Closing Bell - Closing Bell Overtime: Charles Schwab Chief Investment Strategist Liz Ann Sonders On The Market, Volatility; Snowflake, Zoom Report Earnings 8/21/24

Episode Date: August 21, 2024

Major averages moved higher in the final minutes of trade, sending the Dow higher for the month. Snowflake and Zoom report earnings; we have analysts on each to break down what you need to know. Plus, Liz Ann Sonders, Charles Schwab Chief Investment Strategist talks market positioning and navigating volatility. Our Robert Frank reports on LVMH’s Bernard Arnault recent investments in AI

Well, that bell marks the end of regulation. Advanced drainage systems ringing the closing bell at the New York Stock Exchange. The United States Tennis Association and 2024 U.S. Open doing the honors at the NASDAQ. It starts largely resuming their upward march financials. The only S&P sector firmly in the red energy about flatline as the Fed signals a September cut with consumer names taking the lead after Target hit the mark on earnings. And that's the scorecard on Wall Street. But winners stay late.

Welcome to Closing Bell Overtime. I'm John Ford. Morgan Brennan is off today. And we are moments away from a flood of earnings results, including Wolfspeed, Snowflake, Synopsys, Urban Outfitters, Zoom, and more. We're going to bring you those as soon as they cross. Plus, Charles Schwab, Chief Investment Strategist, Lizanne Saunders on why Fed Chair Powell might not sound as dovish as investors hope at Jackson Hole in just a couple of days. But let's break down today's market action now with our guests. Joining me here is Lori Calvacino from RBC Capital Markets. Also, Barbara Duran from BD8 Capital. Guys, welcome. Lori, you feel good still

about your year-end S&P target here, 5,700. That's less than 2% upside from here. And what do you think about this adjusted jobs growth data? A lot of disagreement about what it means. No, I thought Mike Santoli had some interesting comments in the last segment. I mean, look, I think that at this point in time, we saw, you know, a pretty good move in discretionary stocks today. We saw a good move in small caps. And, you know, we've been playing this game is bad data good or is bad data bad? And I think at least for today, maybe some bad data was at least good for some of those more interest rate sensitive areas, right? So small caps typically do well when we think the Fed is going to cut. Consumer discretionary stocks do well when interest rates are falling.

And for today, at least, I think the market sort of looked at that and said, OK, you know, we're going to get that cut. Not that there was a huge amount of doubt, but maybe it just, you know, calmed some nerves a little bit. Is old bad data, Laurie, the same as new bad data? I think that the old bad data, you know, my read of that, right, is the number came in worse than what our economists were expecting. And I think most economists around the street. So maybe that's what's causing people to sort of sit up and take notice. If everybody missed this, and we've had a lot of those stories this year where everybody in the economics community pretty much misses a print. But if it was that bad, you know, maybe that causes the Fed to take notice and really just sort of cements the idea.

Things were not quite as good as we thought they were. And, you know, maybe it just increases, you know, increases the need that they actually have to go and reduces the risk that something causes them to change their mind. OK, and Barb, you take all of this in and you say we're still in a pretty good spot. Mega caps, you think, can continue, but don't chase them. Exactly. And I think we've seen in the last rebound, the sharp rebound we've had, you know, since the that sell off just a few Mondays ago. And it was the mega cap tech that led last week. So I think that, you know, what the what investors are seeing is that these are strong secular growers with long runways of growth.

And any time you get a chance to buy them, you can. And the fact is, they're not all that expensive, you know, depending which one you're looking at. Alphabet still 24 times, Meta at 29 times. And these are companies the earnings estimates will be coming up. So I think, you know, mega cap tech, you still have to be in. And I think what you're continuing to see is chasing other sectors, you know, whether some people you'll hear some people say this is going to be, this is late cycle. Others say with the Fed cutting, it goes back to an early cycle. So you have this constant chasing, you know, of areas. So it's basically looking for laggards and things that haven't performed. Okay. So Lori, what do you do when you're this close to your overall target S&P wise? You're

just looking for pullbacks, looking for opportunities that might arise beneath the surface? I think so. And, you know, we put a note out earlier this week, and we said, you know, we're feeling good, but we're still aware that there's probably some choppiness that's going to be waiting for us post-Labor Day. And I think, you know, a lot of the debates we're going through, maybe not so much the Fed, right,

but sort of the state of the economy, the state of the consumer. What does the election mean for markets, right? I don't think these are things that are going to go away just because the calendar turns, everyone goes on vacation and, you know, comes back ready to go. I think that we're still going to be fighting, debating, thinking about all those things. And when I look at, you know, sort of that 5,700 mark, I do have a couple of models. I have five models that I used to come up with my target. A couple of those are pointing me to 5,800. So fine, maybe there's some upside risk to my number. But when I look at my valuation work, and I'll spare you all the

details on the math on that, but we look at interest rates, inflation, the Fed, come up with a target PE multiple. 5,600 on our math is basically already baking in. All these cuts from the Fed everyone's looking at and benign inflation kind of running down to 2% on PCE. So we think the market's already baking, you know, in kind of that 5,600, 5,700 range, you know, pretty optimistic outcome on inflation and the Fed. So, Lori, do you have to rework your model with these jobs growth adjustments? So I think that's really going to be more of an impact on earnings. We've actually found GDP is not the most consistent indicator for the P.E. multiple. We could do a special on that.

So we won't get into that here. But I do think the interest rate inflation moves get the multiple up. Then you start debating the economy. Then you start debating jobs, what does the consumer do, how does that impact your S&P revenues, right? That's where there could be some drag, and that could affect some of the market numbers. Okay. I mentioned Snowflake, Zoom, Synopsys, all out. Snowflake is moving lower initially and of course we'll bring you all those numbers as soon as we get them. Let's see, yeah, Snowflake's down about

three percent at the moment, but it was a bit lower a moment ago and now it's lower again. This is the joy of overtime. Barb, particularly from some of these software names, and I'm going to pick on Snowflake here just because it picked on itself and came out. You have a number of companies moving from subscription models to consumption models, trying to prove that the value that they're offering really is leading to results for customers. Do we perhaps get a quicker view on what's happening kind of at the ground level with some of those stocks? You know, well, that is an interesting question. And I think, you know, it'll be interesting, the commentary on the call, because when you had the CrowdStrike Microsoft outage, that obviously affected

names like Snowflake, who do have a consumption-based model. And the question is, is that enough to get their customers thinking that maybe this isn't such a good idea? Yeah, so we'll see on Snowflake, there's a bunch of things that could be going on. They've had lots of delays in their sales cycle. It's really their customers delaying buying sales cycles, lengthening. So we'll see what's really happening with that. And I imagine, Lori, that when stocks like this move, if again, we're close to your overall targets, you're looking at, OK, how much of a one off is this? Is there an opportunity to buy it here? And you might have looked at a stock like CrowdStrike in that same view, not asking you specifically about those companies necessarily, but what kind of a filter do you put on whether this is really something that could head a lot

lower or this is an opportunity to get in? So I'll tell you what I'm looking at right now very closely are some work we do on industries. And so we look at things like software, semis, broad line retailers. And what I'd love ideally to see is a combination of cheap valuations relative to the broad market relative to history and improving earnings revision trends and i'm not really getting that in either place but i am getting cheap valuations in the broad line retailers right now interesting and now we got those snowflake numbers ready kate rogers has them kate hey john being in the top and bottom lines here for snowflake 18 cents adjusted eps there. Revenues also a beat here,

869 million better than the 851 million that analysts were looking for. The company's CEO said in a statement, the quarter was hallmarked by innovation and product delivery and great traction with the early stages of our new AI products. With a combination of our platform, the network effect of collaboration and our AI innovations. We've got a huge opportunity ahead to deliver even greater value to our customers. And also they wound up raising their product revenue guidance for the full year. But you can see the stock is lower just over 7 percent in the after hours. Back over to you. Interesting. OK, Kate, thanks. Now, don't miss Jim Kramer's exclusive interview with Snowflake CEO. That's coming up at 6 p.m. on Mad Money. Barb, what do you do with this? The top line numbers look OK on the quarter and raising product revenue guidance would be a good thing.

But this stock is dropping. Yeah, which is actually surprising because I think a lot of investors, you know, there are a lot of questions out there and, you know, they had they had their own security incident. How much is that affecting the fact that they beat on both, you know, they had their own security incident. How much was that affecting? The fact that they beat on both, you know, at the top line and EPS, the feeling was that they did that if they died higher, you know, for the second half, that could really get this stock going because the stock is down, I think, 33% year to date. And so obviously, you know, down a bit more. So the thought was that this is really discounting a lot of the issues. So it'll be quite, quite interesting and enlightening to see what management says on the call. OK, we'll be watching that, of course. Let's see. Are we keeping folks around or. OK, well, Barb, thank you, Lori, thank you.

And we got more earnings that keep on coming through. Wolfspeed earnings are out. That stock is down in overtime as well. Julia Boorstin, how do the numbers look? Hey, John, that's right. The stock is trading lower because the company reported an earnings miss, an adjusted loss of 89 cents versus estimated an expectation of a 85 cent per share loss. So bigger loss than expected. Revenue is right in line with expectations, but the stock is down 7 percent, also weighing on it on the stock. The company's fiscal first quarter revenue outlook lower than expected. The company guiding to between $185 million and $215 million in revenue versus the $212 million estimated. In the earnings release, the company also announcing that it is taking proactive steps to slow down the pace of its CapEx spending by approximately $200 million in fiscal 2025. They're looking to identify areas across their entire footprint to reduce operating costs. You

see shares now down about 6%. Back over to you. Julia, thanks. That's been a theme in semiconductors. We were just talking about Texas Instruments doing something similar yesterday and Intel, of course, as well. And now Zoom video earnings are out. Kate Rogers back with those numbers. Kate. Hi again, John. So another beat on the top and bottom lines here for Zoom. A dollar thirty nine adjusted EPS higher than the dollar twenty one that analysts were looking for. Revenues also beat one point one six billion higher than the one point one five billion. The street was looking for the stock up about two and a half percent here. Now, it also says it sees Q3 revenues in a range of $1.16 billion to $1.165 billion.

That's better than the $1.15 billion estimated. EPS also $1.29 to $1.31. That is higher than the $1.24 estimated by analysts. And finally, full-year revenues, also a better-than-expected range here, $4.63 billion to $4.64 billion, higher than the $4.62 billion that analysts are looking for. And EPS also better-than-expected range here for the full year, $5.29 to $5.64 billion, higher than the $4.62 billion that analysts are looking for. And EPS also better than expected range here for the full year, $5.29 to $5.32, better than the $5.05 that the street is looking for. Back over to you. All right. That raise the street seems to like in overtime up 3%, Kate. Thanks. Now let's turn, take a break, a breath from earnings for a moment. Senior

markets commentator Mike Santoli has got a look at consumer stocks after targets big move higher today. Mike. Yeah, John, we did get a bid in some of the consumer cyclicals today, some retail, some home builders. And you see that it enabled the equal weighted consumer discretionary sector relative to staples to really kind of bounce off the lower end of this range. This is a two-year chart of this relationship. And I pointed out like last week that it was just hanging in there above the sort of prior lower range. This is one of the main kind of bellwether relationships you would look at to say, is the market kind of building in a still decent economy or are we starting to roll over? And so far, so good. Again, this is equal weighted, to it accounts for, you know, take some of the big weights like Amazon and discretionary and Costco and Walmart in Staples.

Now, Target specifically up 11 percent today takes the stock back to where it was about three months ago. It had been very weak. And you see there's been some relief in the Target versus Walmart relationship. This goes back 20 years. So obviously it's bouncing right off near the lows. That was the sort of global financial crisis low, of course. And then you had another one there in the late 2010s. Now, the issue here is late in a cycle, Walmart tends to start to outperform as growth becomes a little more scarce.

Early in a cycle when spending is coming back on a discretionary side, Target has tended to outperform it. But then you had that massive run in Target during the pandemic, which was absolutely wild. And they seemed like they had Omnichannel figured out. They've been working that off for a while. So it's unclear, of course, at this point, if this is a blip higher or, in fact, if there's some mean reverse that would probably have Target outperformed for a little while longer, John.

Mike, you never bring us simple stuff, but I've got to ask a simple question and maybe you can help bring some insight into these charts. I think of Target as being more weighted toward wants than needs because Walmart is the biggest grocer out there. And yet, even though the first chart you showed had discretionary equal weighted, still outperforming the staples. Yeah. Walmart has outperformed Target. Yes, there's no doubt about it. And so I guess the way I would put it is, first of all, Target, you know, while it is a little more discretionary and general merchandise, it's categorized as a staple stock.

And I don't think that you have completely the sort of swing factor when people start to spend a lot. I think it's a lot more about Walmart being a very particular story right now. And it's growing its way out of just being, you know, necessities and just regular run rate of baseline spending because of e-commerce, because of advertising. It seems like they are kind of changing their character a little bit. And their valuation reflects that. So they've been given that generous that generous valuation to reflect all that. But if you look at everything else, I mean, discretionary doesn't just have retail in it. So, again, homebuilders and things like that have done better.

True, true. And there is a lot to Walmart as well, Mike. Thanks. Now, Synopsys earnings are out. Back to the earnings bonanza. Contessa Brewer has those numbers. Contessa. Hi there, John. We're looking at earnings that beat expectations coming in at 343 adjusted per share versus the consensus expectations of 328. Revenues coming in just slightly higher than what was expected, a billion, 1.53 billion versus the expectation 1.52 billion. The guidance here for the fiscal year, the midpoint just slightly lower than expectations that it's coming in with revenues. It looks like just slightly off on the midpoint there for the guidance, but the earnings per share guidance for the fiscal year, a little bit higher than we're seeing.

The stock right now up half a percent. The company basically is saying that its tech innovation, its integration is badly needed right now as customers are racing to figure out how to play their AI. And that's why they have such resiliency in their business, John. All right. So from software to chip design. Thank you, Contessa. To Urban Outfitters. Those earnings are out. Julia Boorstin has the numbers. Julia. Urban outfitters beating on the top and bottom lines. Earnings per share of a dollar 24 versus estimates of a dollar per share.

Revenues also coming in just a hair ahead of expected of expectations at one point three five billion dollars. But the total and the reason the stock is pretty much flat right now down just fract, is because the total comp store sales increased just 2 percent versus the 3 percent estimated. And we're seeing some disappointment in some of the brands. Urban Outfitters saw a 9 percent decrease in sales versus the 8 percent estimated. And if you look at some of these other divisions here, anthropology as well as free people, both growing just about 7% less than anticipated. So slower growth in those brands that were expected to be driving the company while Urban Outfitters worse than anticipated. Stock is flat right now. John, back over to you.

All right. Yeah, stock flat. And I guess given what it's been doing over the course of the year, that's not so bad, Julia. Thanks. Well, still ahead, much more reaction to all of these overtime movers. And up next, an analyst going to break down Snowflake's quarter and the read through for the rest of the cloud complex as that name takes this leg lower now down about 5%. Plus, Charles Schwab's Lizanne Saunders is going to share her latest thinking on the market and why more bouts of volatility could be on the horizon. Overtime's back in two. Agilent earnings are out. Contessa Brewer back with those numbers. Contessa. John, we're seeing a beat here for the earnings per share coming in at $1.32 versus the expected $1.26 estimate adjusted. And revenues coming in just slightly higher, $1.58 billion versus the streets' expectations of $1.56 billion.

The guidance, though, in line for revenue for the fourth quarter at $1.64 billion to maybe $1.69 billion, they say the expectation was $1.67. But the guidance is a bit low on fourth quarter earnings per share, $1.38 to $1.42, where the street's expecting $1.44. The company is saying that market conditions continue to be more challenged during this quarter and that it saw steady signs of improvement as it had anticipated. Those shares right now up 2% in the aftermarket trading, John. All right, Contessa, thanks. Looks like from looking at the chart, the expectations might not have been that high. Appreciate it. Well, Snowflake shares, as we mentioned earlier, under pressure,

down, well, you know, back down to some of the lower levels of the overtime session, down more than 6.5%. Let's bring in Gil Luria, senior software analyst at DA Davidson. He has a buy rating on the stock. Gil, were the expectations, whisper numbers, just really high here? It seems like they modestly beat on the top line, and they raised the product revenue guide, no? The revenue results are good. The revenue guidance is good. It keeps Snowflake in this rarefied air of a software company that can grow 30% at scale. The disappointment probably has more to do with the margins. They kept margin guidance the same for the year, which is a little

disappointment as they raise revenue guidance. But you really have to keep in mind that Snowflake's going through multiple transitions right now. It's transitioning its storage revenue. It's transitioning its go-to-market model. It has a new CEO who's investing a lot in the product growth. And they're spending a lot on AI resources by renting GPU capacity, especially from Azure. So those are a lot of margin headwinds that will go away. So what's more important is that the revenue is doing great, which is what they just reported.

So you seem to, I was expectedly, be making the case that this is a buy here. We also have the prospect of more direct competition showing up before too long from Databricks, which is one of the more hotly anticipated IPOs. It's been anticipated for a while. Who knows when it might happen? Would the emergence of more competitors in the space be a good thing for this name, clarifying the demand or no? It's mostly a two-horse race, and Databricks is a fantastic private company that we hope goes public soon and is actually growing faster than Snowflake because their focus has always been AI, where Snowflake has more morphed into facilitating AI.

Both of those companies can do very well. This is mostly a green field opportunity in terms of providing data warehouse, data lake services in the cloud. Most companies still have those on-prem. So we still have a ways to go. They can both win. And by the way, Microsoft is winning here as well. Well, that's what I wonder about, though, because you mentioned it earlier. If Snowflake's margins are somewhat pressured because they're paying Azure for AI services and then the hyperscalers are having to pay a lot of money to NVIDIA for the chips in this sense, can everybody really win?

Or if you have to keep paying for these NVIDIA chips and these hyperscaler services, do margins suffer and does a stock like snowflake stay range bound well at some point we're going to have to generate return on these investments and if that doesn't happen it's it's going to flow all the way down the chain and we've probably talked a little bit about the fact that at some point we're going to have that rationalization of capex by the hyper scalers but right now they're building scale and they need to charge somebody for it and they're charging software companies like Snowflake. This won't last forever.

At some point we're going to stay focused on what products are generating return on investment and that investment will moderate and therefore the headwind on margins should moderate as well. Okay. Yeah. I guess there's the argument to be made. If a customer like Snowflake doesn't eventually make money, they won't keep buying the stuff. Gil Luria, thank you.

Well, we've got breaking news on Disney. Julia Boorstin, back with details. Julia. Disney's board has named James Gorman as the chair of its succession planning committee. Gorman joined the Disney board earlier this year. Notably, he oversaw the succession process at Morgan Stanley, where he is executive chairman, previously, of course, chairman and CEO. Now, all of this comes ahead of the highly watched end of CEO Bob Iger's role as CEO that is scheduled to end at the end of calendar 2026. The committee now led by Gorman includes Mark Parker, who is the former chair of the board,

who is the current chairman of Dizzy's board, as well as former chairman of this succession committee. They are joined by Mary Barra and Calvin McDonald. So this is a very highly watched process. And they've talked in this release about how many times they've been meeting in this succession planning process. Back over to you. Okay. The internal question of what comes after Bob Iger. Thank you, Julia Borsten. Well, we've got more breaking news on Zoom. Kate Rogers back with that. Kate. Hi again, John. Zoom announcing in an AK filing that its CFO, Kelly Steckleberg, will be resigning from her role, saying that she notified the company several days ago that

she intended to leave, not as a result of any disagreement with the company, Zoom makes clear in the filing. And they also say they have started a search process to identify Kelly's successor. She will continue to serve as a CFO through the release of next quarter's earnings on October 31st, on a part-time basis, though, beginning on October 10th. So once again, Zoom CFO Kelly Steckelberg resigning from that position. As you can see, though, the stock is still higher by just under 4 percent, John, in the after hours. Back over to you.

Yeah. Kate, thank you. Well, when we come back, Lizanne Saunders from Charles Schwab on why investors might want to tamp down their expectations of how dovish Fed Chair Powell might be in his Jackson Hole remarks on Friday. And we'll talk to an analyst about Zoom's results and this CFO shakeup at the company when Overtime returns. Welcome back to Overtime. The major averages inching higher today with S&P 500 and NASDAQ up more than 1% week to date on hopes that a September rate cut is indeed on the table. This as Wall Street is waiting to hear more from Fed Chair Powell at Jackson Hole.

Joining us now is Charles Schwab, Chief Investment Strategist. Lizanne Saunders. Lizanne, always good to have you. So on the volatility, particularly early August volatility, was that a freak out or a foreshadowing? I don't think it was a foreshadowing or anything significant. That said, I'm not sure that the primary driver of that being the unwinding of the end carry trade is fully in the rearview mirror. I think there could still be some positioning-related volatility, but I think that kind of swing, what you saw on that August 5th

day was the biggest intraday spike in the VIX in history. And the same exact day, you had the biggest intraday decline in the VIX. So, I wouldn't expect a repeat of that. But when you get some of those extremes in volatility, it tends to be followed by more bouts of volatility, even if they're not that extreme. And there's lots of reasons to expect bouts of volatility, be it monetary policy uncertainty, economics uncertainty, and then, of course, the election. Yeah. Don't we tend to get a lot of volatility in the 100 days ahead of an election? We do. I would say I would express caution, though, for investors that think it's it's easier or appropriate to trade around potential election outcomes, be it at the sector level or more broadly. It happens. There's money that does that. But I think it's a bit of a

of a fool's errand. And there's still a yawning gap, as is generally the case, but probably particularly in this cycle between what is being proposed on the campaign trail and what can likely get done, given no matter what happens to the makeup of Congress, we're not likely to have major majority. So I think it's premature to start trading around post-election probabilities. Then what about trading around the volatility itself? I mean, if you have a thesis that you believe in, that you're comfortable with, and the volatility kind of creates some apparent opportunities value-wise there, should you jump on it? Well, I'd say maybe I wouldn't call it trade around volatility,

but one strategy that I think investors can employ is volatility-based rebalancing. A lot of investors do the rebalancing based on the calendar. They might do it quarterly like mutual funds do, or they might do it annually. And I think volatility does provide an opportunity to maybe do that more frequent or volatility-driven rebalancing, which just forces us to do a version of buy low, sell high, which is, you know, add low, trim high. And I think that's the way to think about some of these potential surges in volatility is use it to your advantage, not to try to trade in advance of it, but to take advantage of it from a rebalancing perspective. That's what I was wondering. And when Fed Chair Powell speaks, oftentimes there is movement. What do you expect

from his tone that might be different from what the mainstream is expecting? Well, you know, whether he is, I think he will probably essentially telegraph what he has been, which is a likely start to cuts in September. But I don't think he would go further than that and be particularly dovish, because when you have a Fed that is still very much data dependent, and that's what they emphasize, and you've still got important data between now and the September meeting, inclusive of PCE and the next monthly jobs report, I don't think it behooves Powell to express something that would be seen as more dovish than the positions he has had up until this point. So I think it's somewhat status quo with the BLS benchmark revisions today. You did see a little bit of a tick up in the probability of a 50 basis point hike,

but our base case is still that they'll move 25 basis points, barring something significant in terms of the incoming data. How significant do you think that revision was? It was about in the range, although the range was really wide from as low as an expectation of about a $300,000 downward revision, a 300,000 person downward revision to more than a million. So we were at 881, I think, or 818. That just means that instead of an average of about 240,000 payroll numbers on a monthly basis through the year ending in March of this year, you're at around 175. That's still a decent pace of payroll growth.

It does help to answer at least some of the questions around the disconnects within the labor market data, particularly over the last couple of years. The fact that the household survey measure of job creation shows 3 million less than the establishment survey, which generates payrolls. We didn't fully answer that with revisions, but we started to maybe put some pieces together to explain some of those cross currents that have existed within the labor market data. So it wasn't a huge surprise. And like I said, it moved the needle marginally, but that's just based on traders positioning. Okay. great insight as always. Lizanne Saunders, thank you.

Thanks, John. Well, it's time for a CNBC News update now with Bertha Coombs. Bertha. Hey, John. Robert F. Kennedy Jr.'s run for office may soon be ending. According to ABC News sources, the independent candidate plans to drop out of the race by the end of the week. Kennedy announced today that he is planning a speech Friday on, quote, his path forward. It comes after his running mate, Nicole Shanahan, told a podcast this week that the campaign faces a choice between staying in the election

or dropping out to support former President Trump. A fifth body has been found inside the superyacht that sank in a storm off Sicily Monday. Sources confirmed to Sky News one passenger remains missing. The victims have not yet been publicly identified. The recovery follows a days-long search off the coast of Italy where British tech tycoon Mike Lynch and others were believed to be trapped in that boat's hull. And Congress has subpoenaed Columbia University officials in connection with an

ongoing investigation of anti-Semitism on campus. The GOP-led House Education and Workforce Committee issued six subpoenas to school officials, including the interim president and some board members. John? All right, Bertha, thank you. Up next, are mutual fund holders missing out on big tech gains? Mike Santoli is going to return with a surprising look at the underexposure of those funds to the Magnificent Seven stocks. Over time, we'll be right back. Welcome back. Mike Santoli returns with a look at whether mutual funds are missing out on the returns from MAG7 stocks. Mike?

Yeah, John. You know, Goldman Sachs takes a pretty comprehensive look at the quarterly mutual fund holdings data, a breakdown where the bets have been laid. And, you know, even though everyone assumes that almost all funds owned a bunch of Magnificent 7 stocks on the way up. In fact, a lot of funds, either by rule of their own firm or by regulation, actually can't own a full complement relative to the index of these stocks. What you see here is different categories of mutual funds, and they're overweight or underweight of the Mag 7. The most dramatic underweight, of course, is growth funds, right?

They're like 14 percentage points underweight in the MAG-7. But guess what? The MAG-7 is 52 percent of the weighting of the benchmark growth index. So therefore, they still own 38 percent holdings in these seven stocks. So is that a lot? Is it a little? Is it enough? Is it not enough? That is a big question. And it shows you, by the way, what the index funds themselves, the massive bets that they have, because they just reflect what's going on. The average right here for all large cap funds is about a six or seven percent underweight. But again, it still means that they own well more than 20 percent of the fund in these seven stocks. And by the way, on the correction that culminated on August 5th, they actually were protected by being underweight, those areas. So

it is a matter of whether you think these will continue to be the leadership stocks as to whether this is a good thing or a liability. So, Mike, help me out here. Boiling it down, if I'm playing at home, how concerned should I be about the fact that the funds aren't holding the full complement here? I would say if you are the type to be overly concerned that these seven stocks are too big and the market is too concentrated and they're eating the entire index, then you can say, well, I guess actively managed mutual funds are one way around that because they're going to look elsewhere either by because they're forced to or because they choose to. And so that's not such a bad thing. But I guess, you know, if you feel as if they're they're hamstrung by their inability to own a full complement,

then index funds are right there. They don't cost much. Sounds like a good on the other hand, Mike. That's right. Up next, a top analyst reacts to Zoom's results and what he wants to hear from management on that call, which kicks off in just a few minutes. We'll be right back. Welcome back. Shares of Zoom are up about two and a half percent in overtime after a beat on the top and bottom lines. A strong guide for its fiscal third quarter. Zoom also announcing in an SEC filing that CFO Kelly Stuckelberg is resigning effective October 31st. Joining us now is Evercore ISI analyst Peter Levine. Peter, good to see you. So Zoom said Q2 would be the trough in growth, and it looks like that is the case given the guide from here. Are you concerned about the CFO departure at all?

I'm sure we'll hear more on the call. I'm a little surprised to see that now. Kelly's been with the company since the IPO. She's been a great CFO. So yeah, unfortunately, I don't have any comments until we hear from them. But yeah, a bit surprised to see her taking off. So from here, what can Zoom do with this $7.5 billion in cash that they've got to continue perhaps to instill investor confidence? They memorably tried to make an acquisition coming out of the pandemic that didn't pan out. Should they go on the M&A train again? I mean, I think they should. They're going to be sitting on $7.5 billion in cash. Free cash flow is up massively this quarter. They raised the

free cash flow guide. You know, that asset they were going to buy two and a half years ago at $15 billion is now $2.5 billion. So, you know, for Zoom at over $4 billion in revenue, you know, they have to buy a bigger asset to move the needle. And I think that's what investors are waiting for, to see some kind of catalyst, some kind of asset for them to kind of augment their growth above, call it mid to high teens. Even if we're talking about customer churn, how much does this mention of Zoom as part of the political cycle matter? It seems like it's being used as a way to add fuel to fundraisers. I think they raised the ceiling on how many people you could have on one of these massive Zoom calls. Any significance there?

I don't think it's a big part of that. Most consumers already have it. And you see these rallies that have 30,000 folks on these Zoom calls. Behind the scenes, there's really only one or two admin accounts that build around that. So I don't think it's much. I don't think it's a driver. If anything, it's good branding for Zoom, but I don't think it's much of a talent for these guys. How are they doing versus Microsoft? I think Zoom has taken the top seat in terms of video. It's the best platform. It's intuitive to use. And you've seen a lot of,

there's still some legacy video seats out there. And a lot of it's going to Zoom. Zoom's done a really good job of just owning that market. And again, to your other question, on the call, you should hear what they're talking about with contact center. Contact center is a huge growth driver for them, what they're doing with Zoom phone. And again, that competes with what Teams is doing. But in terms of them versus Teams, it looks like Zoom video at least has taken the top seat in that one. Do they have danger on the AI front in some way? I don't think it's danger. Zoom's done a good job of just giving it away for free. So I think it's a really good retention tool on Zoom's part to do that. And I think you see that

playing out today. Again, to your point, retention metrics, it looks like it's part to do that. And I think you see that playing out today. Again, to your point, retention metrics, it looks like it's troughed out. The idea was this would be the quarter it does trough out. So if that's the case, curious to see what the outlook looks like. But in terms of the AI narrative, I think it probably helps reduce churn for sure through giving these tools away to your customers. All right. It's just shy of 62 bucks a share here in overtime. Your target is 70. Peter Levine, thank you. Thank you. Up next, all the earnings movers that need to be on your radar as we count down to the analyst calls from Snowflake and from Zoom. Plus, the world's third richest man, Bernard Arnault, is using his personal fortune to make a

huge bet on artificial intelligence. Up next, why AI is becoming such a popular investment for the world's ultra wealthy. We'll be right back. Welcome back to Overtime. Let's get you caught up on some earnings movers. Snowflake beating on both lines, but the stock is pulling back more than 6%. Analyst Gil Luria telling us earlier that margin guidance might be the reason. Wolfspeed also moving lower about 4% after a mixed quarter, missing on earnings and matching revenue estimates. Urban Outfitters is lower by also about 4% despite beating on both lines.

Comps missed estimates across all brands. And one winner, software company Zora, is jumping after a big beat on the bottom line, solid third quarter guidance for that subscription economy software player. Now, one of the world's richest people is jumping on the AI bandwagon and using his personal fortune to make a big bet on five AI startups this year. Robert Frank has the details. Robert. John, good to see you.

Well, with a net worth of $190 billion, Bernardo No can buy a lot of things. Now he's shopping for AI companies. His family office has invested in five AI startups just this year. That's more than any other investment category. According to exclusive data from Fintrix, the Arnault family was part of a $220 million funding round in May for Holistic AI, now known as H. The French company is working on general AI and was founded by former members of Google's DeepMind project. Arnault also invested in Lamini, which he is, that's an enterprise AI company, and Proxima, that's a digital AI marketing company. Other investments include Borderless AI and PhotoRoom, that's an AI image editor. The total amount of his investments aren't disclosed, but he has a long history

of betting his personal money on tech. He was an early investor in Netflix, Spotify and Airbnb. Not all of his tech bets have paid off. He said he once invested in 75 Internet companies during the dotcom boom and quote, some of them made it. Many didn't. That's par for the course. AI is now the favorite private investment for all family offices. Seventy eight percent plan to invest in AI over the next 10 years. That, according to a new survey from UBS. So this is, AI is now the craze among family offices who have $6 trillion in capital to invest. So they could become sort of the new venture capital, or certainly part of that venture capital stream into the startups.

I believe that I've seen Arnaud hosting these get-togethers for various startups. It's almost like a conference in and of itself, maybe a pitch competition. And I imagine everybody wants to come to something that he's holding. That's an advantage in deal flow. Do you have a sense of what kind of other advantages he might offer to the startups who are a part of his ecosystem? Do they get introductions? Do they get access, perhaps, that helps? Or maybe even do they get used within some of these companies? Yeah, I think what I've heard from some of the companies just over LinkedIn in the past couple of days,

since my article came out, is they value it as a marketing connection. Bernard Arnault has invested in our company. He's the king of sort of, you know, knowing which companies will gain value. But I also, aside from a couple of luxury related companies, I don't think it's so much can we use them within LVMH. I do think he has a large team within his family office who is probably well connected in the venture capital and tech world. And there probably are a lot of

connections that are made there. Plus, he's got five kids who are all, I know, some of them very interested in technology. So even if he's not personally going into these companies, giving management advice, or bringing them into LVMH, I'm sure that the kids are also very involved. He's so globally connected, too. I imagine for European companies, startups in particular, that connection would be especially valuable. I was surprised, and I know you wouldn't be, but how many French AI companies there are. Three of these five are French companies. And, you know, right now when it comes to applications of AI, not the big foundational models,

but the specific application where you're talking about photo, you're talking about search, there are a lot of these companies in the UK, in France. And so I think that's where his ecosystem in the French business culture. He probably knows which of those companies has the best shot. Certainly the best management. Well, as we just learned at the Olympics, don't sleep on France. That's right. Thanks. Well, make sure to scan this QR code coming up on your screen right now to subscribe to Robert Frank's Inside Wealth

newsletter. He's got a lot more on the world of high net worth investors and individuals. Up next, what to expect from another big day of tech and retail earnings coming up, plus potential market moving news from the Fed. Over time, we'll be right back. Welcome back to Overtime. The earnings parade marches on again tomorrow. Before the bell, we'll get results from Peloton, Advance Auto Parts, BJ's Wholesale, TD Bank, and Baidu. And then in overtime, we'll break down numbers from Intuit, Workday, Bill Holdings, Ross Stores, and Kava.

And on the economic front, investors will digest the weekly jobless claims and the July existing home sales report. And Wall Street, of course, is going to be listening very closely when the Fed's Jackson Hole Symposium begins tomorrow. CNBC will be bringing you several big Fed interviews beginning on Squawk Box at 7.30 a.m. Mike Santoli back with us. Mike, I'm curious to hear more your take on these jobs growth revisions. And there's the question of how much undocumented workers might factor into that. And so does this mean that the initial numbers were more reflective of reality or that these revised numbers are more reflective of reality? I have to believe the revised numbers are slightly more reflective, but I think it's important to recognize like nobody had a job before that doesn't have one now. It's all about the bookkeeping. It's all about us telling the story of exactly how much

momentum the job market had, which I think is why weekly unemployment claims tomorrow has a bit more prominence. It's real time. It's the state based data, even though there's some glitches in it. Usually, you know, you can you can take a fix on it and figure out how that filters into this whole Jackson Hole conversation. So in a way, old bad news isn't such bad news because things are OK now. It's really not. No. Easier to shrug off. All right.

Mike Santoli, thank you. That's going to do it for overtime.