Closing Bell - Closing Bell Overtime: Cummins CEO On AI Impact On Demand; How Grand Theft Auto Is Hitting Take-Two’s Stock 5/16/24

Episode Date: May 16, 2024

The Dow topped 40,000 for the first time ever before turning lower at the close. Cummins CEO Jennifer Rumsey on raising the company’s long-term financial targets, plus the demand picture for its power generators amid the AI boom. The Bahnsen Group’s David Bahnsen and RBC’s Lori Calvasina break down where markets go from here. Earnings from Applied Materials and Take-Two. Bernstein’s Stacy Rasgon on where we are in the semiconductor cycle. Our Melissa Repko on what Walmart’s earnings mean about the state of the consumer. 

Well, minor moves for the major averages today, but a push higher earlier in the session sent the Dow above 40,000 for the first time ever. We had intraday records for the S&P and Nasdaq earlier in the session as well. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Yeah, and coming up this hour, earnings from Chipmaker Applied Materials and GameMaker Take-Two Interactive. We're going to bring you those results and instant analyst reaction. Plus, the CEO of industrial firm Cummins will join us as the company hosts its Investor Day, raises long-term guidance after a solid run so far this year.

This is one of those stealth industrial AI plays, I might add. All right, but we're going to start with this bull market and the Dow topping at least briefly 40,000 for the first time ever. The Nasdaq and S&P 500 touching intraday records as well on hopes that rate cuts are likely to come this year. And joining us now is David Bonson of the Bonson Group and Laurie Kovacina of RBC Capital Markets. Guys, good afternoon. So, David, the Dow kissed 40K and then ran away. S&P is flat around 5,300. If you're a long-term investor looking to deploy capital, do you do it with an eye on the Fed or do you wait until the market's not about watching the Fed anymore? Well, you have to do it with individual investors' risk tolerance in mind because of

timing risk and entry risks. Statistically, there's no question the better thing to do is to deploy sooner when you're talking about the Dow. The S&P being market cap weighted and being so top heavy and us just being very valuation conscious, I'm a little more hesitant to put capital into the index in that sense. The Dow tends to have more value oriented names that doesn't have nearly the same valuation issue. At 40,000 Dow, you're investing for 100,000 Dow. It's going to happen in the lifetimes of people that are in their 40s and 50s. It just is. But I think right now, in terms of timing and the Fed and certainly the multiples you're buying for the S&P, it could pay to be a little patient. OK, well, Laurie, your valuation work has been suggesting a 5200, 5300 is fair value. If core

inflation falls to two and a half percent Ten-year yields come down to 4. We get one to two cuts, you say. So what would it take to justify 5,400 from here, since we're sitting right at the top of that range? Well, look, it's a great question. And look, I would say our valuation model, we always say it's a compass, not a GPS. It kind of gets you in the right neighborhood,

not necessarily to the right street address. But generally, I would say that what we really need to see is greater than anticipated deceleration and inflation. Or perhaps you could also get greater than expected relief on the interest rate front. I'm a little bit more optimistic about the former than the latter. But generally, we found in the post-COVID environment, PE multiples are acting a lot like they did back in the 70s, which is that they're really taking their cues and be acting very inversely correlated with inflation trends. So that's really the first thing that jumps to mind. Also, I think we can look at the economic forecasts.

One of the things I've been talking to investors about today is how really it's going to be getting time to start thinking about 2025 pretty soon, as hard as it is to believe. And economic forecasts, while they've really ratcheted up for 2024, they're still pretty sluggish for 2025, sitting at about 1.7 percent. So if we were to start to see optimism on 2025 really pick up, I think that could power stocks for this year as well. David, I do want to get your thoughts on earnings and the role that earnings growth is going to play in this market as we are hovering right near record highs. I mean, look no further than Walmart. It finished the day up 7 percent, a big move for that name. It pushed consumer staples higher, was the only sector in the S&P to actually finish today higher. And a key part of it wasn't wasn't just the beat on the quarter,

but the fact that they raised their full year guidance one quarter in. We're seeing some of that among other sectors and other companies, and certainly among strategists who think that earnings growth is actually going to be stronger through the second half of the year. How do you see it? Well, the problem is that so much of that is priced in. We're big holders of Walmart. We've been invested in it for over 15 years. And a 7% move in Walmart today came because it was not expected. The problem is that at 22 times forward earnings for the S&P, they're already expecting 11% earnings growth this year and 13% next year. And that requires a revenue growth and a market multiple that, to me, is very priced for perfection. Walmart wasn't priced for perfection. A number of consumer

staples names this quarter have not been priced for perfection. That, to me, is where investors are going to find better value. All right. Well, speaking of earnings, Applied Materials results are out, and Christina Parts Nevelis has the numbers for us. Hi, Christina. Hi. Well, this is a chip equipment maker Materials results are out. Christina Parts Nevelis has the numbers for us. Hi, Christina. Hi. Well, this is a chip equipment maker. And what we're seeing for EPS and revenues in Q2 was a beat on the top and bottom line. EPS, $2.09 on revenues of $6.65 billion. Talking about guidance, Q3 guidance, a little bit better.

Not crazy better, but a little bit better. 1.83 to $2.19. The midpoint is $2.01. That's higher than what the street was anticipating. On Q3, revenue guidance of $6.65 billion. Keep in mind for our audience that about 65% of the revenue for this company comes from the Foundry Logic business. The other remainder, over 35% comes from memory. And we know that memory has been improving over the last little while, so that was one of the drivers for this company. All right, Christina, thanks for seeing shares fluctuate here in after hours. David, I'm going to go back to you on this one before I pivot to Lori, because I know you have thoughts on semis.

I know you're invested in some names in the broader semiconductor space. Your thoughts? Well, for us as dividend growth investors, it's an interesting space because there's names that don't offer anything. And then there's names that don't offer anything, and then there's names that are really quite robust. Broadcom is a name we own quite significantly, and different than Applied Materials that just came out, different than NVIDIA that has virtually no yield. You understand Broadcom is paying you 30% per year on what you invested 10 years ago. The dividend has grown 33 times and the stock price is up 33 times, 2000 percent over 10 years. But the dividend growth is drive has driven it.

That's why we like semis that have that cash flow growth. Texas Instruments and Broadcom are in our portfolio. But we can't get excited about the more speculative stuff like NVIDIA at 75 times earnings. I do want to mention Take-Two Interactive results are out as well. The stock is initially lower. We're going through those. We'll bring them to you as soon as we've got them. Lori, I don't want to necessarily – I know you're not a video game analyst, but it's just so interesting to me to see the way certain companies, both in the video game industry and just who are a part of it,

Microsoft comes to mind, are pulling back from some areas of spend and investment in order to invest, say, in AI. And maybe we're seeing that across the board as money flows in to companies like NVIDIA. Do you model for that at all when you think about what's worth investing in? Hi, so it's a great question. And look, I think the reality is that if you go back and look at the AI theme, you know, we do sort of think about that from a top-down perspective. And really, we've been thinking about it a lot recently because the messaging has changed week to week over this past reporting season. If you go back to kind of week one-ish when all the financials were coming out, we heard a lot of financial companies, some banks, some non-banks say,

hey, wait, hold your horses. This is going to take a while to play out. It might be 2026 before this is going to impact our bottom line. And so the AI trade sort of started off with a negative tone. And then we got to the companies that were helping other companies do the work. And I think they sent a pretty reassuring message saying, look, this is going to take time, but we're going to be there and help with the build out. And then we ended reporting season with utility companies talking about AI and the boost of power demand. I was hearing getting an earful about that from clients in recent weeks.

So it has been, you know, sort of an interesting theme. And I think it's just been really fascinating to see how it's evolved the last few weeks in terms of the conversation. Yeah, we're going to dig into that with Cummins CEO a little bit later this hour as well. Lori Calvisina, David Bonson, thanks for joining us and kicking off the hour after we hit record highs during the trading session for all the major averages, but ended up drifting lower to end the session. And as we just mentioned, take two interactive earnings are out. Steve Kovac has those numbers. Steve. Hey there, John. And shares are down about 3% on this one.

They were down as much as 11%, now down 4%. Let me show you what's happening here. We got an EPS loss of $17.02. We are not comparing that to the estimates. And revenues, though, that was a beat, $1.35 billion versus the $1.29 billion the street was looking for. And this is what seems to be really dragging things down, the full-year revenue guidance. This is for their fiscal 2025. It is pretty significantly below expectations here. I'll tell you why in a second. They're guiding towards up to $5.65 billion. The street was looking for nearly $7 billion for full-year revenue guidance. Reason for that, they're putting a more specific date for Grand Theft Auto. This is the new Grand Theft Auto game launching next year. Before they said

2025, a lot of people took that to mean more in the first half of the year. They're saying GTA 6 isn't going to launch until fall of 2025. So that probably is contributing here to the lower they expect to guide its guys. Steve, did you say $17.02 loss? Yeah. When they were expecting a $0.09 adjustment. But we're not comparing that. They did have some layoffs and some other wonky charges.

So we're not comparing that to estimates right now. So that would be why the stock is bouncing around, I imagine, and lots of ears going to be on that conference call. And then, of course, the GTA thing, too, and the guidance lower. That's another thing. $17.02. That's a lot. Yeah. A little clarification there. All right, Steve Kovac, thank you. Let's get back to the Dow hitting the 40,000 milestone for the first time today. Mike Santoli had his Dow 40,000, his Dow 40K hat sitting on his desk waiting for this moment. Remember we used to have those hats? He joins us now. Yeah, you know, the kindness of strangers has me prepared for the Dow 40,000, Morgan. It's a,

you know, it's a eye-catching number, but also worth keeping in mind that the Dow has kind of been the straggler among the major indexes for this last stretch of time. So here's a five-year chart. See that pretty big spread. It amounts to about four percentage points annualized, lagging the Dow versus the S&P 500. We know why. It's the big mega cap growth stocks that have dominated this run in the S&P 500, not close to being equally represented in the Dow, which is a price-weighted index. It's a little more distributed among older economy stocks, even though it does now have Amazon and Apple and others. Now, what's interesting is if you go over a longer time span, there's really sometimes not as much variation. So this is going back to 24 years, basically right after the ultimate stock market peak in the year 2000, the early part of that year. And you've seen basically they're neck and neck. And for most of that period, after we peaked and after we had this huge growth stock bubble,

the Dow maintained a lead. And so what usually happens is in rougher markets, the Dow holds its value better. It's a bit more defensive. And then in bull markets, the S&P will race ahead. And, you know, often by a lot, as we're seeing in recent years, Morgan. I mean, we look at this chart. Is this ex-dividend? I just wonder how much dividends factor into. Yes, no, this is not dividends. This is just price. And, you know, dividends would probably give a slight advantage to the Dow based on the starting point. Got it. It might also explain why the Dow would be the average to hold in tougher times, arguably, too.

Yes, exactly. And there's also the mix. It just is a little more, you know, we got the Walmarts and the P&Gs and a lot of health care in there as well. So it tends and also just more mature companies. All right. Mike Santoli, thank you. See you in a bit.

Up next, we're going to talk more about Applied Materials earnings and the company's place in the red hot semiconductor market with longtime chips analyst Stacey Raskin. And later, Walmart, by far the top performing stock in both the Dow and the S&P today, hitting a record high on the back of strong earnings. We will talk about the read-through for the consumer and if Target can deliver similar results when it reports next week. Overtime is back in two. Welcome back. Some news just crossing on restaurant chain Cracker Barrel. The company giving an update on its strategic transformation plan, saying it's lowering guidance and cutting its dividend to 25 cents per share from $1.30 per share. The company's CEO writing in a release that

executing its plan, quote, will require increased investment in our business, and we have reduced our dividends so that we can allocate capital to generate organic growth and drive meaningful value creation over time. You can see those shares right now are down about 5.5% here in overtime. Yeah. Well, shares of Applied Materials are also falling in overtime, despite reporting a beat on the top and bottom lines on their earnings just moments ago. Down now about two and a half percent. Let's bring in Stacey Rasgun of Bernstein Research to discuss. Stacey, how much can we react just to these numbers, which look to me to be a little above expectations? How much do we have to hear about health in China and some other things to decide how investors should feel about this report? Yeah, look, overall, the numbers are fine.

It was a small to modest beat and raise, but things are certainly holding up. You know, a good beat on a decent beat on the top line and the bottom line. The guides, they're very solid. China revenues are still strong. They've actually came down a little bit in the quarter. I actually think that's a good thing because everybody's worried about sustainability of China. It's still high, though.

It was 43% of revenue. Came down a little bit, though, but overall, revenues, even with that, are still holding up just fine. I think it's good. I think if the stock's down a little bit, I mean, clearly numbers are not going to go up a lot on this print. They're guided above, but not a ton. So numbers will probably hang around in here. Semi cap in general, the valuation is a little elevated. That may explain a little bit of the sell off. But I mean, in general, this is a very good print. Is this a time for investors to be worried about the boom-bust cycle, or do

you stick with a name like Applied? Just because of all the foundry business that there is, people are clearly excited about advanced nodes because of AI, and so you'd think there's going to be steady demand. I actually think we didn't see very much of an actual boom-bust in Semicap this cycle, which is sort of unusual. Semicap has been pretty robust. I mean, 23 was a down year for wafer fabrication spending, but not very much. We still did mid-90 billions last year, which is really good on the back of China and some other things. And I think if you're looking ahead, I am of the belief that the China spending is likely sustainable for now. Memory spending like like DRAM, is very strong on

the back of AI. And in terms of NAND flash, there's almost no NAND in AMAT's report or in any of these reports because NAND is so weak. That's all on the come in terms of that recovery. I think the outlook for spending as we go into next year actually looks pretty good. And I'd say AMAT has know managed through this better than most of the others they have a more balanced revenue profile so they didn't get caught by as much of the memory swings as some of their peers did um they actually have if everybody's worried about china their their china exposure is high like everybody's but theirs is the lowest of everybody's if that's a good thing and i think they're exposed to some of the longer term secular issues like gate all around and leading edge demand.

AI and high bandwidth memory, all these things there, the packaging. These are things that I think are going to be really important structurally going forward. And they probably have the highest exposure to all of those. And it's actually the cheapest of all the big five semi caps. I actually like it. OK, it's like you took it's like you took the question out of my mouth. Does that mean, especially as you see shares dipping lower here, that this is the name you would buy right now? Or do you like something else better? Within semi-cap, I prefer AMAT. But I'm a long-term semi-cap bull in general. Over the long term, I think you get on the basket.

The correlations are pretty high if you have a multi-year horizon. But if I've got to pick one, I always tend to lean a little more toward AMAT than some of the others. But it doesn't mean I don't like the others. I like the space in general. Okay. Stacey Raskin, thanks for joining us. Atlanta Fed President Raphael Bostic just making some headlines. Steve Leisman has the details for us. Hi, Steve. Hey, Morgan. Yeah, Raphael Bostic the Atlanta Fed president, saying any way that you look at it, April inflation came in lower than had been the case so far this year. He says the outlook for now and for the rest of the year is for inflation to come down and for the Fed to cut rates later this year.

But he cautions nothing is locked in. No particular path for the Fed is going to depend on the data. Also cautions that one month does not a trend make but he was pretty happy about what he saw cautioning still there's still a lot of pricing pressure in the economy but says anecdotally that he's hearing that uh companies that he talks to can't necessarily price pass along pricing increases the way they used to he is pleased with the inflation progress enabled but fed is not there yet so morgan's still interesting that he was one of the sort of became more hawkers going to one cut this year.

Now he's maybe more in the middle, a touch dovish in that he's still talking about rate cuts. Interesting, especially given the fact that he is a voting member this year as well. Steve Leisman, thank you. Exactly. Take two's earnings call is about to kick off. We're going to talk to an analyst about what he wants to hear from management on the call and why the timeline for Grand Theft Auto 6 is so important to investors. And check out shares of Doximity, the online connection service, sort of networking and marketing for medical professionals. That stock is moving higher quite a bit, about 8% after earnings beat by 5 cents at 25 cents a share.

Revenue topped estimates, too, at $118 million. Overtime, we'll be right back. Welcome back. It's two thumbs down for Take-Two's fourth quarter results. Those shares are falling after the full year revenue guidance came in significantly below Wall Street's estimates. The company also pushing back the release date of Grand Theft Auto 6 to the fall of 2025. They didn't push it back. They just narrowed it. And it was further in the year than I think expectations had been in the market.

Joining us now is Brandon Ross from LightShed Partners. Brandon, that's exactly where I'm going to start, because Grand Theft Auto really seems to be what has folks captivated right now. The fact that it's not going to be hitting until later in the year, how meaningful is that? So that's why the stock's down. I mean, if you look at the quarter itself that they just reported, it came in better than what analysts and investors were expecting. You saw some real improvements on the mobile side. You saw NBA 2K, which has been a little bit of a problem, kind of re-accelerating its growth. But the number one thing for this company is getting GTA 6 out there. GTA is the largest entertainment franchise in the world. The GTA 5 sold 195 million units,

and everyone's been laser-focused on that step function and earning from GTA 6 coming out. Okay, so it means when GTA 6 does come out eventually, the expectations will be high, and perhaps it'll be a much rosier picture. But it also raises questions about just how, I guess, even though it has many different types of games, just how undiversified that revenue stream is, how much of it is tied up in one blockbuster hit. What can Take-Two do to,

I guess, expand beyond that narrative? Yeah, I mean, look, GTA is obviously an outsized contributor in years when the when new game has come. But if you look at the earnings profile of the company, it's been a strong contributor for the last several years. But the biggest contributor is is their basketball game, NBA 2K. And they added on Zynga and mobile has been a big part of the story. So they actually have worked to diversify the earning space. It's just there's so much anticipation around this game because of how big it's going to be, not just from unit sales, but improving Grand Theft Auto online. And investors have been impatient. The thing is, everyone expected it to come out in March of next year, of 2025. Now it's probably going to be six

months later than that. For the long term of this company, does it matter? Absolutely not. For short term investors, it matters, and it's moving the stock down 4% now. But for the long-term of this company, two years from now, everyone will forget. Brandon, taking a step back, what is it that's ailing the software portion of the video game industry? I mean, over the past few days, we've seen Microsoft pulling back on some creative award-winning studios saying they're going to double down on some of their main tentpole titles. We're seeing this push later from take two. I mean, at a time when AI tools are supposed to be making it easier for developers to generate code, it's certainly not happening in the video game

space. What does this say at this increasingly connected broadband connected time about just productivity and getting stuff out? Is there something wrong happening here in the industry? No, I mean, if you look at, we'll start with the GTA specifically, Rockstar is always kind of a perfectionist and they often push back titles. So let's put that aside. But the industry at large, coming out of COVID, where you saw kind of a little bit of a step function in the overall player base, was planning for more continuation of that growth. And it just simply never happened. Additionally, things like subscription and streaming, a lot of these companies were fairly bullish on that. We actually haven't been. But they invested in a lot of games outside of their core for that

eventuality. And it just hasn't come to fruition. And Microsoft is actually the number one offender. Yeah, you don't have to say it. I was searching for the word, but the number one offender. They bet their future, right? They spent, what, $75 billion on an acquisition to get Call of Duty for subscription, and subscription growth is absolutely anemic. Right. Yeah, some video game fans feeling betrayed, frankly, by that and the cloud gaming thing not showing up anytime soon. Brandon Ross, great insight on what's happening there with Take-Two and the industry at large. Thank you. Thanks so much. Meanwhile, time for a CNBC News update with Kate Rogers. Kate. Hey there, John. The Trump hush money trial now done for the day after Michael Cohen faced cross-examination from Donald Trump's defense team, where they tried to undermine his credibility by

arguing that he lied under oath in order to get revenge on the former president. Cohen will be back on the stand Monday. Court is off tomorrow so that Trump can attend his son Barron's high school graduation. The Republican-controlled House Judiciary Committee this afternoon voted to hold Attorney General Merrick Garland in contempt for not handing over audio tapes from special counsel Robert Herr's interview with President Biden during his classified documents probe. The president asserted executive privilege on the tapes earlier today in an effort to block the DOJ from turning them over. And finally, with recent reports of possible bird flu infections in dairy cattle, the USDA announced today a new study showing that after cooking

ground beef to temps between medium and well done, no virus was found. Scientists injected high levels of the virus into the beef, then cooked it to get those results. But in burgers cooked rare, reduced levels of the virus were still present. Back over to you. All right. Kate Rogers, thank you. I guess the takeaway, cook your meat. After the break, there's a certain phrase showing up again and again on earnings calls that could be a positive sign for the inflation picture in America. Mike Santoli returns. He's going to explain. Stay with us.

Welcome back to Overtime. Recent earnings calls showing a shift in what companies are focused on. There might be some positive signals there on inflation. Mike Santoli's back. Mike, what are they? Well, John, first of all, what's said on conference calls tends not to be accidental. There's usually an intention in terms of the message that companies want to communicate. Goldman Sachs crunched the numbers on a couple of phrases in terms of most recent conference call transcripts. And then going back. So expense management had this huge surge in the latest couple of quarters, in particular, the latest

quarter. And then pricing power takes the almost commensurate decline over the over a couple of quarters ago. So obviously, companies collectively and this, by the way, is the percentage of S&P 500 companies that have mentioned either of these phrases. Collectively, it does suggest that companies don't feel as if they can push price quite as much. They all want to maybe in the first quarter convey that they're in a year of efficiency. Maybe not great news in terms of their own spending plans or headcount, but probably good news in terms of what a lot of Fed officials and others would like to see in terms of the trajectory of overall inflation. Mike, anything we should take away from the fact that late 2019,

or maybe it's 2018 there, based on the way it's set up. That's 16, yeah. Well, no, I mean, after that, the next one, where the last time we had a divergence like this, where orange was headed down and blue was headed up, was, you know, was that. It's late cycle. I mean, I think that's part of it. And that was before you had the spike in inflation in general during covid, which means that companies were not as much in the habit. That's also what's interesting here is they have not collectively

been in the habit of bragging about pricing power except for that period there right during and after the pandemic. All right. Mike Santoli, thank you. Up next, the CEO of Engine Maker comments on how the AI boom is helping to drive huge opportunities for her company and GameStop and AMC falling sharply for a second straight day as the meme mania from the beginning of the week fades. Despite today's losses, though, both stocks are still up roughly 70 percent on the week. Stay with us. Welcome back to Overtime. Check out shares of Cummins closing lower today, down about one and a half percent, but still near an all time high. The maker of engines and power generators, raising long term financial targets for revenue and adjusted EBITDA growth at the Investor Day today. Now, I sat down with Cummins CEO and Chair Jennifer Rumsey exclusively, and I asked her about what's

driving that longer-term growth, especially as the company's power solutions business, which makes generators, is seeing a surge in demand tied to data centers and this AI build-out boom. One of the exciting opportunities for Cummins is in the power generation space and we've done a lot of work over the last 18 months to really strengthen the position and performance of our power systems business and with this strong trend for backup power needs in data center applications that really benefits and drives a large secular growth opportunity for power systems and our distribution business that also supports customers in the data center market. We also see opportunities to continue to grow our Accelera by Cummins business, which is focused on zero emission solutions, is relatively small today. We're projecting $450 to $500 million of revenue

in 2024 and growing that to $3 to $9 billion by 2030. And then our engine and components business, we continue to see content growth on the back of emissions regulations and evolving customer needs. And our OEM customers continuing to look to Cummins to meet their needs as they're facing the variety of investment choices that they have to make. And we're continuing to invest in these key components. I want to get into Acceleron more, but first, just one more question in terms of what you are seeing on the power generation side. Is this a secular trend as we do see more pressure being put and not just by data centers, but by electrification in general, by, you know, reindustrialization? Are you seeing this as a longer term secular growth opportunity? Yeah, for sure. I think the need for growing power in our country is a long term need based

on data centers, based on electrification and the data centers by themselves. I think we all recognize the increasing use of data, of digitization, of AI that's going to drive this trend to continue. We announced today we're doubling the capacity in our business to be able to support data center PowerGen customers. I'm really excited about that opportunity for our business. We've been very focused on what's going on in the EV market for consumers. In fact, there's been more of a shift towards hybrids. What are you seeing on the commercial side? What are you seeing within trucks and OEMs

there when it comes to some of these next generation new energy alternatives that you are developing? Yeah, I mean, what I would say is in commercial vehicles, it's important to realize that there's a range of different applications and that multiple solutions are required. And in general, our customers are running businesses, the economics matter, and the power requirements, the range requirements are higher. So what that means is it's more challenging for us to electrify a lot of these applications compared to cars. We are today, we have more than 1,500 buses in North America operating with our electrified

power solution. So that's an application that's starting to move. The reason our Destination Zero strategy is investing in a range of solutions is we believe that's critical for our customers to decarbonize while continuing to serve their business needs and the economy that they support for all of us. Are we finally on the verge of significant adoption of natural gas engines for trucks? Yeah, so let me just talk about a couple of the key investments and technologies that we think are important right now for commercial vehicles. One is we've announced we're investing a billion dollars in our U.S. manufacturing plants for our HELM engine platforms,

which stands for high efficiency, low emission, multi-fuel. So that will be high efficiency diesel, meaningfully reducing CO2 emissions and fuel consumption for our customers. And then we have natural gas variants of that. And we're launching our new heavy duty natural gas engine into the market today. We project that that may see growth up to about 8% share. So it's still a relatively small portion of the overall solution. But for some of our customers that have near-term sustainability goals, they see that as the most cost-effective, reliable way to meet their needs. At the same time, we're investing in Accelera by Cummins in zero-emission solutions.

And we formed a partnership earlier this year with PACCAR, Daimler Truck, and EVE Energy to localize battery cell manufacturing here in the U.S., focused on commercial vehicle applications. That'll create 2,000 new jobs here in the U.S. So we're investing across a range of things. That's really the core of our destination zero strategy in action. How much does regulation matter to this entire conversation? How you're investing? What adoption rates are going to look like, especially as we do see, for example, on the trucking side, we're going through a freight recession period right now. You got

high interest rates. But then on the other, you have these incentives that have been rolled out by the government. Yeah, they're really critical regulations and incentives are are critical because these technologies cost more today and our customers you know it's very difficult for efficiency reliability and cost to replace the diesel engine and you need a different infrastructure so those incentives that help create infrastructure build out and offset some of that higher cost today so that we can scale up these new technologies and make them more cost effective is critical. We're making big investments as are others in the industry. And so having that regulatory certainty

that allows us to invest and bring these solutions to market in a way that makes sense and allows it to evolve over time is really important for this decarbonization journey. Well, Ramsey is really focused on this, quote, destination zero strategy for Cummins that they've been executing on for a couple of years, continue with. Says this energy transition will be, quote, long and messy, though. Cummins continues to sell its core diesel engines and components, which allows it to invest in some of these new technologies like battery packs. Cummins has done some acquisitions over the past few years. So I've asked if she's still acquisitive.

And she said they're being very selective. They're very focused on investing in the strong portfolio they have right now. John, it was interesting because some of this commentary really did remind me of Honeywell's CEO, Vimal Kapoor, and what he had to say as that company thinks about this energy transition with its own portfolio as well. Yeah, lots of changes. Interesting stuff. Now we've got some news on Reddit just crossing. Kate Rooney has that story. Kate. Hey, John. Shares of Reddit are up more than 5% or so after hours after announcing they are partnering with OpenAI.

It's Reddit's latest partnership in the AI space as far as training and some of these big AI companies. Three bullet points that they lay out here, guys. Open AI, first, will bring Reddit content to chat GPT and new products. They say it's going to help users discover and engage with some of the Reddit communities out there. They say to do so, Open AI will access Reddit's data API, which provides real-time structured and unique content from Reddit. They say it will also enable OpenAI's tools to better understand and showcase Reddit content. They go on to say the partnership is going to enable Reddit to bring some new AI-powered features to Redditors and to mods,

and Reddit is going to be building an OpenAI's platform as well and using OpenAI's models. And then OpenAI will also become a Reddit advertising partner. And as I mentioned, guys, Reddit has already signed a training deal with Google, but you can see Streetlight says someone up more than 11% now after hours. Back over to you. Yeah, back up near those highs of a couple days ago, Kate. Thanks. Up next, what Walmart's sales surge says about the state of the consumer and what it might mean for Target's earnings next week.

And later, new details about a clash for control over a major copper miner, why it could have a widespread impact on Wall Street. Welcome back to Overtime. Walmart, the top performer in the Dow today after beating Wall Street's profit estimates, thanks in part to stronger than expected same-store sales. Our Melissa Repko joins us for a look at what's driving those gains and what it might mean for Target's results next week. What do you say? Walmart got a boost from online sales and a gain market share from higher-income shoppers.

The discounter has pulled pages from rival Amazon's playbook as it makes money from advertising, membership programs, and its third-party marketplace. CFO John David Rainey told me a third of Walmart's operating income growth in the quarter came from those newer businesses. Rainey said customers' wallets are still stretched, but inflation comes with a silver lining for the nation's largest grocer. He said shoppers are turning to its aisles for cheaper meals as the price gap widens between groceries and fast food. Walmart's strong results could be a warning sign for Target, which reports earnings Wednesday.

Some of Walmart's affluent shoppers may be coming from its stores, and Target has a much smaller grocery business, with Category driving 20% of sales compared to nearly 60% at Walmart. Melissa, I hear you. At the same time, though, Target's shares are well off those March highs. It looks like maybe the expectations are lower. So is there an opportunity here perhaps for some of those higher-end customers to remain loyal at Target and at least have them beat some lowered expectations.

That's a very good point. A lot of investors are betting on Target simply because the bar has been so low for the company. So it's less about the fundamentals of the company and more about Target's had such a rough patch that if it does just decently, it may still see its stock move. I do want to go back to what you had to say, though, about groceries and about the fact that they're competing in this inflationary environment. They're competing against fast food restaurants because there was a time not that long ago and it was pretty distorted when it happened, but it was actually cheaper to go out and eat in restaurants than to,

you know, gather the groceries at home based on some of the metrics and some of the data. So the fact that this has reversed and that Walmart's taking advantage of this, walk me through it. So the CFO spoke about this, that the gap has widened. And if you look at the CPI numbers that came out this week, the numbers bear it out that, you know, food at home versus food away is dramatically different. Food at home is, you know, what people buy from the grocery store, packing a lunch instead of getting it at McDonald's or getting it even at a place like Sweetgreen. And we've seen a mixed bag from these restaurants, but McDonald's has reported slower sales and Starbucks has posted some struggles. And it does raise questions. Are people making their coffee at home? Are they skipping getting the burger and

cooking instead? And Walmart's trying to exploit this. It actually came out with a new premium line of food recently. And a lot of those types of things, I mean, one of them is restaurant style chicken wings. That's directly going after places like Wingstop. Are they getting the omni-channel kind of buy online, pick up in store benefit as well? Because they've got those big stores often in those convenient locations. They are. That is one of their key advantages over Amazon. But interestingly, John David Rainey, their CFO, told me that for the first time, Walmart actually had more deliveries with its online business than pickups. It's really relied on its store pickups for online orders.

That's changed, and that's an interesting mix. And again, you know, potentially shots fired for Amazon as those two continue to compete, and Walmart tries to maintain the throne as the nation's largest retailer. Well, it speaks to the logistics footprint Walmart is building out as well. Exactly. We don't talk about it enough. Two big ones.

All right. Speaking of, cue the QR code, because that fast food stuff leads in perfectly to the latest installment of my On the Other Hand newsletter. In this week's debate, will McDonald's upcoming special $5 value menu help drive cost-conscious consumers back to its restaurants? You can scan that QR code on your screen, join the conversation, or just type in CNBC.com slash O-T-O-H.

Gotta love a QR code on Closing Bell Overtime. Well, up next, the latest deal drama in the battle for a major copper miner and why it could impact your investments. And don't forget, you can catch us on the go by following the Closing Belt Overtime podcast on your favorite podcast app. We'll be right back. Welcome back. Here's a look at some of today's big overtime movers. Reddit is jumping on a news of a partnership with OpenAI that'll bring Reddit content to chat GPT. Reddit also saying OpenAI will become an advertising partner. Take-Two Interactive moving lower.

The company says it expects the release of Grand Theft Auto 6 to come in the fall of 2025. Doximity, meanwhile, popping after beating on EPS and revenue. And restaurant chain Cracker Barrel is sinking after cutting its dividend and lowering guidance. Well, it's the biggest deal drama we haven't talked about. BHP's proposed takeover of mining rival Anglo American. This is a process that over the past few weeks has yielded two rejected buyout offers and the unveiling of Anglo American's own turnaround strategy this week. BHP most recently proposed a $43 billion all-share buyout, what would be the largest mining deal on record. That would involve divesting

Anglo's iron ore and platinum assets. Anglo argues it significantly undervalues the company, then presented, we'll call it a similar restructuring of its own, with plans to spin off platinum, divest potentially the De Beers diamond unit, several other assets, all of this amid an investor conference, where, as BHP weighs its next move, CEO Mike Henry and his team made their case directly to shareholders. Now, at the heart of this deal, though, copper. Copper futures have been trading at record highs this week, but over the longer term, industry forecasts there will be a major deficit as the world moves to cleaner energy, AI takes hold, and we see the build-out of other infrastructure. Freeport-McMoran has actually talked to us about this. Now, Anglo

is attractive for its copper assets in Chile and Peru. BHP, as we've discussed on Overtime with Mike Henry in the past, has been methodically positioning itself in industrial metals, metals like copper, nickel, also potash, that it believes will benefit from these secular growth trends. The clock is ticking. BHP has until May 22nd, so next week under UK law, to make a formal offer or walk away. BHP plans to be very disciplined about this and Anglo has yet to engage. But some analysts do believe that BHP may still make one final bid per JP Morgan earlier this week. We believe that if Anglo shareholders response to the proposed simplification is not broadly supportive, this increases the opportunity for BHP

or another interloper to succeed with another superior offer, which could potentially include a BHP cash component. So the clock is ticking. We'll see how this plays out. And while neither of these companies are American companies or headquartered in the U.S., we're talking about two of the largest miners on the global stage that have much bigger implications in terms of what happens to the future of these assets at a time where industrial metals and industrial commodities are really having a moment. Yeah. Questions about demand behind all of that as well. Not a lot of questions about demand for the Dow, though.

Kissing 40K today. That's always something to watch. It was like a peck on the cheek. Yeah, a little peck on the cheek. But it was exciting, right? Much like a peck on the cheek. Yeah, a little peck on the cheek. But it was exciting, right? Much like a peck on the cheek can be. Meme stocks, though, as we mentioned, falling off of that high. Coinbase, too. Even though Bitcoin held up fine, Coinbase having a rough day. Yeah. The name that did shoot higher, though, was AST Space

Mobile on that AT&T news we broke here in overtime yesterday. That's going to do it for us here at overtime, though. Yeah, more to come tomorrow. For now, Fast Money starts now.