Closing Bell - Closing Bell Overtime: Booking Holdings CEO On Consumer Travel Demand; HII CEO On Shipbuilding, Supply Chain 5/24/24

Episode Date: May 24, 2024

A record close for the Nasdaq as tech recovered from Thursday’s slide. Unlimited Funds CEO Bob Elliott and Wells Fargo’s Tracie McMillion break down the market action. Booking Holdings CEO Glenn Fogel talks consumer demand for travel and the long-term trends shaping the industry. HII CEO Christopher Kastner talks the supply chain, labor challenges and more.

The NASDAQ closing at a record high ahead of the holiday weekend, but the Dow finishing down more than 2% on the week after Thursday's steep pullback. Finishing here basically unchanged today, though. That's 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 coming up on today's show, well, we're going to talk to the CEO of Booking Holdings, which owns brands like Booking.com, Priceline, and Kayak about demand for summer travel as we head into Memorial Day weekend. Plus, I spoke exclusively today with the CEO of the country's largest military shipbuilder, HII, formerly known as Huntington Ingalls, about the USS Intrepid, which was built by

the company back in the 1940s. We're going to hear his take on demand, labor, supply chain, how the company is using AI amid a heightened geopolitical landscape. But first, let's break down today's action and look ahead to next week with our panel. Stocks closed out a mixed week. I mean, in a way, it's interesting. We'll get into that. Joining us now, Tracy McMillan of Wells Fargo Investment Institute and Unlimited CEO, Bob Elliott. Welcome to both of you. Happy Friday, Bob.

On the S&P, we're almost exactly where we closed last Friday on the 17th. After going through NVIDIA and the data, we wondered, you know, how are we going to digest this? And I just wondered, now that we have this extra data point, things have moved around a little, but not a lot. The Dow's flat today. NASDAQ's at record highs. Is growth still so strong that you can be excited about the future, as the AI trade would suggest? Or is it so strong that, boy, these high rates are going to keep a cap on things going forward? Well, I think that's basically what we've seen over the course of the last couple of months. You know, the S&P 500 today trading not that much higher than where

we were to close out the first quarter. And that really indicates the fact that despite the fact that growth is pretty strong and we continue to get strong data points coming in on an ongoing basis, we're in this difficult spot where strong growth is leading to pull back of expectations of Fed easing, which is undermining a bit of the ability for stocks to rally. I mean, even just this week, you had such strength in Nvidia, which ended up the week flat on stocks overall, which highlights the fact that the rest of the market is struggling without getting that easing expectation to get priced in. OK, so, Tracy, you say the market this week had an undercurrent of angst, unless you're Jensen Huang, I suppose. So what do you do for you?

Do you have to pick sectors over indices overall? Yes, we think that that's a good way to play this market, to look at those sectors that are more cyclically oriented. So we like sectors like energy and materials and industrials. And we also like health care for the valuations in that sector and staying away from those sectors that are more sensitive to higher rates. So financials, utilities, those sectors that are likely to underperform if we do see higher for longer rates as as we expect. Bob, you've been talking about higher for longer, longer than many other people who have been coming on CNBC. It raises the question, especially in a week where you had David Solomon from Goldman Sachs saying, hey, we might not get any rate cuts this year. If we don't, does that mean the highs are in for stocks? Well, I think the main thing to look at

is where that higher for longer dynamic isn't fully priced. And it's still in the two years end and the long end, right? We're still seeing near zero term premium in bonds, despite the fact that growth is as strong as it is. And so I think I'd probably look at the market more like assets against bonds, meaning you want to go long stocks, gold, commodities relative to bonds. That's where the real opportunity is, because the pressure, the underpriced pressure is for bond yields to rise right now. It's interesting to hear you talk about gold because we saw some of the shine come off of gold this week. Definitely some profit taking. You still like it. I still do. And part of the reason why that is gold's a global asset. It's not just driven by U.S. rates. And a big part of the driver of gold strength has been what's been

going on in China and some of the exchange rate pressures that exist there. Strong U.S. growth, rising bond yields in the U.S. and a weakening Japanese currency all continue to put pressure on the Chinese yuan and therefore the gold market, which is creating a bid there. Tracy, so what do you do with fixed income here? I mean, not just in the near term, but long term. Yields are at an attractive place versus where they've been over the past several years. And if you are redesigning, rebuilding a portfolio for the long term, you do what? Yeah, so we would say for the longer term, you're right. We see yields now that are at relatively attractive levels, certainly more attractive than they have been in a couple of decades. So as we move toward the upper end of

our target yield for this year, which is around the 450 to 475 range on the 10-year treasury, we think that that's a really good opportunity to extend maturities out, get a little bit more duration in portfolios. We are also moving some of our assets towards the short end, so kind of a barbell there when there's opportunities move out. But the short end right now continues to offer those higher yields better value than across the rest of the curve. And we don't see the inversion changing, un-inverting anytime soon. So near term and long term as those rates move higher. So, Bob, how much hinges now on earnings and earnings growth continuing from here, especially given the fact that, yes, we're going to get some more

retail results next week, but we're largely through first quarter earnings season. Things have been better than expected. And you've seen, unlike what we usually see, many strategists actually bring up their expectations for the rest of the year. Well, I think the reality is the full year expectations are pretty high. I mean, you're talking about 17 percent earnings growth priced in bottoms up analyst expectations in the S&P 500. Getting there, even with the strength that we've seen in this first quarter, is going to be tough. And I think that's one of the challenges. Like, we've had a great run up over the start of the year in stocks up 10 percent and a heck of a run up since since last fall. A lot of the strength of the economy is priced into the equity market and it's not priced in to where bond yields are right now.

And so when you're looking at how to position to take advantage, let's say, of a stronger U.S. economy than many people are expecting, selling bonds is the place to be. Okay. Bob, Tracy, thanks for kicking off the hour with us with another record high for the Nasdaq and a lot of green on the screen for today, but a much more mixed picture for the week here. Let's turn now to pharma and a number of moving pieces in the weight loss space. Eli Lilly laying out a multi-billion dollar plan to boost production of its GLP-1 drugs as Novo Nordisk releases fresh data on Ozempic. Angelica Peebles joins us now. She's got all the details on what has been a busy day and a busy week for this part of the market. Yeah, Morgan, Lilly today saying that it's upping its investment in an Indiana manufacturing site that will make

the active pharmaceutical ingredient inside GLP-1 drugs Manjaro and Zepbound. The nearly $6 billion in fresh funding brings the total for the site up to $9 billion. Now, the goal here, Morgan, is to make more doses of its diabetes drug Manjaro and its obesity drug Zepbound, since Lilly just can't keep up with the demand right now. But don't expect a big change overnight. It'll be a few years before this plant is even up and running. But it does show that Lilly doesn't expect interest to slow down on these drugs anytime soon. And we also got a look today at how the rival Novo Nordisk drug, Ozempic, works in chronic kidney disease. Remember last fall, Novo stopped the trial early because the benefit was already clear. Now today, Novo

published the full study showing Ozempic cut the risk of major kidney disease events, including kidney failure and death, by 24 percent. Lyric analysts saying that they see more people with type 2 diabetes and chronic kidney disease taking Ozempic, but it remains to be seen how exactly the drug might be used more broadly. Morgan? I'll take it, Angelica, question for you. And I'll admit I've got I've got a dog in this fight. As we like to say in the Midwest, sometimes I went to school in Indiana. But six billion dollars is a lot of money in Indiana. I'll put it a little pitch for watching The Last Call.

I believe that show is out of Indiana today. I mean, should we think of these manufacturing investments in pharma as similar economic impact wise to chip fabs? Yeah, these are obviously huge investments in local economies. These are skilled jobs, manufacturing jobs at a time when everyone's talking about bringing these types of jobs back to America. So it certainly is a big deal for Indiana. Yeah, a lot of college kids graduating looking for jobs at Lilly. So thank you, Angelica. And speaking of Indiana, don't miss an exclusive interview with Eli Lilly, CEO, tonight, 7 p.m., on Last Call. Sugar cream pie, that's what I expect from you next time you go out to Indiana, since you do make those trips.

Oh, I'm not familiar with that. I'm familiar with the Kentucky hot brown, but not the Indiana sugar cream pie, that's what I expect from you next time you go out to Indiana, since you do make those trips. Oh, I'm not familiar with that. I'm familiar with the Kentucky hot brown, but not the Indiana sugar cream pie. Okay, well, we're going to put that on the list. Okay. In the meantime, let's bring in CNBC Senior Markets Commentator Mike Santoli for today's market dashboard. Mike. Thanks, Morgan. I thought you had come up with a new nickname for me when I heard you say that.

But anyway, here's the S&P 500 over the last year and where this week has taken us, which is essentially nowhere. It was a hold this week, just about flat, as you guys were saying. What I also find interesting is 5,300. We've crisscrossed that level six of the last seven trading days. And on the seventh trading day, the low of the day was like 5,302. So there's some stickiness around this area as there's some churning underneath. You have the equal weighted S&P backing off a bit. What levels do we care about?

Well, that's right around 5250. That's the old March high. We had the little 5% pullback, 5150 thereabouts or so. So a couple few percent down from here is the 50-day moving average. And also right at the 20 times forward earnings level, the S&P. Nothing magic about that, but just something to keep in mind that even if we got down there, it really would be quite normal and essentially still have a fully valued stock market. Now, you've had a lot of stocks essentially moving independently relative to the index and to each other. That's what this

measures. This is the implied correlation index. It's complicated, but essentially it's the market view on exactly how all as one stocks are going to move or how independently they're going to move. Times like this, when the market is under stress, it's a risk off tone, all stocks for sale typically. And that was the case last October when the market bottomed. So lower here is calmer and usually associated with stronger, more stable markets. So there was your end of the first quarter highs in the S&P 500. And then you had that little spark higher in correlation as we sold off in stocks. So what it means right now is things seem relatively stable. It helps explain why the volatility index is very tame right now.

But we did get this uptick yesterday. So just keep an eye on this. It's not really a complacency gauge, Morgan, but it's something that tells you whether people are fixated or obsessed with macro factors or they're happy to sort of allow stocks to do their own thing and not really try to buy much protection on the overall market. I mean, I'm still focusing on the fact that your new nickname is apparently sugar cream pie, Mike. I didn't say that, but go ahead. Seasonality, how does that factor in here or is this bucking that trend? I mean, we hear so much about sell in May, go away. We can talk about the fact that

the S&P is basically flat on the week. The industrials have lost 2.3% this week, but we're still looking at hefty gains so far for this month. Yeah, we are. And even the sell in May thing wasn't necessarily so much, oh, things get dangerous and stocks go down after May comes along. It's more that the bulk of the returns historically have been in the other parts of the year from October to April. Summertime, you do obviously have thinner trading. You tend to have a market that sort of can find an air pocket, but in general, it doesn't have radical moves. I will say that in election years, typically there's strength in the market into July. I don't know

how much credence we want to put in things like that. But at this point, I wouldn't say what's happening here is strictly about seasonality. It could also just be about you have the strong mega cap growth trades, a lot of confidence in the fundamental stories there. And then other sectors are kind of trying to find their way within this sort of sticky high yield and inflation environment. All right. Mike Santoli, thank you. And for the record, when I mentioned the Kentucky hot brown, I was not looking for a nickname necessarily. Shares are booking holdings, meanwhile, up more than 40% in the past year. But data from Bank of America shows sentiment for big ticket travel this summer could be turning lower. Up next, we're going to ask Booking Holdings CEO Glenn Fogle for his read on travel heading into this key season. We'll be right back. Welcome back to Overtime. Some new data from Bank of America Global Research showing

that fewer consumers expect to spend more on travel compared to 12 months ago. Here to discuss what kind of consumer demand he's seeing as we kick off the summer travel season is the president and CEO of Booking Holdings, Glenn Fogle. Glenn, welcome. So as a piece of discretionary, travel experiences seem to be holding up, but for how long do you think? Well, hard to say, and thanks for having me. You know, I hear about, is it gonna slow down? Is it not? We've had such great, great numbers in travel

coming out of pandemic. What's gonna happen? And I always tell people, please stop looking short term. Stop asking me what's gonna happen next week or next quarter. Think long term. And long term, travel is a strong growth industry, has been for a very long time,

and it's going to continue to be. I don't know how to think about travel long-term when two years ago, people were trying to convince me that the metaverse was the next big thing, that we'd just be traveling with something on our faces and not actually physically going anywhere. And now AI is on the scene. Maybe that's going to make the booking process for more complex trips actually simpler and get people traveling more. What do you say to the technology angle here?

Well, absolutely. Like AI is a fantastic tool for travel. Travel is so complex. It's so frustrating. And even now, with the advances that we've done over the last, let's say, 20 years of technology, and you know how different it was 20 years ago. You had to carry around a paper ticket and such, and you didn't have a mobile phone to fix it. Even with all the improvements that we've had to date, there's still so much more that can be done, and we're doing it. Booking.com, we have an AI trip planner that will help do your itinerary. Priceline, we've got a thing called Penny that's doing a great job to help people plan their trips and help them if something goes wrong. So a lot of, absolutely a lot of opportunity for us.

And I'm glad that we have the scale and the AI capabilities to take advantage of this. So, Glenn, I want to go back to the travel picture longer term because we did see basically no travel during the pandemic. We come out of the pandemic, revenge travel. Have we reached equilibrium in terms of a new normal? And if so, what are we seeing in terms of some of these more steadfast demand and trend elements to how people are traveling? Yeah, so we talked a little bit about that three weeks ago when we did our earnings call. We talked about approaching normalizations, the word we used. There's still parts of the world, you know, we are extremely global. So we talked about Asia up 15% year over year, and the effect was really coming out of still longer to get out of COVID.

So we're getting a good comp there. Whereas in Europe and the rest of the world, not as fast because Europe came out sooner. And the U.S., which was first out of pandemic, that was real normal, a lower growth rate there for the first quarter. So we are 2024. We're really talking normalization. What that means is travel generally goes a little bit better than GDP does. And we, being an online player, we have the advantage as people go more and more digital buying of travel, we get that tailwind. So we're looking good. We've been talking a little bit about the prospective bifurcation of the consumer amid what's still a high inflation environment or

higher than it was a couple of years ago. It's been it's meant some belt tightening and some different behaviors, particularly for the lower end or working class consumer, maybe not so much for deeper pocketed folks that are traveling. I wonder what you're seeing across your different behaviors, particularly for the lower end or working class consumer, maybe not so much for deeper pocketed folks that are traveling. I wonder what you're seeing across your different brands and your different businesses right now. Yeah, it's interesting because we mentioned this on the call. We talked about we had not seen any decrease in star ratings, average star ratings, people are going to go for a hotel. If you did see a step down in star rating, you'd say, okay, that's an impact of people not willing to spend up. Also, we didn't see any shortening in

the length of stay. Also, that would be an indication if we saw that, that people were tightening their belts, but we didn't see that either. And we look globally, again, long-term travel's good. And I understand pandemic, and believe me, I've been here almost 24 years in this business now. And I know there are times things are going to go bad and such. But people should think the long term. I look back when I first started this company, this company in 2000, our stock went down to an equivalent of six dollars a share, tore up over 600 times since then. That was very good for people who thought long term and stick with it and don't worry about the month by month variations.

Yeah, that sounds good to me. I want to ask you about China and the shape of China outbound travel coming out of the pandemic. Is it similar, the revenge travel profile to what you saw out of North America? Or is there something different there as we see the middle class continue to evolve? I think the curves are similar, but that curve is behind. There's still nowhere near where they were, say, pre-pandemic in terms of the outbound, but it is increasing and coming back. So it's obviously more to happen there. But we are seeing that people want to travel out of China. The Chinese traveler is no different than any other traveler. They want

to see the world and we're there to help them. Glenn Fogle of Booking Holdings, thanks for joining us. Thank you. We have a news alert on GameStop. Pippa Stevens has the details. Hi, Pippa. Hey, Morgan. Well, GameStop is surging and extended trading up more than 20 percent after the company said that it completed its previously disclosed at the market equity offering. Last Friday, the company said it had registered with the SEC to sell up to 45 million shares. And then today, the company said that it sold the maximum number of shares registered under that at-the-money program for a total of $933 million before expenses. And that stock, once again, here, up 21 percent.

John? Yeah, quite a pop. Pippa, thanks. Ether, meanwhile, pulling back today after a furious rally this week as the SEC opens the door to Ether ETFs. Up next, we're going to talk to Coinshare's head of U.S. asset management about why his company says it does not see value in launching a spot Ether fund. And later, a rare and exclusive interview with the CEO of HII from the flight deck of the Intrepid aircraft carrier in midtown Manhattan. His take on labor shortages, using AI, countering China, as we do have Fleet Week here in New York City. We've got more ahead on Overtime.

Welcome back to Overtime. Big news in the crypto world. The SEC approving a rule change to pave the way for Ether spot ETFs. We've got more ahead on Overtime. ETFs. But our next guest says his firm will not pursue a filing for an Ether fund. Joining us now, CoinShares head of U.S. asset management, Stephen McClurg. Stephen, it's great to have you on. I just want to start with the fact that this decision by the SEC to approve the exchange applications themselves was really sort of seen as an unexpected decision. It paves the way for the spot ETF applications that a number of entities have put forward. The buy the rumor, sell the news dynamic we're seeing in Ether, is it similar? How to think about this? Is it similar to what we saw with Bitcoin? Well, thanks for having me. So, well, first of all, you know, we're not really, you know, getting involved because what they've done is eliminate staking from the applications.

And ETH staking is part of the total return profile of ETH. And right now you get about three and a half percent yield just from holding ETH in one of the other exchanges. Now, we participated in the Bitcoin spot ETF and launched that back in January. And with that particular ETF, what's different about it is you can actually move your Bitcoin from an exchange into the ETF with very little issue. And because there's no staking feature for Bitcoin, you're not losing out on anything. But to buy an ETH spot ETF in this market, in this format, it'd be like buying a bond without the interest rate. Interesting. So I guess what do you think about that? You're not going to participate in this. CoinShares is not. But is this a situation

where as these products potentially come online, it could cannibalize some of that demand we have seen for the Bitcoin spot ETFs or maybe not so much. Yeah, I don't think it will. The difference between Bitcoin and ETH is that they're two very different types of cryptocurrencies. ETH is more of a global currency. And that's what it's really meant to be used for. It's electronic cash, where ETH is really a currency within the application. It's similar to playing a game on your iPhone and earning or buying diamonds or whatever the game is and then using those to buy in-app purchases. That's really how

Ethereum was designed. And when you're participating in the network, you earn those rewards. So a lot of people that already own ETH or are interested in earning ETH, they'll likely stick with buying ETH through the exchanges. Or, such as in Europe, there's ETPs that do offer staking for their clients. And they'll continue to look at those types of products or exchanges directly where they can earn three and a half percent. Steven, curious, I'm looking at this from a potential investor's perspective who's watching the show. Risk appetites are generally high right now for all kinds of different assets. So and then the conversation around crypto and Ether. Yeah, a couple of years ago, three, four years ago, there was a lot of talk about all the applications that were going to be built around this.

Now people are talking about applications with AI built in more than blockchain and cryptocurrency. So what where are you seeing if you're seeing it, the innovation that Ether is involved in? Yeah, I'm not really seeing much as far as that innovation going forward. You know, there have been some experiments. There has been a lot of commercial applications. There's a lot of competitors. So I do think Ethereum will be around for a long time. But, you know, I really don't see it

as the same type of thing as Bitcoin. Bitcoin, again, was largely built to be a currency that can be used for global transactions to buy services and goods. Well, Ethereum really wasn't built for that. It's really only a currency that's good within its own ecosystem. Right. Yeah. Still looking for the ecosystem. Stephen, thanks. Thank you for having me. Now let's get a CNBC News update with Pippa Stevens. Pippa. Hey, John. Blackstone CEO and chairman Stephen Schwarzman will support Donald Trump in the upcoming election. Schwarzman told

Axios that he decided to back Trump due to concerns about rising anti-Semitism and that he believed President Biden's policies and immigration and the economy were taking the country in the wrong direction. Schwarzman supported Trump in 2016 and 2020, but had called for new leadership in the Republican Party in 2022. The Biden administration announced today an additional $275 million in military aid for Ukraine as the country struggles to hold off Russian troops in the Kharkiv region. The package includes artillery systems, munitions, as well as tactical vehicles. Including this package, the U.S. has now provided nearly $51 billion in military assistance to Ukraine since Russia invaded in February 2022.

And the launch of the first crewed flight of Boeing's Starliner capsule will move forward despite a leak in the spacecraft's propulsion system. The leak was discovered following the first launch attempt that was scrubbed due to an unrelated issue. Boeing is targeting June 1st for the launch, with additional opportunities on June 2nd, June 5th, and June 6th. And of course, Morgan, I'm sure you will be all over that. Back to you guys. All right. Thank you, Pippa.

Well, lunch is getting cheaper. That could spell trouble for fast food chains. Mike Santola is going to wade into the battle over the value menu next. And check out Workday, closing out its worst day since 2016, following results that we brought you on overtime yesterday. Subscription revenue guidance coming in below street estimates. We'll be right back. Welcome back. A battle between McDonald's and Burger King over low priced meals is heating up. CNBC's Market King, Mike Santoli, is back with a look at some of the challenges these names are facing. Mike, try another nickname there. Yeah, appreciate it,

John. Well, you know, heavy is the head, right? Where's the crown? Look, the market's been expressing some concern about the fact that fast food chains have maybe pushed price a little too much. Consumers not really taking it quite as well. And you see here the shares McDonald's, QSR's restaurant brands. That's the parent company of Burger King as well as Popeyes. And then the overall restaurant sector vastly underperforming the S&P over the last year and, in fact, in negative territory. Now, one of the issues is, in general, food disinflation has been pretty sharp. And if you look at here exactly how much it's come down, the blue line is food at home.

Grocery prices have come down a lot more dramatically than food away from home, so restaurant meals. And that obviously is also creating a little bit of a tradeoff among consumers, less interest in going out to eat. In fact, Walmart's CEO cited that as one of the reasons its grocery sales have been very strong. So it seems like this is the fix that these companies are in, and they're going to try to do what they can to compete on price for a bit. All right. By the way, my dad is a Burger King franchisee. I'm happy to get you one of those crowns anytime. And I'm an alumnus, former employee as well of Burger King. All right. Up next. Oh, you have a question. OK. Up next, how the nation's largest military shipbuilder, which has been in business for nearly 140 years, is embracing artificial intelligence.

Welcome back to Overtime. We're heading into Memorial Day weekend and in New York City, it's Fleet Week. This morning, I sat down exclusively with Chris Kastner, the CEO and president of HII, the largest U.S. military shipbuilder on board the HII-built Intrepid. As next door, the USS Bataan, an amphibious warship also made by the company, sat docked after an eight-month deployment in the Red Sea and Persian Gulf, where it was used to counter drones. Now, as geopolitical tensions flare and the U.S. moves to expand the Navy's fleet, Kastner says HII has 40 ships in process and will negotiate another 20 over the next six months. I asked what it will take to meet that demand. It takes labor on time and an increase in labor, which you know we have significant challenges on right now.

It takes a healthy supply chain. The good news is the Navy is leaning in with their industrial-based funding that was very important in the 24 budget, and we're working very hard on labor. We have world-class apprentice schools in both shipyards, great relationships with community colleges and high schools. So we're going to get there. We've been doing it for 100 years. We're at our core a workforce development company.

So we're going to get to the other side of this. So let's talk a little bit about the supply chain piece of this too. Whether it's from the material side, we know there's great demand more broadly across the country right now for things like steel which you use a lot of right right um and we know that supply chains in general particularly on the national security uh focus side have been continued to be challenged coming out of the pandemic what are you seeing yeah so what we see in the supply chain is lead times are extended they're stable now but they're extended takes longer time so we need to get the orders um in plenty enough time to get them started so they can meet the demand. We're also seeing inflation.

We have really good data because we buy on pretty standard increments on how things are inflating. So we need to make sure we have the appropriate buying power and the budgets are appropriate to meet that demand. But it is stable, just in an inflationary environment. Now, HII makes everything from unmanned vessels to nuclear-powered submarines like the Virginia class that lawmakers are potentially seeking more of in next year's budget. We found that out just this week.

But with China flexing its military might, I asked what the future holds for new aircraft carriers, which can cost $13 billion apiece. The first question that always comes from a president's mouth is, where are the aircraft carriers? So they're paramount to the national defense strategy. We've got three in production now. We'll deliver one next year. It's an important part of our portfolio. We need to make sure that in the 2025 budget we get long lead for the next aircraft carrier.

And there's really no discussion about eliminating aircraft carriers right now. It's central to our strategy. China's building them. They're going to have a nuclear aircraft carrier. It's important that we continue an area that we have real technical dominance. When we talk about the data and technology strategy of the Pentagon, I mean, you've really doubled down on it. You made an acquisition a number of years ago.

Mission technology is a fast-growing part of your business and one that perhaps investors have overlooked or don't know enough about. So when we talk about how you're positioning yourself and you're positioning HII for this software enabled future, what does that entail? Yeah, so the good thing about getting spun, which we were in 2011, you get to reset. You get to reset your strategy, take a look at it, make sure you're in the right place. We had some software businesses within our shipyards. We pulled those out, created a different division, looked at the national defense strategy, saw that it was becoming more software-enabled, more technology, commercial tech sort of integration,

made some small bets, bought the largest unmanned underwater vehicle company that provides the most vehicles, both domestically and in 30% of their businesses international. That was Hydroid. And then we bought Alliant, which is really aligned with the national defense strategy of AI, cyber, EW, C5ISR, live virtual constructive training, nuclear. Put that all together, it's a $2.7 billion business now. It grew at 20% in the first quarter, grew 13% last year, $85 billion backlog. We're very pleased with Mission Technologies. When we talk about data, we talk about the AI possibilities here within HII. How do you take those capabilities and apply them to your own shipbuilding strategy?

Yeah, so thanks for that question. We have a really good relationship with AWS. We've been partners with them for a while, for at least four or five years, over in mission technologies in the form of Alliant. We're now pointing AWS and our really good AI software developers in the shipyard. So we're doing pilots on efficiency to improve schedule performance,

to take cost out of the ship. Now, they're just pilots because, as you know, in AI, data has to be right before you can actually use it. So we're wrangling the data right now. But I have high hopes it's going to make us much more efficient within our shipyards. HII has traditionally been a domestic shipbuilding business. That's really been the focus. But two things are happening. This faster-growing mission technologies unit needs more software and services amid the huge Pentagon push to connect all of the war fighting domains. Things like JADC2, as it's called. And number two, thanks to the AUKUS security partnership, an international opportunity to help build out Australia's nuclear submarine strategy. It will always be a shipbuilding company. It'll be the core to our culture and our values.

That'll always be the core of HII. But we are going to be more tech-enabled. Tech is growing faster than our shipbuilding business. It'll become more a part of the portfolio. And you'll see, I think, more of an integration between the two. We have really interesting meetings with the Navy on technology in the combatant commands and how we can apply that technology. We are actually launching underwater vehicles from submarines now and recovering them autonomously, which is pretty amazing. So I just see more integration between the two, but we'll always be a shipbuilding company. How does that speak to the future of warfighting and what tech is going to enable when we think about that longer term?

Well, data is going to enable everything. Data is everything. Speed is everything. So they've got to be integrated. If you're not integrated, you're not going to be effective. HII stock has slipped from its March highs due partly to soft margins. Kastner says as the company transitions out of ships negotiated pre-COVID, given the sort of new macroeconomic environment that they're operating in, shipbuilding margins should return to more traditional levels. Now, you can catch the full interview at CNBC.com right now. As you can see, shares of Huntington Ingalls finished today up more than 1 percent. Awesome stuff. Well, a key inflation reading next week could be a major market mover. Coming up,

what to expect from that latest PCE report and what it could mean for the Fed. Plus, the CEO of one AI language startup that just completed a big new funding round. We'll be right back. Welcome back to Overtime. Businesses are still spending to prepare for an AI-driven future. It's a theme we saw reflected in earnings this week. Early- stage investors are spending two. Today, John takes time out with the CEO of a startup that had big funding news. John.

Yeah, Yara Kudalowski is founder and CEO of DeepL, as in deep learning. It's a startup that uses AI to do language translation for global organizations, including businesses and governments. This week, they announced they'd raised $300 million at a $2 billion valuation, a little more than a year after raising $100 million at a $1 billion valuation. Jarek was born in Poland, and his family moved to Germany when he was in sixth grade. That's where he started to realize the impact of translation. Personally, I was always super bad at languages. If you ask any of my high school teachers, they're going to probably roll their eyes

when they see me talking to you about language. On the other hand, having grown up the very first days in Poland, then moved over to Germany, being kind of dumped into school in Germany without understanding a word of that language. I think that gave me an understanding of how important language really is. DeepL uses neural networks mathematics to add extra nuance to translations, something that's important in specialized areas like law and business. Kudalowski says DeepL's approach can adjust to fit the right tone for customer interactions and can translate even complicated technical jargon. When you consider like a legal document, you really don't want that to sound like the surf

shop website. That is a totally different language. I think the good thing here is that the AI is usually powerful enough to really understand what the context is of what you're talking about. Kind of distinguish between this being a legal document or this kind of casual conversation you might be having with this Surf Shop customer. So if you give it enough kind of to work with, if you give it enough context, it will be able to figure out a lot about how to translate and which language to choose and which terminology really to use for that.

But that's really all super essential for business. I think this is part of what anybody doing translation in a business context is going to be caring a lot about. So the timeout takeaway, more than words. Now, right here on Overtime this week, we saw evidence of AI's quick move into practical settings as NVIDIA continues brisk sales of its data center chips. Scarlett Johansson keeps an eye out for DeepFakes, and Intuit shifts investment away from some customer service and content writing functions leaning on AI.

And for global organizations like the Swiss government, which is one of DeepL's big customers, it's about getting tone and terminology right, not just literal translation. It's fascinating. Well, if you thought earnings season was slowing down, think again. Coming up, the key names to watch on next week's calendar. And we've got details on a potentially market moving inflation report. Plus, Deere has already partnered with a satellite company to bring connectivity to farming equipment in rural areas. Well, now a major rival is doing something similar.

We've got those details when Overtime returns. CNH Industrial makes agricultural and construction equipment that moves Earth. Soon, those machines will be connected by space. CNH recently announced it will partner with satellite communications operator Intelsat to bring connectivity to farmers where terrestrial networks don't work. CEO Scott Wine says it was a competitive review, and unlike rival Deere, which recently teamed up with SpaceX's Starlink, for CNH, the best fit was Intelsat.

We know SpaceX have incredible respect for what they've built in their low Earth orbit tools, but we weren't as sure of two things. First of all, we weren't sure that just those low Earth orbit satellites were enough. So we wanted the geostationary equatorial orbits that IntelSat brings in addition to the low Earth orbit. But we also needed the rugged terminals. I mean, like I said, the operating environment, it was simply those two things. When we were searching about what's the best way to serve our farmers quickly and for the long term, we felt like that the Intel set package was better for us. CNH is moving quickly. The offering will roll out first in Brazil later this year,

where less than 20 percent of prospective farmland has high speed Internet access. The U.S. and Australia will come online in the following quarters. The timeline means CNH will be first to market with this type of offering likely to be constructed as an unlock fee as machinery becomes more autonomous. Now, it's about. We're down to the centimeter now. And so when a farmer plants in the spring, actually, Brazil, they plant three times a year. So it's not just the spring. But when they plant, we know exactly where that seed went. And so when we come back and we need to fertilize and we need to spray, you know, we are getting

that precise with the solutions. And, you know, it only happens because we have this level of connectivity that sometimes, you know, we started with GPS and we increased it with cellular connectivity. But those weren't good enough. You'd be surprised. We're not quite at level four and five autonomy. But many of our farmers are reading books or listening to your podcast when they're in the tractor. They're not actually driving the machine and getting to that level of specificity. Now, it's about buoying demand and adding value through agricultural cycles, which currently involves a global downturn. We're in the midst of one. But to watch the full interview, check out my podcast, Manifest Space. It's available wherever you get your

podcasts. And I would note, John, that Wine is retiring at the end of June. So we talk a little bit, we talk quite a bit about this deal, but also about other things where CNH is involved too. All right. Well, listen while you're in your tractor this weekend. Next week might be a short trading week, but it'll be long on economic data and earnings. On the economic front, we're going to get the latest Case-Shiller Home Price Index and Consumer Confidence Reports on Tuesday. Wednesday brings weekly mortgage applications in the Fed's Beige Book. Weekly jobless claims, pending home sales, and the latest reading on second quarter GDP will be the highlights on Thursday.

Finally, Friday brings the key PCE Index, a reading on inflation that the Fed will be closely watching. Plus, we're also going to get a lot of tech and retail earnings. Box and Canva Tuesdays, Salesforce, Okta, HP, Dick's Sporting Goods, and Abercrombie & Fitch on Wednesday, and Best Buy, Gap, Costco, Nordstrom, and Dell on Thursday. That's a lot for four days. That's a lot for four days. I know it's Kava, not Canva.

Slip of the tongue there, since I know you follow Canva. And it's not public. No, but it is one of those IPO contenders, potentially. And they're having like a big kind of convention confab thing. So I do have Canva on the brain a bit. It's not just Adobe with me. I look at the broad space. Yeah. Yeah. But to your point, we are going to see, especially with some of these retail earnings and with a name like Kava, which many people compare to Chipotle in terms of the customer base. Sort of what what this continues to tell us about the state of the consumer here. Yeah, because it's fast, casual. They tend to lean into that healthier, locally grown ingredients idea versus perhaps having to battle it out over value. As Mike Santoli, also known as Market King,

was talking about. Market King, Pi, everybody's got a Pi nickname. All right, well, have a very happy Memorial Day weekend. And I think this is also a good time to just honor all of the men and women that have basically died in service for us to be able to be here celebrating this weekend. Freedom isn't free. That does it for us over time.