Closing Bell - Closing Bell Overtime: Apple’s China Business In Focus; Private Company Insights Ahead Of Earnings 4/9/24

Episode Date: April 9, 2024

Checking on Apple’s China business with Wedbush’s Dan Ives, plus talking the prospects for the other tech giants. Earnings season insights from private companies with Golub Capital CEO Lawrence Golub. Our Kristina Partsinevelos on Intel’s new AI chip aiming to compete with Nvidia; Moor Insights & Strategy CEO Patrick Moorhead on what it means for investors. 

Well, there you have it. A gain for the S&P, albeit just barely. It looks like 52.10 is going to be the level there. The Nasdaq turning higher in the final moments of trading as well. But the Dow just below the flat line. Well, major averages closing off the lows of the session. That's the scorecard on Wall Street. But the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford is off. The Dow falling for the sixth time in seven days as investors await a key reading on inflation tomorrow. Meanwhile, earnings season is about to kick off. Coming up, Golub Capital CEO Lawrence Golub on what trends from private equity-backed companies are indicating about the outlook for Wall Street earnings. Plus, NVIDIA shares getting hit hard as new competition enters the AI chip market. We'll discuss the potential winners and losers in this fast-growing race. And let's get to today's market action with our market panel, Charlie Babrinskoy of Ariel Investments and Adam Krzywfuli of Vital Knowledge.

It's good to have both of you on. Charlie, I'm going to start with you here because we saw bond yields come off a little bit here. We saw stocks basically middling at least into the close. But commodities have in general, maybe ex-oil today, have been pretty strong as well. What to make of some of these different cross currents and dynamics and where do we go from here? Well, in general, lower interest rates are better for some commodities, particularly gold. I think there is a sense that if we got a little bit of interest rate relief, we'd get a little bit of stronger economy, particularly in housing. That's good for copper prices. That's good for

demand for oil. A better economy would be good for China, which obviously is a big consumer of commodities. And fundamentally, I think there is a sense that maybe people don't want to have all their money in the stock market. And having in some hard assets like timber and Iowa farmland and gold is not a bad place to be. You know, the stocks haven't done as well as the underlying commodities. The underlying commodities have been very strong. The stocks haven't really kept up. So we do think there's some opportunities there. Interesting. We don't hear it. We don't talk about timber very much. So I'm going to dig back into that with you in just a moment. But first, Adam, I mean, we've got a crockpot of considerations for investors as we do await inflation data and bank earnings later this

week. You got firmer U.S. growth backdrop. You got hawkish repricing of the Fed pivot expectations, higher commodity prices we just talked about, higher break-evens, higher sell-side S&P 500 price targets, increased downside hedging, breadth improvement, and potentially some reflationary leanings. That's just the list I'm working off of. What to make of it? Yeah, there's a lot of moving pieces, like you just said. You know, I think it's interesting if you kind of read the tea leaves over the last several weeks, you do have a lot of potential tailwinds on the industrial and the manufacturing front. So you've had a string of positive economic numbers out of China. You've seen the price action of commodities with oil and gold and copper. The U.S. manufacturing ISM was decent as well.

And then on the flip side, you've seen a number of negative data points with regards to the consumer and retail spending. And so potentially there's a bifurcation happening. And it'll be really interesting to see within the CPI tomorrow, if you really start to see a weakening in services inflation and shelter inflation, because it's incumbent on those two categories to start to move lower if the CPI and the PC are really going to make that final move down to the Fed's target. You know, so you are at this possible inflection point in the overall economy. So it'll be interesting to kind of see how this all plays out, not only with the CPI

tomorrow, but, you know, we're right on the right ahead of earnings season. The banks Friday morning are going to give us great insight into just the state of the economy, especially with regards to consumer. You know, there's been a few storm clouds around consumer credit quality, especially at the low end of the consumer. So it'll be really interesting to kind of hear their perspective on how things are shaping up there. Charlie, what matters more, inflation data or earnings data, especially as we are talking about diversification into real assets?

Yeah, I'm going to go with inflation data because the Fed just is stubbornly refusing to reduce rates to where they should be until they see a number that they're happy with. Just a very important data point on this is that Gene Fama at the University of Chicago came out with a study probably 40 years ago showing that the real rate of interest for the risk-free rate should be about 1%. It had been for 100 years. And that means that with 3% inflation, we should have a 4% short-term one-year treasury rate. We've now got an over 5% rate. So unless you think we're going back to 4% inflation, which nobody does, interest rates are too high. When they come down, which I think they will this year. It's going to be a real boost to housing stocks, to the ability of consumers to pay off their credit card debt, to finance their lives. So I put me down for interest rates being the number one driver. OK, Adam, do you see it the same way, especially since we do have a week that has a lot of Treasury supply hitting the market. And we do have, as you mentioned, CPI and Steve Leisman is arguing PPI, which arguably is going to matter more to PCE.

Yeah, no, these are going to be crucial data points. You've had you know, you've already had a pretty aggressive hawkish repricing of Fed expectations and yields. So I think your risk reward is to the dovish side into the inflation figures, meaning that, you know, I think it's going to be easier for the CPI to come up looking less hawkish than fear versus the alternative. You know, and with regards to the Fed, keep in mind that there's a bifurcation happening among international central banks. So we have the Bank of Canada tomorrow and the ECB on Thursday. And both those central banks are going to have dovish forward guidance.

You've had some pretty downbeat economic numbers out of both regions, and that's going to provide justification for their central banks to commence rate cuts in June. So that's going to be something to watch also this week, especially the ECB on Thursday, which should have a relatively dovish forward guidance for their June meeting. Yeah, we've been seeing the push-pull of all that play out in the FX markets as well. Charlie Babrinskoy and Adam Krzysztofuli, thanks for kicking off the hour with me. Thanks for having me. As the Dow finishes the day basically unchanged and the S&P in a similar position, up just about one-tenth of one percent as we do await that key inflation reading tomorrow.

Well, NVIDIA shares were a weight on the S&P today. Those were under pressure as Intel unveils its new AI chip. Christina Partsenevelis has the details. Hi, Christina. Hi. Well, Intel taking direct aim at NVIDIA with its GAUTI 3 AI chip. CEO Pat Gelsinger was not shy today in his keynote when comparing Intel's latest chip with NVIDIA's H100 chip, which is the main choice among company building AI systems. Listen in. Gaudi 3 is great on benchmarks versus the H100 on top open Lama models, 50 percent faster and time to train, 50 percent better on inferencing, 40 percent better on inference power efficiency. Not shy indeed. He did went on to say that this chip is going to be available through original equipment manufacturers such as Dell, HP, Lenovo and Supermicron as early as Q2

of this year. Intel also promising, this is the interesting part, that it's going to be at a fraction of the cost. So I asked Intel CEO Pat Gelsinger about this cost comment on a media call maybe just a few hours ago, and he said it was, quote, not a little below, but a lot below NVIDIA's offering. They don't actually provide particular numbers when it comes to pricing, though. So they may win on cost, but Intel still has a lot of software and ecosystem work to do in order to push out NVIDIA. And I say that because NVIDIA holds roughly 80% of the AI chip market, according to analysts. Lastly, Intel's latest AI chip is benchmarked with NVIDIA's chip already on the market. That would be the H100. But NVIDIA is currently launching an updated H200 GPU chip this quarter and has its next generation Blackwell chip shipping in maybe

Q4 of this year. So we won't know how Intel's AI chips stack up until NVIDIA's new chips come to market. But that hasn't stopped Intel shares from moving a little bit higher today, especially when other names are taking a breather. And I know NVIDIA is one of them, down 2%. Yeah. And I just, to stick with that theme here and the fact that you do have Gelsinger making these direct comparisons between NVIDIA's current chip that's on the market and Gaudi 3 that's going to release later this year. I mean, yes, NVIDIA has 80% market share, but I think about AMD and what Lisa Su has said to us about how much this market's going to grow. So maybe 80 percent of current market share. But it raises the question, if that's a growing number, is there truly room for everybody without necessarily eroding what NVIDIA already has in

terms of business and in the pipeline right now? I'll reiterate what a lot of hyperscalers are saying, and that's exactly what AMD's CEO is saying, is yes, the market share is there, which is why hyperscalers like Amazon and Google are coming out with their own in-house custom chips. They seem more than willing to say, hey, there's enough demand for all of us. At Google, the latest today also announcing a new ARM-based processor that would compete with NVIDIA, so it's another custom in-house chip. That was part of the reason why you saw NVIDIA shares down. So you got Intel, Google.

I was in Texas not too long ago at Amazon's lab. They said that although they work with NVIDIA at the same time, they're creating their own in-house chips. So according to them, there is enough market share. But I do wonder in the next one to two years, when companies realize the revenue monetization of spending so much on these chips, you know, hundreds of thousands of dollars may not be there. And so then we might see that demand start to drop when we're not seeing that productivity and that revenue come in to offset those costs. OK, we'll have to see. Christina

Parts and Avalos, thank you. Thanks. We got much more on Intel still to come when a top analyst tells us what this new chip means for the stock and for rival NVIDIA. But it's time to bring in Senior Markets Commentator Mike Santoli for a look at another mega cap tech name, Amazon. It's run toward a new record close, which we didn't exactly get today, Mike, but we're on watch for it. No, Morgan, we didn't. In fact, it's been quite a long wait, especially relative to the other major big growth names. Amazon here over a five year period compared to a couple of its fellow Dow Industrial members here. You see the orange is Amazon and this is the the all time high that we're trying to get back to way back in 2021.

So you remember the massive move in the in the heat of the pandemic that Amazon had. It's been working off that for quite some time. And this is kind of mirror companies to its main businesses, obviously. So Microsoft, in terms of cloud services, especially before the open AI thing became the animating force right around here. I do think that was a pretty good comp. And then, of course, Walmart as sort of dominant retail. Now, on the valuation side, what's kind of interesting, a lot of analysts and investors are excited about Amazon's ability to produce more free cash flow and be more disciplined on cost. This is free cash flow yield. So this is essentially the inverse of the price to free cash flow.

It's what you're getting if you're a shareholder in the form of free cash flow profits. And Amazon now nosing ahead of both Walmart and Microsoft. Now, Microsoft's been going down mostly because the stock's been doing so well and getting more expensive. The valuation premium has been building up, whereas Walmart, you know, similarly, although, again, it's also having a little bit of a flatter period in terms of stock performance, Morgan. This is really fascinating to me.

Why are you seeing free cash flow yield nudge up with Amazon versus the other two? Is it fair to make a comparison to Netflix versus the media companies that are also heavily investing and looking to build out their own streaming platforms, this idea that maybe it's just a little bit further ahead in some of its key businesses? I would say to a degree, yes. Now, the question with Amazon has always been, will it choose to essentially harvest a lot more free cash flow? Because it really could have all along been managing itself in that direction, whereas they'd rather reinvest and say, make the experience better and all the rest of it. So it does seem right now they're at a point of maturity where the company feels as if, yeah, we can kind of do it all.

The scale is there and they have really slashed a lot of their expenses. They came through a huge investment period, and I think this is, to some degree, harvesting. Now, I will say, this is a forward-free cash flow here, which means this is what the street thinks they're going to get to, and it's notoriously tough, even on a three-month basis, to figure out exactly how much is going to fall to the bottom line at Amazon. So you've got to take that as a disclaimer along with it.

The everything store, the everything stock, I guess. All right, Mike Santoli, we'll see you later this hour. Alphabet hitting a one-year high today as well after unveiling a new server chip, as Christina mentioned earlier, as it takes on Amazon and Microsoft in the cloud infrastructure industry. Up next, Bud Bush's Dan Ives gives us his take.

He's here. And later, Golub Capital's CEO on a new survey showing which sectors may be the big winners and losers this earnings season. We got a big hour. Stay with us. Overtime's back in two. Welcome back to Overtime. We have a news alert from the Treasury Department. Megan Casella has the details. Hi, Megan. Morgan, the Biden administration is formalizing plans this afternoon to impose a 1% tax on all corporate stock buybacks. Now, this was passed as part of the Inflation Reduction Act, but today's move gets it closer to official. Treasury says this will be retroactive. It'll be applying to all stock repurchases since the start of last year. It'll apply to U.S. public companies who repurchase

stock at a value of a million dollars or more. Now, the agency will be accepting public comments on this until June 11th, and they'll finalize the rule after reviewing feedback in the weeks after that. Now, while this tax was included in the IRA back in 2022, corporations have not faced any deadlines yet for payment since the administration had not yet issued the rules. So this shouldn't come as a surprise to anyone, but it does mean the tax bill may soon be coming due. Morgan. All right. We'll be watching it.

Megan Casella. Thanks. Alphabet shares hitting a record high today. That's after the company unveiled a custom arm based chip at its next at its cloud next conference. It will be available later this year. Initial customers who will use the chip include Datadog, Elastic, OpenX, and Snap. Joining us now is Wedbush Securities Senior Equity Analyst Dan Ives. Good to have you here on set.

Great to be here. The fact that Google moved higher on this news, Alphabet moved higher on this news, I suspect you're not surprised since this is a top pick for you. But I guess break down what you thought was the most notable in terms of disclosures, because this wasn't the only one that we got in terms of AI. I think this is a flex the muscles. This is really them going on the offensive instead of the defensive. From an AI stack perspective, I think this could gain share in hyperscale. And when we look at what we've seen with Microsoft and I think eventually we'll see with Amazon as well, we're talking about a trillion-dollar market opportunity over the next decade.

So when you look at what Kurian and Google are doing, this was exactly what they needed to go after. But also, it's developers. It's music to the ears of developers. Look, we believe some of the parts, $30 to $40 per share incremental for the AI opportunity. In terms of the custom chip piece of news that we got today specifically, is Alphabet behind the ball, at least in terms of disclosing it when you've seen similar disclosures

from some of these other companies like Microsoft, like Meta, like others? Yeah, clearly late to the game, but not too late. And I think this was something many were really yelling for them to do. They did it, and now it's really about can they gain more and more share within their install base? Because it was a missing piece in the puzzle. And I think if you look at everything they did in terms of from some of the disclosures, from the chip side,

I think some of the announcements that they're making even on a customer perspective, it shows this is not a company with back against the wall. It's a company on the offensive. And look, I believe, and we believe at WebBush, it's probably on large cap, continues to be extremely undervalued relative to the opportunity. Okay. So how to think about that in terms of some of these mega cap names that I do know you cover? Because you do also have Meta expected to unveil two small versions of its upcoming Llama 3 large language model capabilities this week as well. And then there's Apple. It's kind

of like the dark horse out there. I think there's expectation that at its developers conference, we could get some more detail on AI, but we haven't really gotten much from that company. Look, right now, obviously, top of the mountain, god know, godfather of AI, Jensen and NVIDIA. But then if you look from a software perspective, it's Nadella, what they're doing, Redmond. I think get out the popcorn type of earnings that we're going to see from them. Because of CodePilot, because of what we're seeing

from an AI perspective, monetization, we think $35 to $40 incremental monetization for every $100 spent on Azure. And then I think when you look across large cap, I mean, in our opinion, this is really going to be a very, very strong tech earning season for the likes of Amazon, for what we're seeing with Google.

When it comes to Apple, well, clearly iPhone weak in terms of China, but that's not the story. The story here, $270 million is a pent-up upgrade opportunity over the next year into iPhone 16. And when Cupertino and Cook unveil at WWDC the AI strategy, I believe that's going to be a watershed moment, not just for App Store, but for iPhone 16. Is that priced? So you don't think that's priced into the stock. I guess just looking at Apple, looking at the fact that top line has been so weak over the past year or so, do you buy it here ahead of earnings? And I ask that knowing you just came

back from Asia. Yeah, I mean, look, I view it that the bad news at this point is mostly baked in. Now, clearly, could we get more bad news in terms of week, June guidance like we talked about in our note? But I believe after come back from Asia, what we're seeing, we have not seen builds get cut. And I think the important thing here is clearly iPhone units are weak in China, but there is relative strength in U.S. as well as Europe. I think at this point, New York City cab drivers bearish on Apple as a stock. The risk reward going into WWDC with the golden install base of Cupertino, $2.2 billion. We'd be buyers here, and that's why we're bullish. Okay. Dan Ives, good to have you here on set. Great to be here. Thank you. Well, up next, Golub Capital CEO Lawrence Golub on the clues

private equity-backed companies are giving about the first quarter earnings season. And speaking of earnings, the top airline analyst on what investors should expect when Delta reports results tomorrow morning. Stay with us. Welcome back. A new earnings season is kicking off this week. Delta is set to report its first quarter results tomorrow morning. We've got bank earnings that start on Friday with J.P. Morgan, Wells Fargo, Citi and others. And joining us now to share clues about what investors can potentially expect in Q1 is Lawrence Golub. He is CEO of Golub Capital, a direct lender and private credit asset manager. It's great to have you on the show. Welcome. I do want to start with this report that you've put out that basically shows that private equity backed companies,

that they could potentially be signaling some pros and some cons as we do look at to the public companies that are getting ready to report. So what are you seeing in terms of some of these key trends for Q1? Thanks for having me, Morgan. Really glad to be here. So our report is based on the actual revenue and earnings growth from private equity-backed companies in the first two calendar months of each quarter. So it's not a projection. It's not a forecast. It's simply reporting on a statistically anonymized basis what's really going on or what did go on in the first two months. And we're seeing strong earnings from U.S. companies, PE-backed companies, software, business-to-business software, wow, really knocking the cover off the ball, as it has continued to do over many quarters here with

productivity enhancing, investments really driving things there, revenues up double digits, profits up almost mid-double digits, 25% for the quarter. I think we'll see that come through in public companies and in the business-to-business tech center, not the sort of AI stuff, which really isn't there yet in terms of the implementation side. I think you're hinting at an area where there is a lower rate of growth, which is on the consumer side, the consumer spending side. Okay. So let's talk a little bit about that because we've gotten some warnings. We've gotten some results in the last couple of weeks from a number of high-profile consumer-related companies. And the question has been

raised. Are these canaries in the coal mine? What are you seeing in your data? Well, we lend to a wide range of consumer companies. And I'll tell you that in the consumer sector, different businesses are all over the place. I think one of the things we're seeing is an increasing amount of consumer resistance to price increases. And what we see in our data is a relatively lower rate of revenue growth in the past quarter, healthy profit growth, 4%. But if you dissect the data, car washes that are growing revenue by selling monthly plans that really are a high-value proposition, doing better. Restaurants that keep having labor costs go up and are passing it through on pricing, they're doing okay on same-store sales.

Traffic counts are struggling. And I think we may be seeing the beginnings of some real consumer resistance to passing along the cost increases. What are we seeing in terms of health care? Because we know there have been some real high flyers, particularly in the pharma space and health care, when you think about the Eli Lillies of the world and some of these secular growth stories.

But it's been much choppier or weaker in other parts of the sector. Well, health care services is showing well. I think health care service businesses seem to be getting under control. Their cost structures, better scheduling, better utilization of labor. And we're seeing that through this report with some pretty healthy profit growth, almost 10 percent profit growth. I think when you get to the biotech sectors, you're much more driven by the flows of venture capital funding.

In the pharmaceutical sector, you've got a big regulatory framework. I think as we look forward here in terms of health care services, one area there may be some surprises this quarter would be in the change health care hack. We area there may be some surprises this quarter would be in the change health care hack. We saw a couple little glitches on that. I hope we won't see too many when public companies report. OK. One to keep an eye on, though. In terms of AA, we're just having this conversation with Dan Ives that he expects that this is going to be a very strong earning season for big tech companies, for the hyperscalers, in part because maybe perhaps we're going to start to see this inflection in terms of AI investments being monetized. What are you seeing in your data? Well, you've got to keep in mind I'm wearing

a navy blue jacket. Dan Ives was wearing this gorgeous, I don't know where he got it thing. So you've got to keep perspective on where we're coming from on this. I think overall, productivity enhancing investment is going to be driving the U.S. economy for a long, long time. Costs are going up. Costs are going up because of deglobalization. Costs are going up because of inflation. And productivity driving investment, particularly in P.E. land, is where the owners are really pushing. It's going to be very interesting to see as we get this next generation of LLMs really where we're going to be able to find measurable productivity increases. That's really not something we're seeing so far. I mean going back to our software

businesses, the businesses we lend to. This is still adaptation 20 years into ERP. And so I'm very hopeful we'll see tremendous productivity growth over a long period of time from AI, but we're far away from seeing anything measurable in middle market companies that we deal with. Okay. Lawrence Golub, great to have you on and get your insights. Thanks. Thanks for having me. Well, time for a CNBC News update with Contessa Brewer. Hi, Contessa. Hi there, Morgan. The EPA has set new regulations today that limit pollution from chemical plants.

They're trying to reduce the risk of cancer for people who live near those plants. More than 200 across the U.S. will be affected, and it's the first time in nearly 20 years the government has tightened pollution limits on chemical facilities. California spent $24 billion over the last five years to address homelessness, but didn't track whether the programs were effective. That's according to a state audit released today. The report found that despite the investment, the problem did not improve. California has about 171,000 people who are homeless. That accounts for roughly 30 percent of the entire U.S. homeless population. And the 16th and final mission of

the United Launch Alliance's Delta IV heavy rocket blasted off from Cape Canaveral today, carrying a classified reconnaissance satellite into orbit. That launch brings to a close 64 years of the Delta rockets and its place. The ULA will carry out its missions with the Vulcan Centaur rocket, which had its first mission in January. You know, Morgan, I know you have something to say about this, but I just want to say nothing says rocket to me like self-immolation. There's the rocket. It's on fire. And then it goes up. It's never not spectacular to witness a rocket launch. And I will just say that that is a rocket that has a perfect success rate.

Look at that. Yeah. Beautiful. The end of an era and the beginning of a new one for United Launch Alliance, which is a joint venture between Boeing and Lockheed Martin and a competitor to SpaceX and others. Let the rocket races continue. Contessa Brewer, thank you. Sure.

Up next, Mike Santoli takes a closer look at market-based inflation expectations ahead of tomorrow's CPI report and what that could mean for the Fed and your money. And check out shares of Moderna. It's one of the biggest winners in the S&P 500 today after positive results from an early stage trial of a neck and head cancer drug that it is developing with Merck. Shares finished up 6%. Welcome back to Overtime. Norfolk Southern closing higher in a mostly down market today, finishing up more than 1%. That's after reporting preliminary Q1 results that were below consensus, with revenue down 4% thanks in part to lower fuel surcharges, even as volumes grew 4%.

Now, the Eastern Railroad also announcing a $600 million agreement to settle a class action lawsuit relating to the derailment in East Palestine, Ohio last year. Norfolk Southern reporting an adjusted operating ratio of 69.9%. That was versus consensus estimates of 69.1%. A lower operating ratio means a more efficient railroad. It's come down, and it's certainly in focus as an activist investor Ancora wages a high profile proxy fight against Norfolk Southern. Now, the company did reaffirm its operating ratio improvement target of 100 to 150 basis points for this year. And it also said that it expects a 50 to 100 million dollar impact on revenue in Q2 from Baltimore's Francis Scott

Key Bridge collapse. Shares nonetheless finished the day higher and the transports also finished the day up fractionally. Let's turn now to Mike Santoli. He's back with a look at how market-based inflation expectations have been tracking. Mike. Yes, Morgan. Well, they've been tracking higher at least since late last year. Of course, nominal treasury yields are up to account for that as well. This is the market-based forecast of where inflation is going to be over the next five years. It's derived, obviously, from a Treasury inflation protected securities yields relative to regular old Treasury yields. So you see we were down right around two percent at the end of last year, up around two point four. So this is essentially the market's best guess for what CPI is going to

be over the course averaging over the next five years. Not alarming, but not down at the 2% level. Obviously, way down from where we were just a couple of years ago. That all makes sense. I do want to emphasize this isn't some kind of perfectly prescient forecast. Take a look at the 10-year version of that same chart, and you'll see that we sort of are treating 2 percent as kind of a floor. It's sort of like two to two and a half seems like the market's perceived new range, whereas before that, two was the ceiling. And remember, we couldn't really get inflation up to the Fed's

target of 2 percent or so. But occasionally we did get up above two and it didn't come to pass. But we do have the market clenching up in that direction. So I don't see this as alarming levels, but there's some sensitivity to having this go higher. Obviously, if inflation starts to seem stubborn in the data, Morgan. OK, we'll have to see. Mike Santoli, thank you. Up next, Emily Wilkins looks at why the fight for Ukraine funding in Congress is so important to one key defense contractor. Yeah, Morgan, I mean, this debate in Congress, it's over funding for Ukraine, but it's facilities like this one here in the U.S. that really stand to be impacted if Congress doesn't move quickly. We get into the details when Overtime returns. Welcome back.

The battle for funding for Ukraine is heating up on Capitol Hill, but it's not just Ukraine that's being impacted by that fight. Emily Wilkins looks at one U.S. defense contractor with a lot at stake. Hey, Morgan. Well, we are here in Rochester at L3 Harris's production facility that makes these tactical communications radios. You can actually see some workers here putting some finishing touches on some of these radios.

And this facility, it's 4,000 employees, and it's gotten several hundred million dollars since the war in Ukraine began and the U.S. began giving that federal funding. It's really not uncommon. Of the more than $100 billion in federal funding for Ukraine aid that Congress has put forward, more than half of that has gone to U.S. companies. And so even though there are still a lot of questions about what the future of the funding is going to be, that money has now run out. And so Congress is looking at passing another chunk of funding, but that is running into political pressure.

I spoke today with Elbray Harris's president of communication systems, Sam Mehta. He says he often gets calls from his 470 suppliers about what's going to happen with Congress. It's going to impact a lot of those small to medium-sized businesses. Listen to what he had to say. We have hundreds of small and medium-sized businesses that rely upon funding, predictability, and the continuity of the funding so that they can plan their employment, their operations, and their capacity. This is critical for them. Now, the Senate has already passed $60 billion in aid for Ukraine.

It now goes to the House. And you just heard this afternoon Senate Minority Leader Mitch McConnell say that he wants Speaker Mike Johnson to put that bill on the floor. That's going to be tough for Johnson to do. A near majority of Republicans in the House have some sort of opposition to additional Ukraine funding. So Johnson's trying to find a path forward. Now, that could be having some of the funding as a loan. It could mean having some of the funding taken from seized Russian assets. Congress gets back from a two-week recess tonight, and Ukraine funding is near the top of the list. We're really interested and going to be following exactly those conversations between House Republicans on how to potentially get this Ukraine aid done. Morgan? I mean, what's so key about this is the fact that when you talk about the supplemental funding, whether it's Ukraine or some of the other countries that have been in focus as well, is so much

of the funding that's allocated is specifically for the U.S. defense industrial base to replenish stockpiles that have already gone out in light of these different conflicts. I wonder if this is just suffering from a marketing issue and perhaps just needs to be repackaged as such. I mean, Morgan, it is talked about as Ukraine aid, Ukraine aid, Ukraine aid. It's not really talked about as, you know, funding that is actually going to U.S. companies to replenish some of those supplies. And it was interesting when I was talking with Sam Meta today, he mentioned the fact

that stuff like this is out in the field in Ukraine. It's actually helping the U.S. technology because they get feedback from the Ukrainian front lines on what's working, what's not, and they're able to integrate that not into their technology going to Ukraine, but also to the technology that the U.S. military uses. And you've seen reports from groups

like the American Enterprise Institute noting that there have been some supply chains that have really gone dormant in past years that are now back up and running because aid is going to ukraine for a land war it's it really has revitalized a number of jobs here in the u.s but it's a question of what the future looks like with some of the political opposition yeah it also speaks to the billions of dollars to your point that we've seen go back into ramping production for things like missiles and munitions as well. Emily Wilkins, great reporting. Thanks. Up next, a top analyst on whether Intel's new AI chip

will threaten NVIDIA's dominance in that hot industry. Intel unveiling its new AI chip set to compete against NVIDIA and AMD. Shares of the chipmaker higher today, but falling 13% so far this month. Joining us now, More Insights and Strategies CEO Patrick Moorhead. Patrick, I had to start right here with you. There's a lot of bad news priced into Intel right now. Is the market fully appreciating the fact that it has a chip that's coming to market that, at least based on what NVIDIA currently has in the marketplace, sounds like it's highly competitive? Yeah, so overall, I don't think Intel is getting as much

credit as they deserve, and primarily of what their foundry business will be bringing. Now, what they announced today, which was a chip called GAUTI3, does for certain workloads outperform Nvidia's current product line. It will take certain percentage, probably single digit market share in this, but I don't think that this is going to be a sea change out of the gate.

It gets much more interesting for Intel when they bring an AI GPU to market in 2025. And then what they can do is leverage GPU accelerator and CPUs that do AI processing across the board in the data center. That's when it gets really interesting. Okay. How about the software and inferencing piece of this? We know NVIDIA has such a formidable lead on everybody where this is concerned. It continues to drive more and more revenue and more and more stickiness in terms of its customer base for that company. But Intel did say that with the new Gaudi 3 chips, that it not only has some customers already in place,

but it is looking to work with folks like Google, like Qualcomm, like ARM to build open software that isn't proprietary. Yeah, Intel actually created an organization that's part of an open organization inside of the Linux Foundation for many of the companies you just listed to work together on a common standard. So independent software vendors and enterprises don't have to start from scratch, whether they're using ARM, whether they're using Intel, and a lot of other manufacturers. And this will reduce the friction it would take to move off of NVIDIA for certain. I mean, I've never seen the groundswell of effort in the industry to come up with some sort of an abstraction layer that allows you, like we have with

processors, to bring in any type of software to run regardless of what the hardware is. I do want to shift gears to Google, but before I do, NVIDIA was down another 2% today. It's been pretty weak in the last call it week, week and a half of trading in general. Is this profit-taking or is this the fact that you do have more prospective competitors coming to market, including, by the way, as of today, Google? Yeah, I think this is profit-taking at its best. I mean, the valuation is in the stratosphere here, and I've seen nothing that would convince me

that there's some sort of a sea change that NVIDIA is going to lose at this point. I need to see a little bit more evidence. I need to see more customers from the AMDs and the Intels out there. Okay. You did just speak with Google Cloud CEO, Tom Kurian. They did just host this big event focused on AI,

focused on their own custom chip unveil today. Your takeaways? Yeah, so a couple of things going on. So first of all, this show is all about enterprises. And I think Google is bringing a much more compelling story to the table for them. Not only is it getting deeper into their own custom silicon, that's TPU for AI acceleration. They brought up their own ARM-based CPU called Axion.

But one of the most interesting thing was the hitting what enterprises really want, and that is either a workforce-based, customized solution, let's say for an accountant or a finance person or a marketing person, role-based AI that enables them to get more done with less time and less resources. And I think that's probably the most interesting thing that the company brought out. Okay. Market seems to agree with Alphabet shares hitting a record high today. Patrick Moorhead, thanks for joining me. Thanks. Well, Delta shares have been, oh, I'm going for it, flying high, outperforming the airline index and the S&P 500 this year. Up next, an analyst tells us what she's expecting from the

carrier's earnings tomorrow. And do not forget, you can catch us on the go by following the Closing Bell Overtime. Shares of Delta closed in the green ahead of the Q1 earnings report that's coming out tomorrow morning before the opening bell. Joining us now to share her expectations for that report is Helene Becker, TD Cowen's senior research analyst. Helene, it's great to have you on. What are you going to be watching for,

especially given the fact that Delta did give us somewhat of a pre-announcement that seemed, I'd say, pretty upbeat or pretty bullish just a couple weeks ago? Yeah, thanks, Morgan. So we think that a lot of what they're going to talk about is the summer months because obviously heading into the second quarter, third quarter, most people who have summer vacations plan them between mid-March and mid-May. And so we're right in the thick of it. And we think that demand for experiences, which Delta talks a lot about, still remain high. And so we think that we're going to see very strong demand, especially for, or continued strong demand for international travel. So we're expecting that.

We've seen a number of other airlines restructure their domestic networks. So we think that's going to be improving. But we think Atlantic will be big this summer, followed by Asia, excluding China, and then Latin and South America, which you would kind of expect because this is summer, northern summer isn't the time to go to South America. Okay. In terms of headwinds, could Boeing and some of the production and safety issues we're seeing there be one for Delta? And perhaps just as importantly, with the run-up we've seen in crude and refined products like jet fuel. Could that also be a challenge?

Yes. So I'll take the second question first. Fuel is definitely going to be a challenge. As we look at all the airline estimates that we have, we have to think about fuel being higher at the end of the March quarter and then staying higher here into early April. So we're thinking about that for the summer. And of course, demand is very strong in the summer months, especially with people traveling. As to the first part of your question, Delta doesn't have a lot of Boeing aircraft on order that are the max aircraft. Their aircraft aren't really coming until a little bit later in the decade. So they shouldn't have the same concerns that we would have for, say, United or Southwest. But the one headwind that you actually didn't ask me about but exists is maintenance costs. We're definitely seeing higher maintenance costs because of supply chain issues,

getting aircraft into the maintenance bays. Fortunately for Delta, they do a lot of their own maintenance, so it's maybe less impactful for them. But that is something that they've highlighted for 2024 as a headwind. Okay. So does Delta set the stage for the rest of the airlines and their earnings reports, or is it really the standout and maybe the name you should be buying ahead of or on the heels of this earnings report, despite what happens with the rest of the industry? Yeah, so we think that. For 2024, Delta is our best idea.

After having United be our best idea for the past two years, they have a lower CapEx program for the next decade versus United. And American has the smallest one, primarily because they had refleted last decade. But yeah, so we definitely have Delta as one of our best ideas. We think that they're doing something a little bit different than the peer group. They're delivering a really great product. Maybe their customer base is slightly different. I mentioned that we're seeing domestic restructuring. So that's coming along. And remember, last summer, domestic was a headwind for people because there was too much domestic capacity in the places Americans tend to go. Okay. Helene Becker, thank you so much for joining me. We'll be watching tomorrow, especially as we do get a CPI report where airlines are expected to be a driver

of some of the cooling that we potentially see in core services. Delta's earnings tomorrow, they're just the appetizer to the main course of economic data. Look at that. I just teased myself here. The March consumer price index is the big thing to watch as investors brace for the latest reading on inflation. Economists are expecting the CPI to increase 3.4 percent year over year, excluding volatile food and energy prices. The core CPI is expected to see a rise of 3.7 percent year over year. Also on Wall Street's radar tomorrow, the latest Fed minutes and weekly mortgage applications. Also tomorrow, and speaking of air travel, I'll be at the Space Symposium in Colorado Springs. This is one of the largest space conferences of the year covering what you need to know about investing in the space sector.

As more money, both government dollars and investment and investor dollars, flow into this sector. Well, it was a mixed picture for stocks today with the Dow finishing down fractionally, but everything else paired losses to finish in the green today. That's going to do it for us here at Overtime. Fast Money begins right now.