Closing Bell - Closing Bell Overtime: Booz Allen Hamilton CEO, Palantir CTO Live From Reagan National Defense Forum; Samsara CEO On Earnings 12/6/24

Episode Date: December 6, 2024

The S&P 500 and Nasdaq closed at record highs and Jefferies Chief Market Strategist and Unlimited CEO Bob Elliott break down what’s powering the latest leg higher – and what could derail the run. Morgan is in California at the Reagan National Defense Forum and she sits down for key interviews with Booz Allen Hamilton CEO Horacio Rozanski and Palantir CTO Shyam Sankar to talk the new partnership between the two companies and what investors need to know about the incoming Trump administration. Samsara CEO and co-founder Sanjit Biswas on the latest quarter and the negative investor reaction. 

The bell marks the end of regulation. Chainbridge Bank Corp. ringing the closing bell for New York Stock Exchange. App Pro Holdings doing the honors at the NASDAQ. And speaking of the NASDAQ, the composite closing at another new high. It looks like the S&P is going to settle in new high territory, too. That is the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Ford along with Morgan Brennan who's at the Reagan National Defense Forum. Meanwhile, the

Dow dragged down by UnitedHealth, which accounted for all of the blue chips losses. Yeah, well John, the Aerospace and Defense ETF sitting out the rally today after creeping towards record territory earlier this week. We have a pair of big defense interviews coming your way from this conference, which is one of the largest of the year. First, we've got Palantir's chief technology officer on his stock's massive gains this year and the company's new partnership with Booz Allen Hamilton. Speaking of, we have the CEO of Booz Allen Hamilton will also be joining me here for a rare and exclusive interview. We will get his outlook for defense spending under Trump 2.0.

A lot of focus on Doge, John. So a lot to get to here. Yeah, looking forward to that. And for now, let's bring in Jeffrey's chief market strategist and CNBC contributor, David Zervos, and unlimited CEO and CIO, Bob Elliott. Guys, happy Friday. Bob, you say with these job numbers that we got today, the Fed's going to keep cutting even though the Fed shouldn't. And so what should investors do, anticipate doing in 2025 to take advantage of whatever result is going to come from that? Yeah, I mean, we're kicking off 2025 with the continuation of that over easy policy. And

today's job numbers were just soft enough to confirm that we're going to get another cut in December. And probably those cuts are going to continue into the first and second quarter of the year. And that's kind of setting us up for a perfect situation for risky assets where you've got cuts coming. So monetary easing. You've got fiscal easing on the horizon, regulatory relief on the horizon from the Trump 2.0 administration. And at the same time, growth is pretty good, right? Employment's hanging out, hanging in there, continues to power forward. Consumption continues to be strong. This is a perfect combination that should support asset prices ahead. David, do you see it the same way?

And do you think the Fed would be wrong to keep cutting with numbers like this? Well, you know, John, I'm not a big believer in talking about what the Fed should do. I try to tell our clients what I think they're going to do. And I think I agree they are going to cut. I think the the consensus is probably closer to right than wrong. There's going to be a pause at some point or a slowing or a kind of hawkishness to the language that they can wait a little while. But my belief is generally that the data are going to start to confirm that the neutral rate

is actually just where it was before COVID. So we're going to go back and realize that 2017, 18, 19 rate levels, the Trump 1.0 rate levels are going to be consistent with the Trump 2.0 rate levels. And that's actually a way, way, way out of consensus view. I think most people, even at the Fed, but certainly on the street and investors I speak to, all seem to have come up with some rationale for raising their neutral rate forecast. And I think we're going to stand out. I'm going to stand out next year and into 2026, really pushing this idea that I don't think that's true. And we'll find out in the data. The data is going to come in and we'll see how the inflation data work. I think they'll probably surprise to the downside by the end of 25, maybe even the middle of 25.

And that'll put some pressure on the Fed. But I really think that's an even more powerful positive for the risk asset story that Bob just outlined. It's an even bigger tailwind. So we agree on direction. I think I'm going to probably have a slightly bigger magnitude because just my rate view is so different. I do want to dig into that a little bit deeper. But first, Bob, the fact that you have the Nasdaq at a record, S&P, it looks like, squeaking out with a record close here. Big tech's been really leading the charge. And we've seen that rotation out of the more cyclical parts of and maybe economically sensitive parts of the market. You have the Russell 2000 down on the week. You have the Dow Industrials down on the week. And actually, the transportation average, the Dow Transports have really taken it on the chin. Looks like finishing down more than 4 percent this week.

Why are we seeing that rotation, given the fact that the economy does remain so strong? Well, I think what we're seeing is we're seeing a situation where basically a lot of hype right after the Trump election came into the pro-growth stocks. They got a little bit of a bounce and a rally and some short covering. And that's, you know, you see some folks who are taking some profits on those trades through the course of this week. But big picture, if you take a step back, you look over the last four weeks, everything's up. And so various folks will talk about how they had a particularly genius idea about Bitcoin or bonds or tech stocks or the Russell 2K.

And the reality is the underlying driver of what's going on here across basically all of those assets, it's the same thing. It's over easy monetary and fiscal policy that's ahead. And that's lifting everything. And, you know, day to day, week to week, one thing might be up more than another. But that overall trend is what's driving the market today. And David, I said I was going to dig deeper. Here we go. In Trump 1.0, before the pandemic, what we had was an acceleration in economic growth with inflation nowhere to be seen, even as tariffs were being implemented and trade wars were being waged. So when you think about Trump 2.0, there's a lot of talk about the fact that maybe inflation stays sticky here.

Maybe it even reignites with another round of tariffs, whatever that policy ends up looking like, and a curb on immigration. The flip side of that is you do have Doge coming in. You do have what's expected to be broad and sweeping, potentially cuts to government spending in areas that are seen as wasteful. Plus, and I think this is important because it doesn't get talked about a lot, but the folks who are involved in Doge explicitly saying this is also about economic growth and turbocharging the private sector to basically bring down that debt load. To me, that does not sound inflationary.

That sounds the opposite of it. So how to game this out when you are looking to 2025 and beyond? Morgan, I just want to bring you on a bunch of client meetings with me. Have you sit right next to me and repeat what you just said. That was fantastic. I think you nailed the analysis and I couldn't agree with you more. I think this deregulation trade in Trump 1.0 was the biggest driver of the disinflation that we got in 17, 18 and 19 and counteracted a lot of the tariff scare on inflation. If you remember, there was a lot of scare in 17 and 18 with the tariffs and inflation. In fact, the Fed went too far in 2018 with J-PAL pushing rates up and causing a very messy Christmas in 2018 as the Trump administration was whining and complaining about it. And rightfully so in the end. And he started cutting back in 2019.

I don't think we're going to get that kind of fight. Maybe we'll get a little bit of a fight like that, but I don't think we're going to get it. And Jay's gone by the beginning of 2026 or by spring of 26. So it won't be that big a deal this time. But I do think this deregulation trade that we're talking about, the Doge version, is an amped up version of what we saw in 17, 18 and 19. And it's just, to me, the dominant force. It really is the unleashing of what we economists like to call positive supply shocks. It's a Goldilocks story. It's every cost of production that's related to regulation or anything to do with red tape just goes away or goes down. And if you start to read into the plans that this administration has for the first hundred days, you know, you've seen a number of people from the AFPI that have gone over and joined the administration. This is

an organization that put together 300 plus executive orders to be signed in the weeks after inauguration. And most of these executive orders have to do with deregulation because that's what the president can affect on his own. He can't really affect fiscal and monetary policy. He can do tariffs and he can do dereg. And I just think the dereg story is completely underappreciated in 17 and 18 and 19. It's even bigger, as you point out this time around. And I think it's going to be underappreciated as we go through 25 and 26. Well, a lot of faith I hear on the other side out there, Bob. But let's just say that the neutral rate is where David says it is. And I

presume that that means there are a lot of cuts ahead. What does that mean for bonds and fixed income? Well, that will certainly be supportive to bonds and fixed income, and I think the issue with that is that as yields come down, whether exactly the neutral rate is at 3 or 2.5 or 3.5 doesn't really matter. As those rates come down, what that has the opportunity to do is to unlock the credit component of the economy. And part of that is also going to be supported by the deregulation. You know, credit has been meaningfully constrained in the U.S. economy, particularly in the banking system, as a function of the significant regulatory

framework that has been in place for the last four years. And so you get lower rates, strong growth, deregulation of financials, and that could take credit growth, which has been an place for the last four years. And so you get lower rates, strong growth, deregulation of financials. And that could take credit growth, which has been anemic really for the last couple of years, hasn't really been a big driver of the expansion. Just bringing that to more normal levels could create another injection of adrenaline into this economy. So when we talk about riskier assets running, David, where does Bitcoin fit into that? So I think the Bitcoin story is all it's been a fascinating one. It gets far more fascinating under a Trump wins scenario. You're pushing away the Yellens, the Genslers. You're bringing in

a whole crew of financial regulators, or let's call them deregulators, in fact, that are very open to letting this system flourish. Again, I think it feeds a particularly on the payment system and how we operate a global payment system. This is a hugely disinflationary story in the end and a hugely positive story for businesses that have costs associated with moving money around that can now use a crypto or a distributor or the ledger type technology to get that done in a much more and more about as these weeks progress and thinking about crypto and how it how it's moved so quickly is you know how how much does that create some financial instability in the traditional financial system the banks and everything else because you are really talking about displacing some of the traditional stuff particularly on the payment side and there's a lot of fees a lot of vested interests that are gonna want to try to

keep those so I think there's got to be a lot of healthy thinking about how you let crypto into the mainstream. But I mean, it's coming in like a bull in a china shop and it's got a lot more to go, I think. I don't know where it's going to end and whether it's going to create that financial instability in the traditional system or not. What I think is anybody that says they know how this is all going to end is probably wrong. And we're just going to watch something really fascinating evolve over the next three, five, seven years, where this structure of payment, this structure of transaction with crypto really becomes more clear globally. And whether we have stable coins and digital assets and things are regulated in Washington on the stable coin front, and we can just all have big digital asset portfolios or not, I don't know. But it's fun

to think about. It's fun to watch. But you got to watch what happens in the traditional world, because you can displace a lot of business models very fast. And that's what we need to think about with this deregulation is what business models get kind of whacked. And that could be the sort of the really different angle that the market needs to start really picking winners and losers on. And that I think is going to be a lot of money is going to be made. A lot of alpha is going to be generated. A lot of it's going to be lost as well as that story develops over the next four years. Yeah. Case in point, the aerospace and defense industry, which we'll be digging into more in this hour. Gentlemen,

thank you, David Zervos and Bob Elliott with record closes for both the S&P and the Nasdaq. Now let's turn to senior markets commentator Mike Santoli for a look at the market's current path. Mike. Yeah, Morgan, outperforming most expectations, also outperforming history in some senses. I ran this chart before we got to the first Fed rate cut in this cycle, which was in September of this year. And it suggested, you know, there was a lot of talk of, you know, sometimes the market really struggles after the first rate cut. And it all was going to be determined by whether you get a recession in the year following that initial cut. So this path right here is all those scenarios where you basically had a soft landing and there was no recession the following year.

We are now outperforming that to date at this point. And then, of course, you see if there had been a recession, then you were going to actually suffer and you were going to have downside to the equity market, as you always do in a recession. And therefore, the Fed in their initial rate cut could not save you. So things are going roughly according to plan. Maybe we're ahead of the game a little bit here. Of course, there's very great variation around the averages. I would point out, too, the market itself is up like 35 percent on a one year basis. There's never been a recession in the ensuing nine or 12 months after the market had been up that much. So it's itself telling you probably not a lot of macro risk right now.

Here you go. The high beta parts of this market. That's the SPHB. That's the faster moving, more volatile stuff on a five year basis, really pulling away. So you see here, sometimes it's coming out of a major low that that happens. Sometimes it's an acceleration phase in the bull market. Low volatility stocks did their job through the bear market now being left behind. So at some point, this starts to run a little bit too hot. But for now, it just shows you it's a risk on environment, Morgan. I want to go back to something we were talking about with Steve Leisman earlier this week, and that was this idea, especially with the data we got today, of perhaps this month a hawkish cut.

We've had a lot of Fed speak this week. We know we go into a blackout period next week ahead of the next FOMC meeting. How much does that thesis now permeate the market here when we are at these record levels. We do have these high valuations. We do have an economy that's running strong. But the question now is the trajectory of those cuts looking to 2025. Yeah, I do think with each cut and we are likely to get one in a week and a half with each cut and presumably they get closer to whatever neutral is on the downside in terms of rates. And therefore, they're probably going to be a little more equivocal. They're not going to promise as much in the way of a next cut very soon. So they're going to be data dependent. I think they're going to kind of dictate that. So it will be a little more

touch and go. The market's going to have to get its arms around exactly how things are pacing in the way of the numbers and the Fed reaction to them. I don't think that's necessarily got to be a real challenge for the markets, because, look, we've gone through these phases where everyone thought it was going to be opening the floodgates to aggressive downside in terms of interest rates by the Fed. And we've adjusted them back and say the Fed's going to go slower than we thought. And the markets have been able to deal with that simply because it was for a good reason. The economy was hanging in there. It sure hasn't been a boring year. Mike Santoli, thank you.

We'll see you a little bit later this hour. Up next, Palantir CTO Shams Ankar on how AI is becoming a game changer for the defense industry and more. And later, an exclusive and rare interview with the CEO of Booz Allen Hamilton on the outlook for defense spending under the incoming Trump administration. Overtime is back in two. Welcome back to Overtime. Check out shares of DocuSign surging nearly 30 percent after beating earnings estimates during overtime yesterday and issuing strong Q4 sales guidance. And that's a modest gain compared to Asana, up more than 40% after the work management software maker reported a smaller than expected loss thanks to significant demand for its AI tool.

All right, well, Pound here has been the best stock in the S&P 500 this year. It's up a whopping 340 percent. It closed at another record high today after announcing a new partnership with Booz Allen Hamilton, sending shares of both of those stocks higher. The deal will focus on two areas, two key areas, modernizing information infrastructure and enhancing collaboration and mission planning with allies using data driven systems. So joining me now from the Reagan National Defense Forum is Sham Sankar, Palantir Chief Technology Officer. It's great to speak with you. It's great to be back with you, Morgan. So let's start right there, because this is a key partnership. Certainly, the market's focused on it today, but you've actually had a flurry of partnerships that

you've been announcing here in the last couple of weeks. Yeah, we've been doing a lot to, in the words that I like to say, to rebuild the American industrial base. We forget that the industrial base that won World War II and won the Cold War, only 6% of spending went to defense specialists. Actually, most of the money went to what I call dual-purpose companies. Chrysler used to build cars and missiles. Ford built satellites until 1990. And so how do we broaden the aperture of who can provide the cutting-edge capabilities we need to deter conflict? And that's important because it's very clear that the West has lost deterrence. We have North Korean generals getting wounded in Ukraine.

We've had a pogrom in Israel. We have Iran months away from getting a bomb. And we need to rally together as a country to organize around this problem. So when you talk about losing deterrence, how do you reinstate that? How quickly does that happen? What is the role that AI plays in it, which is something I know Alex Karp, CEO of Palantir, has talked about quite a bit. Absolutely. I think AI is the determinative factor because you need a technological offset, something that you can do much better than your adversary that's going to continue to scare them and tell them today is not the day to pick the fight. It is not a coincidence that the leading frontier AI labs are in the U.S. It's not a

coincidence that the U.S. commercial market is exploding because of the rate of adoption of AI. So we have something special in this country that we know how to do this. We need to bring that to our military. Our military, I would give them a lot of credit. They started this program with the crash program Maven in 2017, 2018. But now I'd say over the last two years, the rate of adoption, there's been a huge inflection there, driven in part by real world events like the Afghan NEO and events in Ukraine. But applying all of that to the Pacific right now where we need the most deterrence. You just mentioned Maven. And I think it's a good time to revisit that because, as you mentioned, 2017, 2018, there was a big up in arms about that program at Google. We saw them step away from it. Palantir stepped in.

It's obviously been a very big success story to the extent that it can be talked about publicly. up in arms about that program at Google. We saw them step away from it. Palantir stepped in. It's obviously been a very big success story to the extent that it can be talked about publicly. Flash forward to now, six years later, we are seeing all these partnerships being struck, whether it's you with Booz Allen Hamilton or Anthropic last month, or whether it's Andrel with OpenAI as OpenAI moves further into this space,

even Meta with Lama being made available for national security. It really seems like we've gone 180 degrees. And I wonder why that has happened now. Well, I think, one, this is a development we should obviously welcome. And two, I think events in Ukraine really woke people up to realize that actually the individual liberties and freedoms that we have, we can't take for granted, and that all of us in this country have a responsibility to contribute towards not only the prosperity we enjoy, but the freedom that's required to have that prosperity. So I have to ask, because there's been reports this week, that you are under consideration for a position in the Pentagon under the Trump administration.

Is that true? Well, Morgan, all I say is I'm very happy at Palantir. As you know, I've been at Palantir 19 years. I joined as the 13th employee. And I think we have an opportunity to build a generational company. We have done 1 percent of what is possible. And I'm excited to pursue that. Do you think regardless, looking at the Trump administration and some of the folks that are being assembled, either in official or unofficial capacity around it, I think about David Sachs being appointed AI and crypto czar just last night, a number of defense tech-related folks, and so-called PayPal mafia, which Palantir was born out of, being involved in this administration. Do you think that this conversation around dual-use technologies

and around adoption of new technologies and new capabilities and thinking about contracting differently actually manifests? I'm very excited about the possibility of change. In order for change to happen, it's not like the generals don't view the necessity of change or Congress doesn't view it. You need to believe that there's something worse than change. And I think there's a broad consensus that we are in an undeclared state of emergency, and I think we're going to see a huge amount of change. I give you the inverse of Bill Gates' quote. He always says, we underestimate what can be done in 10 years, overestimate what's

going to happen in two. I think in the department, we underestimate what we can accomplish inside of two years, inside of the Davidson window. And we spend too much time thinking about how the world will be different in 10 years. And, of course, you did pen a report on this called Defense Reformation that came out a couple of weeks ago as well. So you have some pretty strong thoughts on all this. You mentioned commercial, so I want to segue over to commercial because obviously it's been a big growth area. It's still a smaller business than what you have going on on the government side, particularly the U.S. government side. But U.S. commercial customers have been adopting very quickly. How is that process going? And I guess when you look to 2025 or beyond, is there a point at which private sector starts to adopt more aggressively than

public? Well, of course, the total market in the commercial world is bigger. And actually, at this point, we're about 50-50. And so I think you can expect that sort of trend to continue. What you really see is the opportunity with autonomy. I don't mean killer drones. I actually mean in businesses. How do I automate the insurance underwriting process? How do I automate the discharge process at hospitals? How do I help drive automation into the process of creating new products like automotive seats? So the impact in construction, manufacturing, and healthcare, it's tremendous. It's reducing the dwell time, all this idle time that we've accumulated in our economy, this essentially deadweight loss.

AI provides us a real opportunity to drive efficiency, and that's going to unlock economic growth. Are you still doing boot camps or is the demand beyond it? Absolutely. I mean, I think, so with AI, you have this supply-demand dynamic. We've been so focused on AI supply, the model side. And what we see is the models are getting better all the time, but across closed and open models, the open source and proprietary models, they're getting more similar. And I think where the emphasis in the market is shifting is on the demand side. Okay, great. We have this magical stochastic genie. How do we use it to get economic value?

And the boot camp is the way to experience that. You're going to leave an eight-hour session with a production-ready or near-production-ready use case that ignites your imagination. And that's been a very effective motion for us. All right. Shyam Sankar of Palantir. So great to have you here. Thank you. And we have much more from the Reagan

National Defense Forum in just a few minutes. I'll be joined for an exclusive and rare interview with the CEO of Booz Allen Hamilton as well. So we're going to dig a little deeper into the details of this partnership and so much more. John, I'd also just note in terms of Palantir, the company shifted over to the Nasdaq for trading a couple of weeks ago. This is one of the other things that investors are watching closely is going to be the rebalancing of the NASDAQ 100 and whether Palantir, and if Palantir gets added to that as well, that's something to watch for a week from today, too. For sure. All right. Up next, Samsara CEO Sanjit Biswas and his company's earnings beat and conservative revenue outlook, which is disappointing investors.

And Lululemon shares soaring, making it the big winner in the S&P 500 today after beating earnings estimates and raising its full year outlook. Thanks in part to a jump in gross margins. Be right back. Welcome back. Samsara reported results in overtime yesterday. Stock is up 56% year-to-date, but down about 5% today. On guidance, a little lighter than the street wanted. Today, I spoke with Samsara CEO Sanjit Biswas about that.

Well, for us, it's around being consistent and honestly being conservative. We want to make sure we don't disappoint. We've been very consistent in terms of our performance. We grew 35% year over year at billion dollar plus scale. Our most recent report is 1.35 billion in ARR. So we definitely see momentum in the market adoption of these products. But to your point, expectations are high. We want to make sure we're setting reasonable expectations that we feel confident we can hit. I also spoke with him about growth. He mentioned that 35% jump in annual recurring revenue, and it's adding

Samsara is to the services it offers. One new service is Samsara Intelligence, which gives customers detailed information on operations. Another is like an industrial-grade air tag for tracking valuable equipment. So we recently released the Asset Tag. It's a tiny device. You can put it on top of any kind of equipment. It could be a toolbox. It could be the bucket on an excavator. Those are assets that often get left behind on site. And so we can help find it, track it down. If it gets stolen, we can go and understand where it went. And then if it's underutilized, so imagine you have a big bulldozer, costs half a million dollars, but it's only used once every 90 days. Your company might be able to rent that bulldozer instead of own it. That sort of insight isn't possible with a pen and

paper checklist or clipboard, but it is possible when you put a sensor on something. So that's the other use case, which is helping improve asset utilization. The quantified self, but for equipment, Morgan, you know that there's a lot of stuff out there, valuable equipment that could be measured in business models and operational models certainly could shift as a result. Absolutely. And it's something we've been covering for quite a while now here on the show through Samsara and others. Great stuff, John. Well, it's time for a CNBC News Update with Pippa Stevens. Pippa. Hey, Morgan. Police in New York now believe that the person of interest being sought in connection with the killing of United Health CEO Brian Thompson left New York City shortly after the crime was committed. Top NYPD

officials told CNN that surveillance footage shows the person of interest taking a cab from the Upper West Side to the Port Authority Terminal near the George Washington Bridge in Upper Manhattan. Police are now trying to determine which bus the man may have boarded. President Joe Biden will deliver remarks on Tuesday at the Brookings Institution. The White House says he will address his economic record and legacy. The announcement came after the better-than-expected jobs number this morning. A Biden administration official tells NBC News that the president is looking to take credit for economic gains during his time in the White House. And French President Emmanuel Macron will meet with U.S. President-elect Donald Trump in Paris ahead of tomorrow's reopening ceremony for the Notre Dame Cathedral. Macron is also set to sit down with Ukrainian President Volodymyr Zelensky,

who will travel to Paris for the festivities. Morgan. All right, Pippa Stevens, thank you. Up next, we have an interview with the CEO of Booz Allen Hamilton on his company's new partnership with Palantir and the outlook for defense under President-elect Trump. Stay with us. Welcome back to Overtime. Shares of Booz Allen Hamilton up today after the defense consulting company announced a partnership with Palantir. Joining us now in a rare and exclusive interview is Booz Allen Hamilton at CEO Horacio Rosansky.

It's great to have you here. Thank you for having me here. It's great to be here. So I do for having me here. It's great to be here. So I do want to start with this partnership with Palantir and just what the significance is of it and perhaps just as importantly the fact that this is a partnership that was born out of this conference last year. Absolutely right. Yeah, Alex and I met here last year. We began talking about our companies who already knew each other in the market. And we said, let's do something bigger and better together. And here we are, announcing a year later.

So what does this partnership enable then? So they have great technology and great people. We have great technology and great people. And the thesis is we can move faster. To me, I'm obsessed with speed. I think our country needs to speed up. I think the Department of Defense needs to speed up. And I think industry plays a role

in that. And we wanted to do some work and something tangible to obviously drive revenue and drive opportunity but also prove the concept that if we get together and we do something together, two companies that couldn't be any more different, that something great and fast would happen. And 45 days later, we have a prototype. Yeah, and Booz Allen Hamilton has really been on the forefront in terms of AI development and capabilities as well, particularly where the government is concerned. So what does this do to now, I guess, amplify that? How are you thinking about that

type of digitization and adoption with a Trump administration coming in? So one of the great things is this is going to be our 20th administration transition in 110 years as a company. And we are always squirreling the side of change. And AI is potentially the biggest change we've seen this century and the biggest change that is going to drive national defense over the next 20 to 50 years. Stocks, defense stocks, including Booz Allen Hamilton and contractor stocks, have sold off since the election.

There seems to be this sense in the market, at least among investors, that you're going to have doge coming in, you're going to see cuts to government spending, you're going to see layoffs potentially within the public sector, and a lot of disruption. And so investors have been taking that as perhaps a negative for government IT services, companies and contractors like Booz Allen and Hamilton. Is that a real risk here or are there potentially tailwinds when we are talking about things like efficiency and productivity and cutting government workers, which perhaps means outsourcing to contractors? You know, the way we see it is change is necessary, right? It's not that we're doing the wrong things as a country. It's just we're doing the right things too slowly.

And Doge is positioned to act as an accelerator. So we want them to succeed. We need them to succeed. And what's going to come from that is all the things you're talking about, greater use of technology, greater use of dual-use technologies, things that have been created for the private sector that can be ported into the public sector, more focus and investment on the key critical missions that matter the most to this country, and a look at things that are inefficient and that frankly either need to go away or need to be improved. And so honestly, who can disagree with that?

How are you thinking about that across your different businesses? Because you have the defense business, but you also have a civil business. I think it's true across all of our businesses. We've built a position where we're focused on some of the key missions, the Indo-Pacific, space, public health. These are all areas that need to be transformed, need to move faster. And our job is to bring these dual dual use technologies and make them valuable into those missions. I'll give you an example.

Most commercial technology assumes perfect connectivity all of the time. If you're a cloud provider, you assume that all your enclaves are going to be able to talk to one another. That's not true in defense. If you're on a ship, if you're in space, if you're on a submarine, you almost have to assume the opposite. So what Guzalan brings is we can take this great technology and make it useful in those settings. So for that, for us, that's upside.

And, you know, similar stories can be told in the civilian sector. Similar stories can be told in intelligence. We're optimistic. I mean, we recognize that at the beginning there may be all of this creates uncertainty. Transitions create uncertainty. They always do. And the market has responded to that, as you said. But honestly, I'm bullish.

I think in the medium term, in the long term, this is great for the country and it's great for Buscella. So what is your outlook then for defense spending? What is your outlook for the geopolitical landscape? You published an op-ed today and you talk about this three-time frame process. So, you know, I was borrowing from physics where they say there's this three body problem, right, which cannot be solved by conventional math. And the three time frame problem is the same thing that we're facing as a country. So we're at the same time supporting technologies that have been around since the 1950s and

1960s, modernizing the things that are in play today and building for the future. On any given day at Booz Allen, we're hiring an astrophysicist to work on quantum and somebody with COBOL programming experience to help support the system that's been around since the 60s. We need to move faster through these phases because technology is accelerating so much, especially at a time where a lot of our adversaries, China, Iran, Russia, North Korea, are coming together into a military and economic bloc that pose a real danger to the free world. And companies like Booz Allen, like Palantir, like many others, need to be part of this solution. New world order, is that the way to think about this right now? I think the U.S. needs to continue to lead. I think the U.S. is in a leadership position.

I think the U.S. cannot do it alone. We need allies and partners in the Indo-Pacific, in Europe, across the world. And I think the U.S.'s economic engine is going to be the driver of success, just like we were here in the Reagan Library, just like it was during the Cold War. And again, I'm passionate about this, and I think Booz Allen can play a role, and I think a lot of companies need to get in the game. That is a big talking point here, is this intersection of the economy and national security. It's one we're going to be talking about quite a bit as the weekend continues to unfold. So Horacio Rozanski, Booz Allen Hamilton, CEO,

thank you so much for joining me here. Thank you. John? Important part, certainly, of the economy and for national security, Morgan. That was great stuff. Well, the job market keeps chugging along with healthy employment and wage growth. Up next, Mike Santoli looks at what that could mean for the Fed and for the market. And investors putting Shopify in their carts today. Luke Capital upgrading the stock from hold to buy, hiking its price target from $110 to $140

a share, citing an underappreciation of AI capabilities for merchants and its internal needs such as HR and accounting. We'll be right back. Welcome back. Mike Santoli returns with a closer look at this morning's better than expected jobs report. Mike. Yeah, John, this metric kind of boils it all down into aggregate payroll income that the country is earning at a given time. This adds up the actual job growth, number of jobs in the economy, as well as average hourly earnings, as well as the number of hours worked. So it pulls it all together. It's sort of the nation's sort of paycheck year over year change. And it's been very steady around this five percent annual rate. You see, that's pretty similar to where we were pre-COVID. So there's

been a normalization of this measure. Now, that definitely means that, you know, it's what the economy produces in an expansion, but it probably doesn't mean it's inflationary or something that represents an acceleration in the economy. So if you look below the surface in some other measures, look, the unemployment rate did tick up to about four and a quarter. That's higher than was anticipated. Private sector job growth, if you take out the ad back from the hurricanes and the strikes, was not that impressive on a two or three month basis. All of this sets the scene for waning labor demand, not many layoffs, kind of a slow and steady job market, but one that the

Fed can probably feel comfortable with easing into at least another quarter point and then reassessing once we get past that. Whipsaw back there from COVID. Does the trend look like it's pretty much evened out now? We seem to be bouncing along. It does, more or less. There's also kind of a three-month annualized version of this that actually ticked a bit higher just recently. So it is sort of bumping around these levels, around the sort of upper end of the pre-COVID trend. All right. Mike Santoli, always great to get that insight from you. Well, is Microsoft's new cloud PC good enough to get real work done? That's next. Welcome back to Overtime.

We can talk hardware as part of Cloud Week 2, especially if that hardware connects to the cloud. When I was in Chicago for Microsoft Ignite a couple weeks back, I got a close look at a new kind of work PC. It's called Windows 365 Link. You need a high-speed internet connection for this, but it sits on your desk for about $500, a little more, connects to the Azure cloud, and streams a potentially highly configured PC experience to you. It uses an x86 processor to host the local operating system that we use, which is a lockdown configuration with small version of Windows that is highly secure and its only purpose is to link your monitor and keyboard

to the cloud and your computer in the cloud. The idea being that a lot of the computational heavy lifting is happening in the cloud. In the cloud, correct. And this is just the piece that's here locally helping. So it's more affordable than a desktop or laptop that you'd be able to. Absolutely.

It is much more affordable than traditional client computing because it computes happening in the cloud. A lot of our customers have been asking for this around scenarios and workers that include frontline workers, folks who are working in offices or hot desking, people who need high performance compute in labs, folks who have specialized workplaces, for instance, and they want the benefits of having compute in the cloud, a simple device management solution on the edge that can be streamlined and one that is highly secure. Folks like me who have lived a while will recognize this as

the latest twist on the thin client concept. In the cloud era, these PC experiences though are more customizable. You can add GPUs with some mouse clicks. It's not for everyone. I'm too mobile, work with a lot of video, so it wouldn't work for me. But if you're in customer service, retail, or lab setting, it could be an interesting option. It's also a way to further shift costs, Morgan, from the capital budget to operations. Should we really be thinking about this as kind of a first shot across the bow in this new AI PC era? This is different from the AI PC in that in Qualcomm or AMD or Intel's models, those processors on board on that client machine are able to do more of the compute right there on the device, right? So it's

a PC that's better at AI because of the intelligence in the client. This is flipping that on its head and having very little intelligence in the client. the compute is happening in the cloud, Morgan. Got it. All right. Well, up next, the CEO of Global Foundries on how important it is for national defense to have a homegrown semiconductor supply chain. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back. Earlier today, I spoke with Global Foundry's CEO, Tom Caulfield. Semiconductors are a key part of the defense supply chain, but also a poster child for a broad-based U.S. industrial policy that has steeped the national security concerns.

That's evidenced by the fact that outgoing Commerce Secretary Gina Raimondo will be here this weekend, again, second year in a row. Now, I asked Caulfield whether the U.S. can truly stand up a domestic semi-supply chain, especially given the challenges at Intel with its foundry business. This didn't happen overnight, where we have a high geographic concentration of semiconductor manufacturing. That's not in the U.S. And this is going to take a decade to correct it. But the key is to start, make steps, but not, you know, one day it's in fashion, the next day it's not. And I think it's important that through administrations that this continues because it is a priority for our nation.

Of course, Global Foundry has also just got $1.5 billion from the CHIPS Act just a couple of weeks ago. Now, investors and the industry itself are trying to determine what the Trump administration will mean for defense and aerospace and how and where cuts or changes to the contracting process could manifest, how priorities take shape regarding what the military now needs for the future. Remember, the U.S. closed in on a trillion dollars in defense spending, including aid and supplementals over this past year. I asked David Trulio, a former Lockheed executive and now CEO of the Ronald Reagan Presidential

Foundation and Institute, what he's expecting. DAVID TRULIO, Former Lockheed Executive and now CEO, Lockheed Institute of the Ronald Reagan Presidential Foundation and Institute, what he's expecting. Look, Morgan, at the state of our deficit, right? We're spending more money on debt service and paying down the debt than we are on the military now. That's a very ominous trend. But I think more broadly, there's an increased appreciation that there's an interplay, a real interplay between having a strong economy and having strong national security. You can't have strong defense if you don't have a robust economy. Well, defense stocks, prime contractors,

particularly like Lockheed, RTX, Northrop Grumman, General Dynamics, those have fallen post-election. But Palantir, that's soared. That's now the highest market cap of any defense player in the market. But another big focus is on autonomy and drones. So we're going to be talking more about that in the next hour on Fast Money. When AeroVironment CEO Waheed Nawabi joins me exclusively. AeroVironment makes drones like the Switchblade, which is used in Ukraine. They just posted mixed earnings this week. Investors are wondering what a change in Ukraine policy under Trump could mean for this company.

But also be sure to check out my podcast, Manifest Space, because in addition to everything we're doing live here on CNBC, we are sitting down for a flurry of interviews that will be focusing on that domain as well. Those are going to be publishing here over the coming days. So scan the QR code on your screen to subscribe. John, it is going to be a busy working weekend. Oh, I'll bet it will. And it's interesting those comments you got from Global Foundry's Tom Caulfield giving the way that we started the week with Pat Gelsinger's exit from Intel. And these questions around how the Trump administration, the second Trump administration, is going to approach leading edge semiconductor manufacturing. You can either fight for it, right, in Taiwan, literally,

or you can build it here or do a combination of both. And it's not clear how the president-elect views this and views this investment. It's a key point, John. And actually, it's worth noting, and Caulfield talked about this, that some of the industrial policy we see where semiconductor manufacturing is concerned, some of those seeds were actually planted during the first Trump administration, and then we saw chips act, obviously, in the current one. So we'll see what happens in 2.0. All right.

Well, that'll do it for Overtime for this week. Fast Money starts now.