Closing Bell - Closing Bell Overtime: Ark’s Cathie Wood on OpenAI Investment, Tesla Robotaxi; Jason Furman On Hot Jobs Report 10/4/24

Episode Date: October 4, 2024

Ark Invest’s Cathie Wood joins for a wide-ranging interview, including why she is upping her firm’s investment in OpeanAI, what she expects for next week’s Tesla Robotaxi event and her fund’s underperformance against the broader market. Plus, Jefferies’ David Zervos and Jason Furman break down the hot jobs report and what it means for the Fed going forward.         

That's the end of regulation. Sovereign's Capital ringing the closing bell at the New York Stock Exchange and Inate Pharma doing the honors at the NASDAQ. Will stocks hire? Yields jumping as a pair of big question marks for investors gets answered today. We've got a job surprise to the upside and a resolution to the port strike. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. And in just a moment, ARK Invest CEO Kathy Wood joins us for a first on CNBC interview to talk about her big bet on artificial intelligence by participating in

OpenAI's latest funding round. Plus, former Council of Economic Advisors Chair Jason Furman on the solid jobs report and what it means for the Fed's next rate decision. And the port strike is over for now, but untangling the knots in the supply chain could take some time. We got the latest on what comes next. That's right. We also got a closing record, a new record high, closing record high for the Dow today as we did see major averages rally here into the close. The Nasdaq also finishing up 1.3 percent. The S&P basically at highs of the session, nine tenths of one percent. But first, ARK Invest joining a Thrive Capital, SoftBank, Altimeter, Tiger Global and others participating in OpenAI's latest funding round, raising $6.6 billion.

That was raised at $157 billion valuation. Joining us in a first on CNBC interview, Kathy Wood, CEO and CIO of ARK Invest. OpenAI is now the third largest position in the ARK Venture Fund. Kathy, it's great to have you on. Welcome. Thank you, Morgan. Happy to be here. Happy to see you. So I want to start right there because this was a record fundraising round. We know there was a lot attached to this fundraising round, including a promise of a conversion to a for-profit entity. Why did you feel it was compelling to invest now and at this valuation? Well, we've been doing work on AI for 10 years, and we've been waiting for the companies that were

really that NVIDIA was going to hand the baton to you. Not that NVIDIA's story is over at all, but as you know, NVIDIA has basically been communicating and investors have been buying a very big idea. And for NVIDIA to continue to work, we think there are going to be other winners. We think that the foundation model players are going to be very big winners, $15 to $20 trillion in market cap in the next five to 10 years. We put out a piece in our Sunday newsletter you can find on arc-invest.com, and we're going to put out a lot more on this. So OpenAI leading the charge, really. Anthropic, XAI, so Elon Musk and team. And even era, I think that the four winners are showing themselves very quickly. Whereas in the railroad era, which, by the way, accounted for 63% of the stock market in its heyday in the early 1900s, unlike the railroads, there were hundreds. I think there were hundreds.

We can focus on the big winners. This space is moving so quickly and is going to become so big because it's effectively substituting software for labor. Not that this is going to kill jobs at all. It's going to make people much more productive. And they're already seeing it with chat GPT just as a starter. And of course, the four companies you just mentioned are all companies that you are invested in through your funds. You mentioned XAI. It's been interesting because Elon Musk, co-founder of OpenAI, has been very vocal, very critical of where OpenAI is headed and the direction in which Sam Altman is taking it. Do you disagree? I think what he's talking about is more about the history

of the company. And we're looking at the future. And I was happy to hear that he did mention, of course, OpenAI as one of the leaders. Of course it is. So, you know, we're just looking to the future. I know there's a history there. And, you know, what's done is done. And we're just looking forward, trying to figure out who are going to be the big winners in this space. Kathy, I want to look back at the Innovation Fund for a moment. Over some periods of time,

see the S&P is up 34% over a year, beating ARK Innovation by 14 points, 94% over five years, beating that fund by 84 points, 191% over 10 years. That's for the S&P beating the innovation fund by 64 points, pretty much since inception. What do you say to investors who look at that performance and doubt that you're making the right calls? Yes, I would say, first of all, our compound annual rate of return since inception has been nearly 10%. We went through a boom in 2020 during COVID, where we were up 360%. And we had valuation and interest rates and concentration in the markets working against us. We are a diversified exposure to innovation, truly disruptive innovation. I would focus people on the fact, and looking at your chart there, that if you take away that boom and bust, what we have now is three forces working for us and a long base.

Again, you take away, you can say we have a base after that period. You can look at since 2018, we've been basing. And I remember saying this with Tesla at the time. The longer the base, the bigger the breakout. And we certainly were right there. The three forces that I think are going to become tailwinds now, they have been headwinds, interest rates, they're coming down. And I think they're going, despite what we saw in the employment report today, I do think that they will come down more than people think during the months ahead. The second is the concentration in the market towards the Mag 6.

That is starting to dissipate. And I think that will work in our favor. And then the third is valuation. During August, when the market got hit, our valuation as measured by enterprise value to EBITDA dropped to nearly a market multiple. We were basically sitting on a market multiple at 21 times EBITDA, enterprise value relative to EBITDA. Now, we do adjust it for stock-based compensation, which is really important when it comes to innovation, alignment with shareholders, as well as normalize R&D. But that valuation typically is twice the markets. And we hit the market. So now I'm looking at what were headwinds turning around and becoming tailwinds.

And a very long base to break out of. Can you give us your thesis on AI refreshed now? Because you were right to be focused on AI, but you sold NVIDIA before a monster run. It kind of could have been your Tesla, I imagine, of the AI thesis. So how much hardware, how much software, where do platform versus applications fit in here? Because it looks like you sold NVIDIA starting maybe a little less than a couple years ago now, correct me where I'm wrong there, and bought software. Yes. So we didn't sell NVIDIA across the board. We kept it in our more specialized, focused funds like autonomous technology and robotics, next generation internet. so ARKQ, ARKW, they have held it.

It has not been in the top 10. We have been looking for the software players, the Palantirs, UiPaths, and so forth. OpenAI, a lot of them are in the private sector, and we're really happy to have a venture fund now so that we can participate there. So we believe that the tech stack around AI is going to change somewhat. We believe that the software as a service part of the tech stack, which represents 40% of it, will diminish. It won't go down. The whole space is going to be growing very rapidly. But in terms of share shift, you'll see

more shifting down to platform as a service and infrastructure as a service. And the reason for that is because we're not going to have to rely on one-size-fits-all software as a service. Now that engineers are becoming so much more productive, developers so much more productive, we believe they will, inside enterprises be using these incredibly productive tools to customize this software for their own company. So we do think there's going to be a shift among the categories, but the whole space we think is going to grow very rapidly. And of course, you did just mention the venture fund. Your largest holding there is SpaceX, which we can talk about how fast OpenAI is growing, but SpaceX is still the most highly valued private U.S. company as well right now. And then, of course, Tesla with AI. You've got the Robotaxi event next week. I mean,

just looking at these two companies, is there one you're more excited about right now? Which one holds more promise? Which one? I mean, are you talking about excited about right now? Which one holds more promise? Which one? Are you talking about SpaceX OpenAI? SpaceX and Tesla. Oh, SpaceX and Tesla. Well, we are excited about both of them. Tesla in our public funds is the largest position in our flagship and in our Autonomous Technology and Robotics Fund. So we're extremely excited about it because this robo-taxi event, we believe, will be an important reason for analysts to think very carefully about what autonomous mobility is all about and how importantly placed Tesla is. Tesla's in the pole position. And if you look at these AI opportunities, we're looking at winner take most in

autonomous taxi platforms, the company to get people from point A to point B, the fastest and the safest, is probably going to win the lion's share of the market. That company is Tesla, and it is because of its proprietary data. And no one comes close. You can add the data that everyone trying, vying for this space has, pull it all together, and Tesla still has orders of magnitudes data more. And I'll say, just in terms of this focus on data, it's very interesting what Elon Musk is doing here. Data is the secret sauce when it comes to the winners in AI, proprietary data. Think about the proprietary data out of Tesla,

X, SpaceX, and we think that XAI is going to have highly, oh, and even Neuralink, so the multiomics data, highly differentiated data. So we're paying very close attention there. But if you look at the biggest opportunity short term around AI, Tesla is the largest AI project in the world. We think autonomous taxi platforms globally, including China, the platform opportunity is a four to five trillion dollar revenue opportunity in the next five to 10 years.

And it is going to be winner take most. Okay. We'll be watching closely when we do get that RoboTaxi event next week. In the meantime, we covered a lot with you, Kathy. Thanks for taking the time. Kathy Wood. Thanks, Morgan. Thanks, John.

Well, it's Santoli time. Let's get to CNBC's senior markets commentator for his take on the jobs report and how it changes the narrative around the consumer. Mike. Yeah, John, it really did kind of refresh the market's belief that we are not in a hard landing scenario, essentially relief over the idea that we had greater than expected job growth revisions upward to the prior years. The consumer spending power remains intact. Now, the market has been pretty much in that kind of in that lane for a while right now. You take a look here. This is the relative performance of consumer discretionary stocks over consumer staples. So it's kind of a macro risk on versus risk off indicator. And you see today's move finally got this to a new high for this cycle. It's a

two-year chart. So there's a little bit of hesitation in late summer. We did think perhaps that the Fed was late and we were going to have a bit of a downturn. At least for now, the jobs number pushed away those concerns. Now, lots of other back and forth movements among bellwether sectors I always like to highlight is homebuilders relative to semiconductors. They just have good multi-year bull cases behind them. And then, of course, they get frothy for periods of time, have to back up. They were perfectly aligned for a while on the way up here. And then we started to get yield moves in one direction and semis get a little bit ahead of themselves and had to correct more. And here it's interesting because today you see the homebuilders moving down and maybe they're going to converge a little bit again. Big picture, the structure of this is

still positive. They're in, you know, long term trend semis still have a little bit to prove here, but they're definitely sort of not spending a lot of time at the low end of this range. So I would say you check off that box, but keep it sort of on a short lease. This moving yields today was very dramatic. And the homebuilding stocks and other housing related stocks did react pretty negatively on that news. But bottom line, Mike, the idea behind a jobs report like this implications for the broader consumer. People are going to have jobs, are going to be able to pay their credit card bills. And therefore, that engine of the U.S. economy probably chances are going to keep humming for a while. Yeah, that's the that's the big picture takeaway. I mean, there's this measure

of aggregate weekly income. So it kind of gets how many jobs, what's the average weekly, you know, average hourly wage and how many hours will work. That's still in a healthy position of five percent nominal. It's kind of like pre-pandemic norms. I will say some people are saying on a multi-month level, it still shows like there's some softness there. So I guess you're not completely free of these concerns that, you know, we are going to have an undertow of growth. But for now, it doesn't seem like we're closer to that negative scenario, Morgan. Okay. Mike, thank you. We'll see you later this hour. Mike Santoli coming up. We just talked about NVIDIA with Cathie Wood. Well, it logged more gains today

after yesterday's big pop. And next week, the company kicks off its AI summit in Washington. We're going to talk about if that will be the next catalyst for the name. And later, does today's hot jobs report close the door on another 50 basis point rate cut in November? Former Council of Economic Advisers Chair Jason Furman weighs in. Overtime's back in two. Welcome back. We have a news alert on Rio Tinto. The mining giant is said to be in talks to buy lithium miner Arcadium.

That's according to sources with direct knowledge of the talks who spoke to Reuters. Shares of Arcadium lithium are up nearly 20 percent, about 19 percent right now in overtime. And perhaps not surprising, John, given the fact that a lot of these global miners are positioning themselves for transitions, energy transitions and societal transformations of the future. Lithium is certainly one of them. Yeah, and some of what's driving those transformations is energy demand and AI. Always bringing it back to AI. And electrification.

Yes. Speaking of which, NVIDIA and AMD outperforming today. They're two of the top stocks in the S&P 500 over the past month. Both are also scheduled to hold AI events early next week. So could that be the next catalyst for these names? Joining us now is head of Mellius Tech Research, Ben Reitzis. Ben, happy Friday. We've talked to NVIDIA this week. We've talked about NVIDIA a lot this week. Where's the opportunity in chips across NVIDIA, which has already been huge, then you got AMD, and you got Intel, which hasn't been doing so well?

Well, you're talking about two of my favorite names right there, NVIDIA and AMD. NVIDIA just sounds like it's great. I mean, you know, congrats to you to have that great interview the other night with him saying the word insane. I love that. That sort of tells you what you need to know. Our checks on Blackwell are great and everybody wants it. That should drive some significant sequential growth in January and then again in April. And then we

think the gross margin starts to improve quite a bit on the back of Blackwell after a quarter or two, and that'll get the stock going again. So, you know, we feel pretty good there. We know some folks have voiced some concerns on your network as well, but we're seeing, you know, really good demand. And remember, OpenAI just launched a bunch of stuff, and we're not even inferencing with that stuff yet. And Apple, you know, is getting out Apple intelligence, which hopefully drives some of the open AI. So we feel good there. And on AMD, they got a big event next week. We don't think they're bringing us out there, you know, to lay an egg. And we think that last year on that event, it

really popped. And, you know, there is room for another two there, number two there. So we feel good about AMD as well. Speaking of Jensen Huang, here he is with us just a couple of days ago. This is the now that the beginning of a new wave called enterprise AI. And then after that, as we're entering into enterprise AI, we'll simultaneously developing, cultivating the wave after that, which is industrial AI. So we've got industrial AI that Jensen is talking about. We've also got Apple intelligence and perhaps an application-driven consumer AI wave. Which is more investable? Well, I think it's all investable. I think a lot of stuff gets started in consumer,

and then it creates actually a lot of interest in the enterprise. And just like what happened when we had the chat GPT mania, then a bunch of enterprises woke up to it. I think as investors, investors, well, as consumers start using visual intelligence from Apple, as well as from Google, their version of that, and those kind of things where you're seeing things with your phone and then asking questions about it, that's going to drive a lot more awareness of AI in general. And I think in enterprise, you're going to start seeing many enterprises want to work with small language models so they can cater it to their industries. And then you're going to also see more adoption of the NVIDIA NIMS architecture, which is really

going to fuel more enterprise adoption. And we're in the early innings there. We haven't even seen the interest in AI agents, which are autonomous, really pick up. And that's going to be huge. You've been hearing a lot about it from Benioff. I actually think Microsoft's going to drive that more than a SaaS company. And, you know, we're just in the early innings, John, on so many things. I'm pretty excited. Yeah. I mean, the other chip news of the week, Lunar Lake from Intel. Maybe it's the space enthusiast in me. I like the name. But I want to get your thoughts on this and whether this is a step in the right direction for that company. Yeah, probably on the top line, Morgan. The issue with Lunar Lake is that they don't make it. TSMC does. So there could be margin issues. You know,

gross margins has really been the big disappointment here. Obviously, revenue has been tough. But, you know, there was a real whammy this year with gross margins. I mean, people were thinking, like, it could be, you know, if you take us a year ago, we were thinking it could be closer to 50. And now we're lucky if it's close to 40. And when Lunar Lake is a great chip, it's getting great reviews. It's actually even better than we thought in terms of the reviews and battery life. But it's the gross margin that comes out there. And they're going to be relying on TSMC quite a bit through the next year. So what we need to see from Intel is, you know,

obviously some revenue momentum. And, you know, we think we could see that. But I think the big concern is gross margin. And we'll have to see that. They really shouldn't benefit too much from some of their new manufacturing until 2026 on the gross margin line. So that's the big concern there. But it is a good chip. OK. A lot for us to watch as we look to several big semiconductor events next week. And we had a strong another solid day for the semis here in trading today. Ben Reitzis, thanks for being with us. Hey, thank you, Morgan. Take care. Now coming up, former CEA chair Jason Furman and Jeffries David Zervos on today's hot jobs report

and the market reaction that sent the Dow to a record close. And later, the former CEO of the South Carolina Ports Authority will give us his take on the tentative deal to end the strike and the questions that still remain. Ground Automation, stay with us. Welcome back to Overtime. The Dow notching a record closing high on the back of today's hot jobs report, which gave some clarity on the economy, might cloud the Fed's rate cut plans. Maybe not. Let's bring in former CEA chair and professor at Harvard Kennedy School, Jason Furman, and Jeffrey's chief market strategist and CNBC contributor,

David Zervos. Gentlemen, happy Friday. Jason, so 50 basis point single cut pretty much off the table now. You're saying is there any big worry now? Look, I'm not even sure why 50 basis points was on the table, but maybe we know now. So if you get a report like this, you can sacrifice it and keep going ahead with 20 basis, 25, which looks like what they're doing. We obviously have an inflation report. That'll be the one other big thing. But I do think their primary motivation for cutting rates was concern about the employment side of the mandate. And you just have to be a lot less

concerned now than you were two months ago. So, David, when the Fed just put the focus on labor as being more of a concern going forward versus what the balance was before, and then you get kind of a blowout jobs report like this, what do we need to see? Well, what do investors need to see on the inflation side to feel confident that these levels that we've reached on the Dow, we're near record highs on the S&P as well above 5700, that they could hold and maybe even continue to climb higher? You know, I don't know if there's much on the inflation side that's really going to get in the way of stocks. I think the focus did go to the employment side. And really what Jay did at the last meeting was kind of hedge himself nicely for a weak report. He got ahead of it.

He did the 50. But remember, John, in the guidance, he was very positive. He gave us really rosy guidance. He said, you know, things look good. I'm doing this kind of as a bit of a hedge and want to recalibrate. That was the word. But he certainly didn't commit to doing a fast set of moves in fact he said quote he was in no rush so i think jay really got his dovish cake with the 50

and he got to eat it too and that's what he's doing today is he can kind of look to the market and say hey guys i never told you i was going to go fast i just wanted to get 50 in see how it's going and make sure that if we got a weak number, I was not behind the curve. And he's clearly not behind the curve. He's in a good spot. And I think the market's not going to question that 50. We're going to look back on it and think that was good risk management. We get a couple of 25s into the end of the year unless the employment numbers get revised and go down a lot in the next report. And there's something to talk about at the December meeting. But I think we're on a decent trajectory. And the equity markets look very strong if we get another 225s going into the end of the year.

A lot more will depend on the election, John. Yeah, we still have a lot to watch here, to your point. Jason, wage growth, it was stronger than expected. It's been pretty resilient here. It raises the question, why? And just as importantly, perhaps, can that continue without reigniting inflation or perhaps keeping inflation stuck where it is above that 2% target? Yeah, if you look at wage growth, it was in September slower than I think any of the last five or so months. It's still running at an annual rate of about 4%. That's what you think you'd have in a world of roughly 3% inflation. So if there is a risk of inflation to the upside, I think it is that the labor market is maybe telling us some signal that we're missing in all the noise on the price side. More likely, though, you're going to

continue to see wages slow. Some of this is catching up for the earlier real wage losses that workers had. And maybe, just maybe, we have a little bit of faster productivity that would justify and support that faster pace of nominal wage growth. David, the fact that you saw yields move higher in addition to equities today, what is the bond market telling us about the data we're getting? I mean, I think the bond market

has really got back into its usual place, which is as a hedge to the risk-off world. And when stocks go down, bonds are going up and vice versa. So I think it's really back to our lovely world of risk parity, and it's been a wonderful year for that. So I think it's really back to our lovely world of risk parity, and it's been a wonderful year for that. So I'm going to cheerlead that a little, as I usually do with you, Morgan. But I will chime in on the inflation side. It's really hard to be

worried about inflation because things are a little perky on the growth side after we've just had eight quarters plus of growth, above potential by any measure, while inflation has come down from 9.1% to 2.5%, we've seen a real outperformance on the growth side since the middle of 2022. Super strong growth. I don't think we've had a single quarter except for one barely below 2%.

Lots of twos, threes, fours. I think we even had a five in there on a quarter. And inflation just kept coming down. So the idea that, you know, we have an inflation problem just strikes me as a little bit of a silly one. I think we're going to work through it. We've got some housing specific inflation that has to work through the system. But the Fed should feel very comfortable with how things have progressed over the last couple of years. It's been incredible, to be honest. you. Yeah. And we'll continue to watch it.

David Zervos and Jason Furman, thanks for bringing us your insights today. Always a pleasure. Well, it's time for a CNBC News Update with Bertha Coombs. Bertha. Morgan, the U.S. military carried out 15 strikes on Houthi targets in Yemen earlier today. In a post on X, U.S. Central Command said the targets were tied

to the Iranian-backed rebels' offensive capabilities. The Houthis have carried out nearly 100 attacks on ships crossing the Red Sea since November. Boeing's largest union said today that contract negotiations with the company will resume on Monday. Contract talks between the two sides broke off last week after they failed to reach an agreement on key issues. The strike by more than 30,000 machinists is now in its third week. And JPMorgan Chase denied this afternoon that CEO Jamie Dimon endorsed Donald Trump for president. Trump posted a screenshot on his true social account showing an image of Diamond with the caption, new. Jamie Diamond, the CEO of JPMorgan Chase, has endorsed Trump for president. But a spokesman for Diamond flatly denied it,

saying Diamond has not endorsed any candidates. Trump told NBC News he didn't know anything about it and it wasn't posted by him. Guys. It is called truth social, though, isn't it? Well, I mean, this also speaks to what we're seeing in this election environment around cybersecurity and everything else, potentially. And remember that Taylor Swift post as well. All right, Bertha Coombs, thank you. This week's surge in oil prices helped ExxonMobil stock achieve something that hasn't happened since 2007. Mike Santoli joins us next to explain. And check out the biggest winners in the energy sector this week. Diamondback Energy, APA, Williams Companies, and Marathon Oil all seeing outsized gains. Overtime, we'll be right back.

Welcome back. Mike Santoli returns with a look at how the latest spike in oil is driving one energy giant higher. Mike. Yes, the most giant energy giant in this country anyway, ExxonMobil. It actually finally bested its previous high of market capitalization from back in 2007. This is from October of 2007. That was during the China commodities emerging markets boom, of course. That's when oil prices reached certainly their real highs in price. And here you see it just crossing at $550 billion, towards $600 billion now is ExxonMobil. I put it up against Visa because that company came public right after that prior peak in ExxonMobil. You show how the value is built here, what the market prefers, which is these network effects, digital businesses, a broad claim on consumer activity. However, because of buybacks and dividends, Exxon shares have actually delivered an acceptable total return over that period of time.

The company has bought back something like 22 percent of its shares from 2007. Of course, it started out with about a 2.5 percent dividend yield. That's gone up in absolute dollar terms from there. So you see it's been about a 5.5 percent annualized total return for Exxon shares, even though you just did a round trip in market cap. Of course, that is lower than the S&P 500's return over that period of time, which is a little bit above 10 percent, Morgan. How much does this highlight the power of the dividend darlings and where they fit in the portfolio? The ones that have a strong record of raising dividends, most of all. In fact, there's

really a scarcity of good initial yield right now. The S&P 500 dividend yield is down to about 1.3%. So the ones that actually have an above market dividend and have a history and an intention of continuing to increase it, that's how you potentially can capture returns in a market that's already fully valued. All right, Mike. Thank you. All right. Up next, the port strike has ended after three days, but questions remain about how long it's going to take to sort out the supply chain disruption. The former CEO of the South Carolina port system joins us next to discuss.

Welcome back to Overtime. U.S. port workers were back at work today after ending their three-day strike. The Dock Workers Union and the United States Maritime Alliance reached a tentative agreement on wages, extended their current contract until January 15th of 2025. Now, under this tentative deal, wages for port workers will increase more than 61 percent over six years. Sticking point still seems to be automation. So joining us now is Jim Newsom, former CEO of the South Carolina Ports Authority. Jim, it's great to have you on. Welcome. Happy Friday, Morgan and John.

So there's a lot to get into. But before I get into the actual details around this contract and what it means for the workers and for the ports. First of all, with workers going back to work, what does it mean for some of the pileups we've seen here over the last couple of days and untangling the snags in the supply chain? Well, the work stoppage has been very short. I think that most retailers anticipated the potential of a work stoppage, so they moved their cargo in advance. Certainly, the cargo statistics show us that. So I don't think the impact is going to be as large as it could have been if the time frame was prolonged. So we've got a tentative deal on wage increases over six years.

As I just mentioned, it seems the sticking point is automation. What will it take to get to an agreement there, especially when so much of the existing language is pretty stern around the adoption of automation already? Well, as you said, there's a whole article, it's Article 11, the current master contract that deals with automation that really prohibits full automation and only allows semi-automation. There's a technology consultation procedure, including a technology committee. And there's certainly implied in that wording that existing workers would be guaranteed security if they were displaced by automation.

The reality of life is that it's not necessarily the case that a terminal is going to use automation. The reality of life is that it's not necessarily the case that a terminal is going to use automation. I mean we looked at it in my time at South Carolina ports, you know, building a new terminal we concluded that it didn't make sense. It's 40% more capex, we weren't getting any more productivity or space utilization. So it's by no means just the rebuttable fact that people are going to adopt automation. I think the current wording is sufficient to protect workers. I mean, it means I don't know of any case where automation has been employed that workers have not been protected.

And that's different than saying that generations of workforce down the road won't be impacted with technology progress. I think what we also have to say is there is automation today. There's automation at Long Beach Container Terminal on the West Coast that's fully automated. There's semi-automation in most of Virginia's terminals and then Global Terminal in New Jersey. So that does make a competitive element in terms of the cost structure.

And obviously, as wages go up, automation is technically more attractive. So I don't think that we can agree to there can be an agreement to a prescription of automation and perpetuity. That just doesn't make any sense to me. I don't think management would agree to me. I don't think the management would agree to that. On this wage agreement so far, there's been a lot of talk about the union asking for around 70 plus percent. This is north of 60 percent, depending on how you look at it. Do you think this wage part of the agreement is fair, especially in the context of West Coast wages? Absolutely, I do. I mean, the West Coast set the competitive wage for their six-year contract in 2022. This agreement is about where I thought it would end up, basically $63 an hour after six years.

This is a high-wage industry. I mean, one has to remember there's a lot of on-call labor required here. Ships come at inconvenient times, and they're often late. So I don't—and remember that these wages are reached through the collective bargaining process. It's always been a high-wage industry. It will continue to be. And the outcome did not surprise me at all. Jim Newsom, great to have you on. Thanks for joining us. Have a nice weekend. Take care. Well, the Pentagon is set to award a billion dollars in loans to national security tech. Find out which companies stand to benefit next.

And take a look at the airlines today. Shares of JetBlue and Frontier are soaring double digits after Wall Street Journal reports said rival low-cost carrier Spirit was in talks with bondholders about a potential bankruptcy filing. We'll be right back. Well, the Pentagon is preparing to award nearly a billion dollars in loans to jumpstart technologies deemed critical to national security. 31 categories have been identified, technologies with broader applications that range from quantum science to biotechnology and nanomaterials, even space propulsion. Now, it marks a first for the Defense Department as its new lending arm, the Office of Strategic Capital, issued a notice of funding availability detailing the application process just this week.

It's kind of a notion of a defense industrial base that caters only to defense is kind of evaporating. We have an expanded industrial base. Semiconductors are vital to national security. They're absolutely vital to the Department of Defense. I don't know if anybody would say the semiconductor market is a part of the defense industrial base specifically. And as that exposure to commercial industrial providers has definitely impacted the supply chain for the Department of Defense, the opportunity that we see to use these programs today is to work directly with dual-use or solely commercial vendors that are part of the supply chain that the Department of Defense relies on, but does not directly procure from. So established two years ago, OSC represents a new economic model within the Defense Department, but one that is really fashioned after other federal credit

programs in the Department of Energy, for example, and Commerce with the CHIPS Act, since there's a lending arm there. Basically, these are loans extending over the life of an asset. There isn't a profit objective like there would be with a financial firm, per se. But unlike other DOD programs, Director Jason Rathje says he expects a return on investment. Now, Director Rathje has been focusing on the intersection of tech and national security for the past decade and has witnessed firsthand the influx of defense tech startups and venture capital. There were some small businesses that were growing and doing really good work. But in the capital investment community, there was this focus on aerospace and defense, and there certainly wasn't a lot of venture investing in companies who were focused on

the Department of Defense. That has exploded. right? And I think, you know, everybody has seen this massive growth, especially over the last, you know, five or so years. The opportunity that we see now moving forward is we have to hit scale. We have to hit production. We have to be able to actually keep the industries that we need growing in a way that's conducive to the future national security needs. So in other words, the focus is shifting from a military simply buying end capability to one supported by a more robust supply chain that relies even more on things other than the military-industrial complex to survive and to thrive. So for more of this interview, check out my Manifest Space podcast. You can click on the QR code right there on your screen.

You can listen wherever you get your podcasts. But, John, obviously this has become a hot area of investing, defense tech. And so this speaks to how this is evolving and how the DOD is now looking to evolve with it. Yeah, important area, too. Well, believe it or not, earnings season officially gets underway next week. And there are some key names reporting that could set the tone for the whole market. Your Wall Street look ahead is next. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app.

Lots of podcasts. We'll be right back. Welcome back to Overtime. Earlier we told you about a Reuters headline saying Rio Tinto was in talks to buy lithium miner Arcadium. Well, take a look at Arcadium shares right now. Near their post-market highs, they're up nearly 40% on this news. When I hear lithium and Arcadium, I think of Nirvana and Red Hot Chili Peppers. I don't know what that says about me. Well, if you thought this week was busy, just wait. Next week, we kick off third quarter earnings season with big banks reporting on Friday, including JP Morgan and Wells Fargo,

along with BlackRock. We'll also get results from PepsiCo on Tuesday and Delta on Thursday. On the economic calendar, we'll get FOMC minutes on Wednesday, the September CPI report on Thursday. Also on Thursday, investors will be watching the Tesla robo taxi event, something Kathy Wood discussed earlier on the show. If you look at these AI opportunities, we're looking at winner take most in in autonomous taxi platforms. The company to get people from point A to point B, the fastest and the safest, safest is probably going to win the lion's share of the market. That that that company is Tesla. Lots of questions here that I have about the business model behind robo taxis. Is it this huge benefit that a lot of Tesla investors think it's going to be?

Is it an excuse not to buy a Tesla? Well, we'll have to see how Musk rolls it out. Yes, it'll be very interesting to see what his comments are. And certainly, you know, the data piece of this is going to be key. What they actually demonstrate in terms of AI capabilities is going to be key. And there's a lot hinging on this, given the fact that you're disappointing Tesla deliveries this week. The stock actually finished down 4 percent. And we know it's been kind of bumping around in general, although it's kind of regained on the year, but basically flat.

But it's kind of had a rocky year. And I wonder what the bank commentary around net interest margins is, given this 50 basis point cut and, you know, given the strong jobs report, what the consumer outlook is. And of course, we get FOMC minutes as well. So it'll be interesting to see what's in there, given the fact that we just did get this stronger jobs report. And Powell did reiterate the dot blot that does it for us here at Overtime.