Closing Bell - Closing Bell Overtime: CEOs of Cloudflare, SAP and Nubank; OpenAI CEO Talks To Congress 5/16/23

Episode Date: May 16, 2023

The major averages closed lower, near session lows. Vital Knowledge’s Adam Crisafulli and Alejandra Grindal, Ned Davis Research Chief Economist, break down the market action as the US creeps closer to a potential default. Congressional leaders speak after another meeting at the White House. OpenAI CEO Sam Altman spoke before Congress today; our Steve Kovach reports on the key takeaways and Cloudflare CEO Matthew Prince on how AI will impact his business. Tesla annual meeting is tonight; our Phil LeBeau on what investors are watching most closely. SAP CEO Christian Klein on AI and the cloud, plus Nubank reported strong quarterly numbers from its business as a digital bank in Latin America. CEO David Velez on the company’s expansion since its 2021 IPO. 

Well, stocks hitting session lows into the close today with the Dow finishing down 1%. That is the scorecard on Wall Street, but the action's just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan, along with John Ford, who is in Las Vegas today. We are closely monitoring a pair of big events. Yeah, Tesla's annual shareholder meeting is about to kick off. That's one of them. And President Biden's debt ceiling discussions with congressional leaders at the White House could wrap this hour.

We will bring you all the breaking news from Tesla and from Washington as it happens. Let's get into today's market action, though. Joining us now are Adam Crisafulli from Vital Knowledge and Alejandra Grindahl from Ned Davis Research. Good afternoon to you both. Adam, I'll start with you. The fact that we, well, it wasn't a particularly strong session to begin with, but the fact that we ended here at session lows despite the outperformance of big tech again today, your thoughts?

It was a very strange session. It was actually much weaker than it looked on the surface, even with the slump into the bell. If you look at the eco weight version of the S&P, which adjusts for the outsized weighting of the mega cap tech stocks, it was a very weak session all day. You had a lot of heavy selling in a lot of the big cyclical groups, you know, energy, financials, capital goods, et cetera. It was masked by what occurred in tech. And you just had a lot of mixed signals everywhere. You had Home Depot missed on sales, lower guidance. Then you had relatively solid economic numbers. You had a blowout home builder survey just a couple of hours after Home Depot talked about reduced spend.

Adam, I'm going to interrupt you right there because we have got Speaker McCarthy making comments at the White House right now. Let's listen in. We've got a lot of work to do in a short amount of time. Now, I wish we had been able to be in this place 100 days ago. This is what we requested, but we are where we are. So we will work hard to make sure to try to have this to come to fruition.

SEN. KERRY, Well, the great thing about that question is we've already have taken the fault off the table because the House Republicans passed a bill that raised the debt ceiling, limited our future spending, saved taxpayers money by being able to pull back unspent money and waste, and actually grow our economy by making our economy stronger and helping lifting people out of poverty into work. And so those are the parameters we'll talk about. Let me give a moment to have Leader McConnell say a few words.

Let me just say what I've said since February. The President and the Speaker are the keys to the deal. I'm prepared to try to deliver as much of my conference as I can for whatever the Speaker and the President can agree to that we know will get a signature. Mr. Speaker, when will you meet again? It's a no-brainer. I don't think anybody in America doesn't think if you had billions of dollars sitting out there that you appropriated two years ago,

people could not spend, and it's hard-working taxpayers' money, and the pandemic is over, you can't bring it back. It's the only place in Washington that Democrats think you shouldn't do that. But I think at the end of the day, it will be in the bill. Mr. Speaker, when will you meet again? Yes, sir. A lot of Americans watching this are probably wondering, why aren't you just taking it? Yeah, I am too. You know, the difficult part here is I came February 1st to sit down with

the president, so we wouldn't be at this day. So how could we responsibly lift the debt ceiling? Our spending is out of control. That $6 trillion extra the Democrats spent brought us inflation. How could we grow our economy and make us less dependent on China and actually work together? Unfortunately, for all those thinking that, for 97 days, the president ignored us and said we couldn't meet. It wasn't until the Republicans

would no longer ignore the problem and actually raise the debt ceiling, pass a bill, did we finally get a meeting. It's unfortunate we are where we are, but the good thing about it is Republicans always look to find a solution. Mr. Speaker, you said earlier this week that you were still very far apart. We are. You're still very far apart at this point. Yes. What progress was made in this meeting and you wanted to see a deal by the end of the week. Yes. Do you think a deal could be possible? It is possible to get a deal by the end of the week. It's not that difficult to get to an agreement. When you think about limit, save, grow, the bill we passed, we raised the debt ceiling. We cap future spendings. We grow our

spending in Congress by 1% each year. That gives you trillions of dollars of savings. We bring back money that we have already appropriated from the taxpayer that wasn't spent in a pandemic. We put in work requirements that the president voted for as a senator that in Wisconsin just a couple months ago passed by 82%. It lifts people out of poverty, put them into jobs. What that does is helps our supply chain. So no longer do we borrow money from China to pay people not to work. And the only thing we're talking about are able-bodied people with no dependents. That's all you're talking about

it's already in place in certain areas and so then we make ourselves more energy independent we change them the red tape that we can actually build things in america so the roads we want to build the energy projects we want to build to become energy independent so it lowers the price

to americans but the same times procreates more jobs and the economy we want to build to become energy independent. So it lowers the price to Americans, but at the same time creates more jobs and the economy gets stronger. I would think this opportunity to ask you, what if this Congress is not putting any pressure on the Vietnamese political class, it would be like the president, taking this opportunity to dismay you. All right, come back to me

when we're not talking about the deaths of the deaths. But this situation is still unresolved. The president, as you know, is about to head overseas for the G7. Should he stay put and not go? Mr. Look, the President is the President of the United States. He can make his decisions of what's best and how to use it. The President has now—what has changed in this meeting is the President changed the scope of who's all negotiating. Instead of all the four leaders, it's really he's finally taking Leader McConnell's advice that he's applied to him

the same advice you gave to President Trump that it worked out same advice to President Obama and others Appoint somebody from the president's team Who can work with the speaker's team to see if we could come to an agreement? That is what the decision was made in this meeting. So the structure of How we negotiate has improved. So it now gives you a better opportunity, even though we only have a few days to get it done. Had we done this back 97 days ago, we'd already have a bill passed.

Yes, ma'am. Why don't you keep slamming Republicans for cuts to veterans' benefits? My understanding is the Appropriations Committee rolled out funding that is $18 billion above this year's 2023 levels. Can you confirm that and then also talk about whether the White House is negotiating in good faith? And when's your next meeting going to be? Look, great question. As you really know, for many times the White House and the President would say Republicans are going to cut the veterans. We would say that was a lie. Today, out of appropriations, it was proven it was a lie. We actually increased spending for our veterans. We would say that was a lie. Today, out of appropriations, it was proven it was a lie. We actually increased spending for our veterans. It's like any other household.

You prioritize where you spend your money. The real question is, how much debt is too much? We're at $32 trillion almost, 120% of our GDP. That means it's larger than our economy by 20 percent. This is the equivalent of your child having a credit card and they hit the limit again and again and again. And every year when your child hits the limit all you do is increase the limit. Well it comes to a point now that you can't afford it. So do you just increase the limit again? Or do you actually take a serious thought of where you're spending your money?

You're still gonna fund the things that are most important to you, but you're going to eliminate the waste. Maybe you don't go to Starbucks every single day. Maybe you don't waste the money that we, the president just now appointed individuals we will set. I would like to meet today actually and just start meeting until we get this done. Yes. Well, that's all up for negotiation. Inside the Republican bill, we lifted it for $1.5 trillion. I mean, when you think about it, the spending has gotten so far out of control, we already borrowed $1 trillion this year. And think about what that means to the average American.

We are borrowing money. We are borrowing your future for things that are being wasted upon today. For more than a trillion dollars, that means China is funding this. We need to change that behavior and make America stronger, less dependent on China and actually curve inflation. Yes sir. What is your level of optimism that this is all going to get resolved? You know look, if this is where we were in February when I first came down, I'd be very optimistic that this would get solved right away. The structure has changed, so we're in a better process.

Mitch, you want to say anything else? Let me. Seven of the last ten, seven of the last ten debt ceilings have carried something else. What the Speaker and I are advocating here is not unusual. It's more common than not. A perfect example of it is the Congressional Review Acts that we've been voting on periodically in Congress to overturn what was done on a debt ceiling

during the Clinton administration. So this shouldn't be this hard. Number one, we know we're not going to default. They know it. We know it. We're running out of time. And just finally, as the Speaker's pointed out, the President's agreed to designate somebody to be the the lead as i recommended to president trump in 2019 when we faced the same situation do you think he wanted

to negotiate with speaker pelosi of course not i said you'd have no choice are we understand that mr biden's not been short his trip did you put pressure on him to do that? Yes, ma'am. Go right ahead. Can you talk about your discussions during the meeting on the work requirements? Are you just discussing TANF changes now, or is Medicaid and SNAP requirements still on the table? Look, I'm not going to negotiate with all of you. We know where we need

to get to. We know what bill we have passed. Look, the way the founders have developed this country, which is an unbelievable country, you lend your voice to your elected officials. The House passes a bill, the Senate passes a bill, and then you go to conference. Unfortunately, the House is the only body that has passed a bill and raised the debt limit. We are now 15 days away from hitting this limit.

Republicans didn't sit back and wait until Janet Yellen told us when the deadline was. We passed it long before she ever said June 1st was coming. Because we didn't want to put America into jeopardy like this. And so we have worked to try to solve the problem. Just as you looked at Title 42 being lifted on the border. We didn't ignore the problem, like the White House. We actually put a border control bill out there so we can secure our borders. And what happened this weekend?

A person on the terrorist watch list from Afghanistan was just coming across this border. Why? You know, we caught more people in the month of February on the terrorist watch list than we caught the entire time of the last administration. You can't keep ignoring problems. You've got to find solutions. And that's what the Republicans in the House have done. Yes, ma'am. Thank you so much. What do you tell the world who is looking at you now and concerned about possible defaults and the implications in the global economy?

Look, I think America is the number one economy in the world. And when we get done with these negotiations, America's economy is gonna be stronger because we're gonna make the American economy stronger by putting more people back to work, lifting them out of poverty, lowering our energy costs, and more importantly, curving our spending at the runaway. So as the world looks around and look back at America, said they were spending too much,

they won't be able to say that when we're done. Thank you all very much. Have a good day. Are you going to a staff meeting day. Our staff meeting today? Okay, that is the Republican congressional leaders outside of the White House after meeting with President Biden and their Democrat counterparts about this latest round of debt ceiling negotiations. Still very far apart, House Speaker McCarthy saying, but also adding that it could be possible to get a deal done by the end of this week. He was joined right there by Senate Minority Leader Mitch McConnell as well.

Let's bring in Eamon Javers for more. Eamon, some of the talking points, negotiation points that we've been hearing about for a number of days now. Yeah, Morgan, look, it's pick your data point here from what Speaker McCarthy was just saying. As you say, he said we're still very far apart, which he's been saying a lot over the past 24 hours. But then he also said it's possible to get a deal done by the end of the week. So, you know, you sort of scratch your head at that. But, you know, with the way these negotiations go, that's sort of always the case, right? They're very far apart until they make the concessions and then they're not very far apart anymore. That's sort of what we're looking at here is both sides are kind of dancing around this, who's going to cave first.

And I think you need to get a lot closer to that June 1st deadline before you're going to see that moment where both sides are willing to cut the deal. In the meantime, between now and then, they both want to show their political bases that they are fighting hard to get what they want. We also agreed that we need to pass a bipartisan Schumer here stepping in the microphone, so let's take a listen to that. I asked Speaker McCarthy, does he agree with that? And he said yes. And his bill, of course, is not a bipartisan bill.

And so the bottom line is that we all came to agreement that we were going to continue discussions in the way that I believe Speaker McCarthy described, which was agreed to by all of us in the room together. And hopefully we can come to an agreement. We don't have much time, but default is just the worst, worst alternative. And having a bipartisan bill in both chambers is the only way, the only way we're going to avoid default. Hakeem and I are committed to trying to get that bipartisan bill done. It was a positive meeting. I thank the president for once again convening us. It was an open and an honest honest but a very cordial discussion. We all agreed

that the only path forward is to reach a bipartisan agreement anchored in common ground. We all agreed that default is not an acceptable option and must be avoided and we all agreed that over the next few weeks we have to proceed with the fierce urgency of now in order to make sure we can reach that bipartisan common sense common ground agreement so that we can protect the health the safety and economic well-being of the

american people so that we can protect the health, the safety, and economic well-being of the American people. A few questions. Yes, yes. Yeah, we're not going to get into negotiations out here. We have to come to common ground. That's the only way this has ever gotten done. It has never gotten done with one party saying, you have to do it my way. You have to get both parties in both houses together. Yes? Well, you'll know it when you see it, and what that means is that we'll not sacrifice our values.

They'll probably not sacrifice their values, but we'll have to come together on something that can avoid default. Default is a disaster. Full stop. And everyone understood that in the room. I was glad to see that everyone understood what a disaster default was. Would you say that you're closer to a deal today than you were a week ago? You said it was productionally closer to a deal. Yes.

I think it was, as the leader said, it was a much more cordial meeting. There were honest and real discussions about differences that we have on a whole variety of issues. But it was all respectful, and that was a good sign as well. Okay? Do you want to say one thing? Go ahead. It was...

I know this is kind of new for you, but if both of you could speak to the challenge, because our Commander-in-Ch chief is a tough negotiator. and productive over the last several days and then bringing us back together to have another positive discussion with a clear path forward in terms of reaching an agreement because default is not an option. Everyone agreed that that was the case. A default would be a disaster for the American people. It would trigger a job-killing recession. Default would crash the stock market and hurt the retirement security for millions of older Americans and a default would dramatically increase costs on people all across the country and it was a very positive development that everyone agrees we're going to work

with the fierce urgency of now over the next week or two, reach an agreement, avoid any default, and continue our efforts to be there for everyday Americans. You'll get the last question, but one thing I want to say. What gave me the most hope, and there were a bunch of things, is that everyone, including the Speaker, agreed we need to be bipartisan. The idea of having a partisan bill we knew would get us nowhere, and everyone freely admitted that in the room.

Last question. Clarifying something that McCarthy said, he said the President appointed appointees or negotiators. What does that mean? Is it new staff? Are you getting— No, well— Who are those people?

I'll let the president talk about that. But the bottom line is the bipartisan negotiations that we've had are going to continue, but there'll be a few additional players added to those. Thank you, everybody. All right, you have been watching Democratic congressional leaders Chuck schumer on the senate side and have been jeffries on the house side their side of what's happening in those negotiations a bit unless pointed then uh... what we were hearing from the republican side trying to it sounds like make it

make it seem like we should get closer together uh... that then what we're hearing from Kevin McCarthy and Mitch McConnell. But let's get back to the panel right now. Alejandra Grindahl, on this, I don't know, it seems like they're still pretty far apart. And maybe investors should expect this to run down to the wire, because it sounds like they're looking for who's to blame if this doesn't come together quickly. So what should investors expect? How are you positioned on this one? It's a great question.

And it was nice to be able to listen to those comments because I would say there are two key takeaways. One good news, one bad news. To start off with the bad news, to your point, I don't think there's going to be a resolution until the X date. So for the time being, I think markets are going to be a little worried and jittery until we hear an actual result. In terms of the good news, so I always have to put

that in. I liked how pretty much both McCarthy as well as Schumer mentioned that debt default was off the table. So it's good that that understanding is there because as we know, that wouldn't be good for the economy. It wouldn't be good for the global economy, potential financial risks. And the comment from McCarthy about, you know, we have to pay off our debts. Well, if you look at where the trajectory, according to the CBO, of where a lot of the government spending is going to see the growth in, it's actually in interest payments. And so if we default on our debt, I can't see that number actually getting any better. So at least if there's an ounce of good news, there seem to be broad agreement that the debt default is off limits, at least for now. Yeah. Adam, I want to get your reaction to

what we've just heard, the fact that we are seeing these debates. We've got, what, 15 days left. Consensus right now in the market is that a deal is going to get done. In the meantime, I saw an interesting note today that maybe a savior for retail spending has been the unexpected source of T-bill interest that is helping to boost savings for some consumers right now, as we have seen shorter duration treasuries paying more in part because of some of the angst of the recent past several weeks. Yeah, I think I think the tone coming out of this meeting was certainly, you know, a little bit more conciliatory than we've been hearing. It does sound like there is movement towards a compromise.

There have been reports about how Democrats in the White House were entertaining some of the work requirement demands from Republicans, and the Republicans perhaps were, you know, moving a little bit away from some of the more draconian spending cuts they were demanding. So definitely, you know, some progress in the meeting and the tone. You actually did see CDS costs on five-year CDS on U.S. Treasuries coming in a little bit today. So I think the market feels a little bit more relaxed about this topic. Definitely coming right down to the wire, unfortunately, you know, two weeks until June 1st, which could be the X date. I'm clear on the precise X date is, but obviously we're coming right up to that deadline. You know, but a little bit of movement in the right direction coming out of this White House

meeting. All right. One more data point for investors to sort through in what has been a lot of mixed messaging from a macro standpoint. Guys, thanks for kicking off the hour with us, Alejandra and Adam. And OpenAI CEO Sam Altman testifying on Capitol Hill today on artificial intelligence regulations as well. Steve Kovach has the highlights on that. Hi, Steve. Yeah, Morgan, busy day in D.C. OpenAI CEO Sam Altman testifying in a House Judiciary Subcommittee today as Congress weighs how to regulate the rapidly evolving technology. Now, Altman, in his prepared remarks,

proposing Congress pass a law that grants licenses to AI companies that meet certain standards for safety. Overall, though, the hearing was more of a learning session for senators, with some like Senator Chris Coons admitting the U.S. government was too slow to rein in the power of today's tech giants. And Altman welcoming the regulation, telling me after the hearing he hopes Congress doesn't miss the chance to take action now, especially as the EU barrels forward on its own AI regulations. Here's what he said. If they don't, then the industry does what we think we should do anyway. We can't control what every player does.

We've said a lot about the things that we want to do, that we hope other people will do. I think on the positive side, the industry does take the gravity of this very seriously, but I still think we'd be all better served by the government. Now, Morgan, other issues coming up as well, including Senator Marsha Blackburn's concern over AI tools using copyrighted material without permission, or Senator Hawley's concern AI can be used to manipulate ads and content across social media networks. But the overall message from the hearing was clear and bipartisan. There's a lot of promise with AI, but it needs guardrails now before it gets out of control. Morgan.

All right, I will take it, Steve. And wow, you got a full Washington wardrobe makeover. I really did. The tie and everything. Yes, Steve Kovach, we're going to stick with AI here subject-wise. Cloudflare announcing this week new developer tools and partnerships to make generative AI tools faster and more secure. Cloudflare CEO Matthew Prince joins us now. Matthew, good to have you. It's not just

about faster and more secure, also safer for businesses to use. Back when GPT-4 was first announced, we knew it was coming out. I think Samsung pulled back on letting employees use it because they felt like some of their intellectual property was getting out into the wild in a way that was unsafe. You've got a product and an approach that's gonna prevent that, you say? Yeah, that's exactly right. So regardless of whether you're allowed to or not,

the latest data says that nearly half of employees and companies are using AI tools, and about two thirds of them are doing so without telling their employers. And I think AI is going to be part of business going forward. And so at Cloudflare, what we're trying to do is provide the guardrails that say, here is data that you can have shared to an external AI company. Here's data that we can only use to our internal AI tools. And then here's the data that we're going to actually say isn't going to ever touch AI AI at all I think providing those guardrails and giving

that that power to employers is exactly what we need in order to make sure that there are safe use of AI in businesses around the world now if you this reminds me of the consumerization of IT phase we went through 15 or so years ago, when you had also early SaaS products moving in to IT and corporate environments in a freemium model. And eventually people realized we can't do this because we're putting too much data into clouds where we don't have control over, we don't know where it's going. Do you think AI is going to travel the same trajectory where there's going to have to be some standardization with vendors, including perhaps Cloudflare, that IT knows it can trust, not just individual employees running content through various generative AI models? I think that's exactly right. And that's what we're trying to get in front of is how do we make sure that the same way that we had a shadow IT problem across businesses around the uniquely positioned to do this is because today, so much of the AI universe

sits behind Cloudflare and uses us. And so we can sit as that intermediary to make sure that as businesses say, we want to harness the power of AI, that they can also make sure that they keep their secrets and that they don't let it out. What's difficult about AI is once AI learns about some secret, it's almost impossible to exfiltrate it and bring it out of the system. It's like taking a bunch of grad students and having them run through your secret data. Even if you say, hey, don't ever use that again, they've learned something in that process. And so it's really more important than ever

for businesses to have the controls in place in order to keep their secrets out of these AI systems. And at Cloudflare, we're committed to building those controls to make sure that businesses can get the most out of AI, but keep their secrets safe. So, Matthew, the fact that you have a developer week underway right now, you have this R2, this infrastructure that is powering AI companies. How does what you're talking about, how does R2 speak to that? And how does it speak to how important the infrastructure component of all of this is when there is so much demand for cloud computing right now? Yeah, one of the things that is a real challenge for AI companies,

not on the users of the AI, but on the companies that are actually building AI, is that they have to have these large data sets in order to train models. And right now there's an enormous scarcity in the GPUs that they can use in order to train those models. And so they're always looking for where can they get the lowest cost and the most availability of GPU time across all of the big hyperscale public clouds.

The problem is that the hyperscale public clouds actually charge you to take your data out from them. And so you get locked in if you put your data in an AWS or a Google Cloud or a Microsoft Azure. And so what we have done with R2 is make it so that you can, as an AI company, store your data there and then look for wherever there is availability of GPUs across any of the major cloud providers. And that's why we're seeing AI company after AI company after AI company, a 270% increase year over year in AI companies signing up for Cloudflare. And if you look at AI companies, we're the leading technology vendor across all of them that they have in common. Okay, so let me bring this full circle here then.

If you were testifying before lawmakers about AI and guardrails, what would you say? I'd say that this is something that we should be watching extremely carefully. We should be thinking about, we should be making sure that companies understand what the consequences are. And Congress should be paying attention to this. And I think it's right that Congress is taking a look at this. But what I would caution is that we want to make sure that this is still an incredibly nascent technology. Even nine days ago, we saw different things in that rapid amount of iteration. And even a year ago, what was happening in AI didn't seem even possible. And so I think this is a place to watch carefully, but to move slowly as we think about what the regulation is going to be, because it is evolving incredibly quickly,

and we want to make sure that we don't shut down that innovation and development before it really gets started. Okay. Matthew Prince, CEO of CloudFlare. Thank you. And up next, the latest highlights from Tesla's shareholder meeting as we count down to our David Faber's interview with CEO Elon Musk. We'll be right back. Welcome back. CNBC senior markets commentator Michael Santoli joins us now from the New York Stock Exchange with a look at the weakest segment in the consumer sector. Mike.

Yeah, John, that would be retail, chain retailers specifically. So the Home Depot disappointment today, not welcome news, but also not totally surprising. If you look here, the XRT, basically equal weighted chain retailer ETF, has been by far the weakest in consumer discretionary. You see leisure and travel. So essentially the services industry has held up a whole lot better, of course, as have homebuilders. So it seems as if we were already waiting for this confirmation that the goods economy has been struggling. We had a big pull forward. Now, it also echoes what's been going on more broadly in consumer cycles. Some people might say, hey, the S&P is up 8% year to date. How can that be compatible with the potential for a recession and a fatigue

consumer down there? Well, if you looked at kind of my preferred basket of things like Whirlpool, Best Buy, Capital One, as well as GM, well, you see they've been headed right south. Also, a two-year chart. So essentially, the market's been bracing for the thing that the bears are talking about they're expecting, Morgan. Mike Santoli, thank you. Of course, we'll be watching for target earnings tomorrow morning. Tesla shareholder meeting is underway. Phil LeBeau is monitoring it for us and joins us with the details. Hi, Phil. Morgan, we're just getting to the good part of the presentation where Elon is talking about where Tesla is, where it is headed, where he would like it to go. And then we'll get the Q&A session from

shareholders who are in the audience. He hasn't made much news so far with one exception. And you see a lot of this at the Tesla annual meeting. It can be quite technical talking about their master plan number three right now. The one thing he did say at the very top is he said, yeah, we'll do a third party audit of cobalt mining. If you're familiar with what's happening with cobalt mining around the world, lots of concerns about child labor being used. And Elon Musk said, we don't use as much cobalt as we used to, but it's incumbent upon us to make sure that there's no child labor involved. That's the only news headline so far from this annual meeting, which has just kicked off. We're going to continue listening to it. The good part comes up in just a little bit. Morgan, that's when you get the Q&A from the

audience. And every once in a while, you get a nugget or two in there from Elon Musk. Yeah. And I'm going to be joining you at the Nasdaq for our 6 p.m. special when David Faber sits down to interview Elon Musk. Sounds like they might be starting a little late here with a shareholder meeting, if I'm reading between the lines. It's not uncommon for Elon to go a little long. True. All right, Philip. We'll see you in a little bit. You bet. We have a news alert on Western Alliance. Leslie Picker has the details. Hi, Leslie. Hey, Morgan. Yes, shares of Western Alliance surging in after hours after offering another quarter to date update on the status of deposits, among other aspects of their balance sheet. You can see their share is up 6.5 percent right now.

The company said that basically in three days it added in an additional $200 million. If you recall, last Thursday they provided a deposit update which showed that their quarter-to-date deposit growth through 5-9 was $1.8 billion. And today, they said quarter-to-date through 5-12 is $2 billion. So that amounts to about $200 million in additional deposits over a three-day period. Last week, shares up now 7.6%. But again, this is one of the more volatile banks we've seen in recent weeks, but they continue to bring in additional deposits, which the market, of course, is cheering today, John. Yeah, that's what a lot of people want to hear, Leslie. Thank you. And coming up, German software giant SAP, a big winner on Wall Street today after raising its revenue outlook and announcing a stock buyback worth up to 5 billion euros.

The CEO, Christian Klein, is going to discuss that and his company's bet on AI in an exclusive interview when Overtime. SAP kicking off its Sapphire customer conference today, showcasing how it's using AI across its portfolio. The software company also updating its 2025 guidance, raising the cloud and total revenue, excluding Qualtrics, which it agreed to sell earlier this year. Joining us now is SAP CEO Christian Klein, as well as our own Frank Holland.

Frank, take it away. All right, thanks a lot, Morgan. Christian, thank you so much for joining us from Sapphire. Great to see Klein, as well as our own Frank Holland. Frank, take it away. All right. Thanks a lot, Morgan. Christian, thank you so much for joining us from Sapphire. Great to see you, as always. Yeah, thanks for having me, Frank. All right. So today your stock is outperforming the Nasdaq and the S&P after you raised your guidance for fiscal year 2025. You also authorized an up to five billion dollar euro share buyback. Again, investors rewarding that decision. Give us a sense, we're going to get to the numbers of your business right now, the demand picture for your business right

now when it comes to cloud and on-prem in the U.S. and globally. I mean, first, the ambition and the ways of our guidance is just a result of the incredible strong momentum we have. Our tech is more relevant than ever. So no matter if a company needs to transform their business model, if we talk about resilient supply chain, or if we talk about running a sustainable business, this is all dependent on SAP. And you saw our announcements around AI today. And that actually leads us to the ambition that we can even further accelerate our total revenue growth in the years to come. All right. So a lot of confidence in the business right now. You actually just wrapped up your financial update a short time ago. You were joined by some of the other board members really digging into the

numbers of the business. I want to talk about the potential of AI. You've announced some pretty big partnerships, partnerships with IBM, Google and Microsoft when it comes to AI. Where do you see the immediate benefit for AI when it comes to revenue? And are you worried about regulation? We're talking a lot about regulation here in the U.S. with the congressional hearing. The EU Commission has also been, you know, very focused on AI regulation. Yeah, indeed, this is true. And this is why we have an open AI platform. And this is why you see also us closing so many partnerships.

And these partners want to also partner with us, with SAP, because our solutions are so relevant for our customers' business. So by embedding AI into our applications, we can touch business processes to drive automation. We can infuse intelligence into their pricing, into their consumer handling. And this is what makes SAP so special in the area of AI. And with regard to regulations in the European Union,

this is why we also partner with European AI companies like Aleph Alpha to also satisfy the needs of the public sector in Europe, but of course also in other regulated industries around the world. Hey Christian, it's John Fort. I'm sitting here in Las Vegas at ServiceNow's conference.

We're going to talk about AI here. The CEO here at ServiceNow, you know well, we're going to have on the program tomorrow. But my question is a bit about, I guess you could call it defense. When there are big technology transitions like the one we're looking at with AI,

sometimes yesterday's strength can be tomorrow's weakness. SAP has a huge portfolio of successful applications, and you're going to have dozens of smaller companies trying to gain share on you using AI and each one of them. So how are you going to battle that? What should investors think of as your advantages in this environment to actually defend that share and perhaps take some in some instances? Yeah. First of all, you should come over to Orlando to feel the excitement here on the show floor. And then second, I mean, you've seen our incredible momentum in the last two years.

We accelerate our total revenue growth. We have an incredible momentum in our cloud business. We are winning market share. And AI, we are embedding AI in all of our applications. accelerate our total revenue growth. We have an incredible momentum in our cloud business. We are winning market share. And AI, we are embedding AI in all of our applications. And that will drive further business for SAP. SAP is more relevant with our technology than ever. And this is what you also have seen

in our updated guidance today, where we increase our total revenue ambition by over 3.8 billion euro. Okay, but let me just take, say, Concur as an example. There are other travel apps that are trying to build in AI to make that process faster, more adaptable, more personalized. Is it speed that's going to help SAP to maintain its position there? Is it the partnerships like the ones that you announced today?

What's going to keep those barbarians from the gates? I mean, first of all, we already built in AI heavily into our Concord application. So take all the compliance checks or finding the cheapest flights, the cheapest hotel. This is what has been done by human beings before, it's done today by AI. Embedded into Concur out of the box. And then of course, overall, you saw our announcement with Microsoft on Generative AI, which will redefine how companies will recruit and educate their people. And there are many, many more AI use cases in the

pipeline. So we are really embedding more AI use cases in the pipeline. So we are really embedding AI across our portfolio, which will drive further momentum for our portfolio. Christian, it's Morgan. I'm going to channel an interview that happened with John on this show last week, which was Arvind Krishna from IBM, where he talked about what AI is going to do to the labor force and this idea that white-collar clutter jobs that you're going to see something like 30% of

those go away at least at that company but that overall you're going to see more need for more roles as AI becomes more entrenched in businesses and in the economy. How do you see it? I mean first of all for sure also, you know, use internally more and more AI use cases to drive productivity, to accelerate growth. But given that our overall growth momentum is so strong, you know, we don't see necessarily a reduction of workforce. But what we're going to see is that we will grow and accelerate our total revenue while we are keeping our headcount growth, of course, underproportional. Hey, Christian, it's Frank again.

You know, my ears perked up when you said supply chain. That's something Morgan and I both know very well. Not that long ago, Palantir CEO said the biggest demand he saw for their AI product was in supply chain and also manufacturing. Give us a sense. What sectors are you seeing the biggest demand for AI in right now? And what are your customers saying to you about how they want to transform their businesses in areas outside of the traditional areas we look at when it comes to generative AI?

See, one more reason why you should come next year to Orlando. There was Pfizer on stage in the morning, and they were talking about SAP supply chain portfolio in the context of AI. So in the past, there was a lot of workload needed to actually predict the demand and optimize the supply. Now with our solution, integrated business planning solution, AI helps to predict the demand and optimize the supply and the inventory of our customers, which is used. In the case of Pfizer, it helped them to increase the productivity in their supply chain by over 20%.

All right. Well, Christian, we appreciate you joining us from this conference. Christian Klein, SAP CEO, and Frank Holland, thank you for bringing us this interview. Morgan, thank you. Thank you, thank you. Up next, the CEO of Latin America's largest digital bank, NewBank.

The outlook for digital banking after posting record revenue for the last quarter. Stay with us. Welcome back to Overtime. Check out New Holdings, the fintech company that is the parent of NewBank. Posting a strong Q1, topping estimates for revenue, gross profit and adjusted net income, thanks partly to higher credit originations and improving cost efficiency. The stock up about 1 percent today, but up over 50 percent in 2023. Joining us now is David Veles, NewBank CEO and founder.

Welcome to the show. It's great to have you on. I do want to start with the fact that you've been able to the show. It's great to have you on. I do want to start with the fact that you've been able to achieve profitability and, according to a number of metrics, outperform peers and traditional banks in Latin America, despite the tough macro environment. How have you been able to do it? Hi, Morgan. Thanks for having me. Sure. We are surfing what is fundamentally a different wave here in fintech in Latin America. The story that we've been benefiting from, it was a landscape, a market that was very much concentrated by five banks about 10 years ago, where there was a significant lack of access.

About 250 million people in Latin America did not have any access to banking services. And the bank population was paying some of the highest interest rates and fees in the world. And so we launched about 10 years ago with obsession on the consumer, being fully digitally native, using the advantage of the business model on behalf of the consumer by offering products that have less fees and better consumer experience. And ultimately, that has been a wave that continues accelerating our growth to even today where we have 80 million customers in Latin America. Almost 50% of the Brazilian adult population is now a customer of Nubank. And with that growth is coming significant profitability over the past 12 months

as we've been able to gain significant operating leverage. We're able to serve those 80 million customers with about 8,000 people. Central lines, we don't need any banking branches. We don't need a lot of expensive infrastructure. So we're starting to really see the benefits and the power of full digital banking that ultimately should translate in 20x lower cost to serve than traditional banks. Yeah, that 46% of the adult Brazilian population is eye-popping. It really got my attention.

The fact that you are doing this credit product expansion, and you're in credit cards and payment accounts and personal loans, insurance policies, you've got trading customers as well, but the fact that you're expanding your products, why do you feel confident doing that despite the fact that we have seen more globally this banking turmoil playing out in real time right now? Yeah, so our story really is about taking share. We're not necessarily giving credit to people yet that don't have it. We are taking share from five banks that had over 85 percent of the entire market. So while we have 46 percent of the adult population of the country,

we're being able to cherry pick the best type of customers that where we have significant story, where we've opened bank accounts and are getting their salaries every day and ultimately giving them additional more products. So we are surfing a wave that is almost uncorrelated with the market, regardless of whether GDP is growing 3% or 0% or negative 3%.

People want to be served better. People want to be paying less fees. People want to have more access. And that is ultimately what has been driving our growth now and through the 10 years. We've been seeing through that decade, and we're turning 10 tomorrow, we've been seeing a really adverse macro crisis here in Brazil consistently. So we're almost used to seeing this entire macro scenario. But the benefit of operating in a market like Brazil is that once you launch, you're actually able to launch a product that is 10x better than what traditional competitors are able to offer.

Well, David, hi, it's John Ford. I want to ask you a question about the globally interconnected nature of the financial system. So in what we sometimes refer to as emerging markets in Brazil, the rest of Latin America, how much of a risk is the U.S. debt ceiling negotiation and the volatility it could bring to global financial markets? If we get really close to default, even if we don't here in the U.S., what's the potential impact on Brazil and the rest of Latin America? Yeah, so U.S. plays a really important role, obviously, in the main market globally in financial services. So anything that happens in the U.S. ripples through emerging markets, ripples really around the world.

In this specific case, I think we would expect to see more volatility. We've been seeing a lot of volatility over the past 12 months, a lot of that volatility in Brazil coming from the U.S. But in reality, when you actually look at Brazil, specifically at the Brazilian banking sector, it's extremely solid. And it's extremely solid because it has had a regulator that 20 years ago had to deal with these banking prices. It instituted a number of different regulatory reforms that forced a lot of conservativeness in effectively every player in the industry. So we would expect some volatility, but it's not that different from the volatility we've seen over the past few months.

And ultimately, people down here are doing their job. Companies are moving forward. We continue to grow. We continue to serve customers. And it would be one more blip in a lot of tumultuous 2023 and 2022. Well, we'll see if you're reporting the storm. David, thank you. Thank you. Target and Cisco headline tomorrow's huge slate of earnings. What to expect from those reports and some key housing data when Overtime returns. Welcome back to Overtime. It is going to be another busy day tomorrow. We're going to get more insight on the consumer with some key earnings from Target and TJX.

We're also going to get housing starts, building permits. That's before the bell. Now, after the bell, Dow Components, Cisco, and some gaming with Take-Two Interactive reporting quarterly numbers. And here is something else to watch tomorrow. We're going to bring you some exclusives on overtime. ServiceNow CEO Bill McDermott from right here in Las Vegas, along with Nvidia CEO Jensen Huang. I'm going to have them with some news.

Morgan, I think we're going to talk a little AI and more than that too. We're very excited, and certainly tech conference season seems to be upon us here right now. Nvidia was actually one of the outperformers in the broader market. It sold off like the rest of the market into the close, but still finishing up 1%. It would seem every AI headline we get or major development we get, this stock tends to move higher. Yeah, I mean, it's like we've got the Tesla shareholder meeting happening right now, and of course our David Faber is going to have that sit down afterward. But Tesla and NVIDIA have been a couple of those stocks.

Just over the last several years have been on these amazing runs. AI has been a big part of the NVIDIA story for a long time, along with some of the mixed reality stuff that we expect to be a theme for Apple going forward as well. So a lot to touch on with Jensen Huang and Bill McDermott. Yeah. And of course, maybe if you get a little bit of time, maybe you play a couple hands of blackjack. Enjoy Vegas, baby. All right. I never gamble in Vegas, Morgan. All right. Well, we're looking forward to that tomorrow. It's going to be a big show.

That is going to do it for us here at Overtime with all the major averages finishing the day lower. Fast money begins right now.