually a pretty good setup for potential new highs on the typical stock. So for most of this year, it's been betting the favorites as the winning strategy. And now betting the field against the favorites seems to be working for a little while. Now, speaking of equal weight, equal weight software, IGV, that's the main software benchmark. Again, a five-year chart also threatening

to get back up to that period. Remember the exuberance in 2021 around software and IPOs and everything? Of course you do. Now, year to date, semis on an equal weighted basis and software compared to the broader market, it shows you that there's still kind of work to be done. Now, they're all kind of clustered together here. But I do think it's interesting that you see them kind of below their highs. Semis way below their high. It's like 15% software on a relative basis trying to make some hay, although over the multi-year period, semis definitely had the advantage,

and that's not just because of NVIDIA, John. Is this really about, Mike, whether the exceptional mega caps continue to be exceptional, whether some of these equal weights end up breaking out? It is. It's largely about that, John. I mean, you can go sector by sector. It's been, you know, first half of this year, it was JP Morgan against every other bank. It was, you know, Costco and Walmart against every other retailer. So the market's trying to round its way into other corners to see if you can get some value there. Again, the overall economy

has to cooperate if that's going to hold up so far so good see if we get a trickle down market mike santoli thanks see you in a bit after the break the ai chess match apple and nvidia reportedly in talks to make investments perhaps in open ai's next funding round we'll talk about how those moves could change the competitive landscape among the tech giants when we come right back back. Welcome back to Overtime. NVIDIA reportedly in discussions to join OpenAI's latest fundraising round. That's according to Bloomberg. This comes as the Wall Street Journal reports Apple is also in talks to invest in the chat GPT maker. The investments would be part of a new fundraising round that could value the company

above $100 billion. Microsoft also expected to participate as it has already. Steve Kovach joins me now. Everyone's participating. Yeah, which raises the question for some, I imagine, what's special about investing if everybody's investing? I think a lot of people think of these companies as competing, although Microsoft and Apple in this space, I'm not sure they are. Oh, you mean Apple and Microsoft?

Absolutely not. Yeah, because Apple's pretty close to Google on the iPhone. And I imagine Microsoft would cheer anything that pries them out of that group. Anything that hurts Google is great for Microsoft, right? I mean, I think it's not really that a party's happening. It's who's in the party, right? Why is Apple doing this? Well, Apple is giving opening eye just massive distribution of chat GPT when it launches

later this year, embedded in the iPhone on those latest and greatest iPhones. And then on top of that, it's just really a vote of confidence from Apple because they typically don't make massive investments. I mean, you have to go back many years to think of a potential investment that big. You have $1 billion in Didi, which is an Uber rival that was based in China. They invested in that. They invested another billion in the SoftBank Vision Fund, which then got redistributed to a bunch of other startups. Arm Holdings, the chipmaker, a little bit there.

That's really, oh, Beats, Beats, of course, $3 billion. That's really it. And so this is likely going to be a significant amount of money going into open AI from Apple, from NVIDIA, from Microsoft. And Apple's not going to do it unless they think this is the best technology, which they have said this is the best of the large language models out there. That's probably why they're putting their money down on it. What this makes me think of, several months ago, people were very fond of saying, oh, Apple's behind in AI. Look at all the investments all these other people are making. It reminds me of a few years ago when people were saying, oh, Apple's behind in, I don't know, assistance.

Look at what Amazon's doing with Alexa. Sure. Yeah. Apple thinks about this stuff differently. Right. They are going for beautiful products that you can hold in your hand, that you intuitively understand how they work, not just the best technology in an abstract sense. How do you think that influences the way that Apple's approaching AI?

But look how we know they're already rolling it out. Just a couple weeks ago, for example, Google launched their Pixel phones, and that has all the features just packed in there, and it's already coming out that they're not working quite as well. Some of the guardrails aren't in there. Apple is taking such a measured approach. When Apple intelligence comes this year, it's not going to be for everyone. It's going to be for people with the latest and greatest phones in the United States who can speak English.

That's it. It's going to evolve from there. It's going to take many, many months for it to, first of all, all the features to come out, and then second of all, for it to roll out to really important markets like China, strict regulations there, European Union. Apple has already said, we're going to not even touch the European Union with artificial intelligence because the regulations there. So this is a slow measured approach. They're also calling it beta. They're not saying this is the final version. That kind of gives them a little bit of leeway. So when it inevitably does kind of screw up and generates headlines, they can kind of throw out there, well, we're still testing it.

And I think it's important to note when 3G and above rolled out, Apple didn't tout just 3G. They touted FaceTime. Yeah. Now look what you can do with video and communication. They touted the feature not the technology it seems like they're starting to take that approach with ai where it's look what you can do with these emojis look what you can do with your communication versus hey look at the answer the skips by the way they did not successfully do that with 5g they just said you can download stuff faster and yeah that was about it but yes you are

right about that i think what's really interesting is what they're doing on the developer front this could take many months for us to see but what they're doing with Siri, third-party apps can integrate deeply with Siri. And so you can already do that in a certain way. It's called Siri shortcuts, but it's very limited commands. But just imagine saying you're going to the airport, right? Call me an Uber to pick me up in time to get me to my flight at LaGuardia. And oh, by the way, make sure my Starbucks order is ready so I can pick it up before I get in the Uber. You know, things like that. A real digital assistant. That is the ultimate goal here. We're not seeing that from the competitors. So I think that is one compelling, at least so far, differentiation of what Apple intelligence could be, assuming it works right.

I mean, it's going to be a while before you know. Yeah. Will this be super cycle? Developers don't have it yet. And when they do, then we'll really see. We'll get a sense in just a few days. Steve, thanks. All right. When we come back, we will hear from the CEO of storage hardware and software provider Pure Storage as that stock tanks today on the back of earnings. Plus, we'll check in on the biggest overtime movers in what has been a very busy after-hour session. We'll be right back. Welcome back.

We are watching some big movers in overtime. Plenty of green on the screen this time. Autodesk beating on earnings and revenue, giving strong third quarter revenue guidance. You see it up 6% so far. Marvell moving higher as well by just over 6% after matching earnings estimates and beating on revenue. Also giving solid guidance. Dell topping estimates on the top and bottom lines. It is up about 3%.

Management saying AI momentum accelerated in the quarter. And MongoDB putting up a big earnings beat at 70 cents per share versus estimates of 49. Revenue is also strong, as was guidance. That is up 14%. Now, Pure Storage took a dive in the regular session after earnings that beat, but not by as much as hoped. Might sound familiar after NVIDIA. In Pure's case, margins were squeezed and the growth wasn't enough to make up for that. I spoke with Pure CEO Charlie Giancarlo about the overall IT spending environment. We had actually been anticipating maybe a bit more of a pickup in the IT economy.

We're not quite seeing that, but there's still robust demand. And so customers aren't shying away from that. Given, you know, there is all of the uncertainty associated with the election and interest rates and all of that. We've seen the IT economy remain robust, but not change much over the last few quarters. I also asked him about the impact of AI, which he said is still in the early stages. We're continuing to see demand for storage modernization, whether that is application modernization needing new storage or the anticipation of AI. And it's really more anticipation of AI in the enterprise. Of course, a lot of companies are using AI on the cloud for experimentation and testing and prompting and so forth. In terms of actual AI implementation in the enterprise, that's actually relatively rare. What is going on, though, is companies

looking at their data and saying, are we ready? Are we able to get access to the data that we need? Is the data prepared? Is it formatted in the right way? And as they go through that, they are reviewing their data architecture needs as well, and that's working out very well for us. I also asked him about pricing in the flash storage market. That's probably not helping margins.

He said that continues to be tricky, but that stock still up about 40% year to date. Well, some potentially market moving data hitting the tape tomorrow morning. And we've got your Wall Street look ahead next. 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. Corporate earnings taking a break tomorrow, but a flood of data is going to be on the top of the minds of investors.

Before the bell, we'll get July numbers for personal income, consumer spending, and the PCE report. And at 10 a.m. Eastern, we'll get the final August read on consumer sentiment. Now, Mike Santoli rejoins us. Mike, I'm thinking right now about Dell because of this significant move after ours. And both of us are old enough to remember a time when Dell and HP were neck and neck. And, you know, not long after that, when Carl Icahn looked like he might take Dell out. What a story this has become for this, in a way, lone enterprise hardware maker of that era still standing in this way. Sure. I mean, I go back also to Gateway. I mean, if you want to fill out the whole former sector. You know, it is really remarkable. And again, it's it's these businesses that have been priced by the market for essentially no growth.

They're just cash cows. And then they get this jolt of new life and a role in the middle of the biggest megatrend that we've seen in a long time. So, you know, it's been a pretty sturdy move, as I mentioned earlier, just over exuberant in terms of how the stock went vertical when people just had enjoyed the novelty of Dell being an AI stock. But now the business is flowing through and it seems like, you know, it has a little bit of staying power for the moment. Plus a bit of a retort to these questions about the ROI on artificial intelligence spend. NVIDIA mentioned Accenture in its earnings call last night. We had the CEO of Google Cloud, George Kurian, with Accenture CEO in overtime this hour talking about that ROI.

ServiceNow partnering with NVIDIA has been talking about that as well. And now Dell 80 percent higher on these AI based servers. Yeah. And I guess on some level, you have to actually trust the CEOs that are shoveling money in unprecedented quantities in this direction that they actually believe they're going to get paid back on it. Now, I think people sometimes are going to have these bouts of doubt because you have comments about, hey, we're going to bet the company on this. We'd rather invest too much than too little, even if ultimately it's unwise. For now, stories holding together, even through a mild disappointment on NVIDIA's stock reaction.

Speaking of things snapping back, Lululemon might fit into those pants. After all, it's now higher by about 2% after hours. Not sure what that's about. Mike Santoli, thanks for sticking with me through the hour. That's going to do it for overtime.