Closing Bell - Closing Bell Overtime: Databricks CEO On Possible IPO Timeline; Lucid Motors CEO On Aston Martin Deal 6/26/23

Episode Date: June 26, 2023

Averages closed in the red, near the lows of the session. Neuberger Berman’s CIO breaks down the market action and gives his second half playbook. Eurasia Group President Iam Bremmer breaks down what’s next for Europe and the US. Lucid Motors CEO Peter Rawlinson discusses his company’s deal with Aston Martin that sent the stock higher today. Nucor CEO Leon Topalian talks Nucor’s upbeat guidance and infrastructure spending amid rising rates. Databricks CEO Ali Ghodsi on MosaicML and what’s next for the company. Plus Richard Haass talks geopolitical fallout from the weekend events in Russia. 

Well, the S&P and NASDAQ, especially in the red, the Dow's about flat. That's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort here with Morgan Brennan, and we have got a jam-packed show coming your way. We're going to talk to two expert voices on geopolitics, Ian Bremmer and Richard Haass, about the turmoil in Russia over the weekend and the potential impact on global stability and the markets. Plus, three CEO interviews. You do not want to miss the CEO of Lucid Motors on a new deal with Aston Martin,

the head of Steelmaker Nucor, on demand for the Bellwether Metal, and the CEO of Databricks on today's big AI acquisition news. And now the S&P and NASDAQ, as I mentioned, closing lower today. Fifth negative day in the last six for those indices. But all three major averages still positive for the month as we head into this final trading week of June. Joining us now, Joseph Amato, Neuberger Berman Group CIO. Joe, good to see you. So not a huge reaction, hey, from the market on the weekend's Russia turmoil, but it certainly did remind us that we don't know everything because I don't know that a lot of people saw this coming.

That's sort of one of your medium term things that you're looking at, even though in the near term, no recession expected. Am I right? Certainly, the geopolitical issues are always going to be front and center. The surprises of the last couple of days were just that. They were surprises, but it was quickly seemed to be pushed to the side. I think there are other issues related to, for instance, U.S.-China relations that probably have a broader economic impact. But I think the larger point is the economy, particularly here in the U.S., has proven to be more resilient over the course of the last couple of quarters. And that's extended

out most of the projections for slower economic activity. And one of the reasons that we've gotten a bit more optimistic is both because the Fed has taken a pause and for all intents and purposes is probably done raising rates and earnings are holding up better than we would have anticipated. OK, so you also sort of oversee fixed income over there at Neuberger Berman. And given that the Fed is just about done, if not completely done, on the rate rises. How is this rise in short-term rates and the digestion that we're going to experience over the next few months and quarters, the rest of the year? How should investors perhaps reposition now based on that and based on the pretty strong first half that equities had? Well, certainly equities had an extraordinary first half that equities had? Well, certainly equities had an extraordinary first

half. I think you've got to appreciate, though, that it's been a bifurcated first half in many respects because you've got, while the broad index, particularly S&P 500, has performed quite well, it's really two indices, right? You've had a group of, as you guys have talked a lot about, and viewers are well aware, you have a group of mega cap technology stocks that have performed extraordinarily well. That group of super seven, if you will, are up 60 plus percent over the course of the first half of this year. The other 490 whatever stocks in the S&P 500 are basically modestly up, more reflecting kind of the meandering economic activity.

While stabilized, economic activity hasn't been particularly robust. But we've moved to neutralize. You know, as we've talked about in this program and in past discussions, we've been underweight equities. And that's been so far this year the wrong call because equities have performed relatively well. So we've neutralized our bet because the Fed has done and we've pushed out that time frame for a slowdown in earnings that we had been worried about moving into this calendar year. So, Joe, when you talk about

neutralizing that bet, what does that actually mean? Does that mean short term maybe making some investments in the equity space or just holding steady and not shorting or longing anything? So we've always encouraged investors to be invested in equities. So it's not about not owning equities. It was about leaning underweight, being more defensive. So we've neutralized that underweight to be essentially equal weight equities. But we still have a quality bias in the underlying asset allocation. So we still want to lean up in quality, lower beta in portfolios from a sector standpoint, lean more toward the defensive sectors, right, whether it's consumer staples, healthcare, utilities, and not the heavier cyclical sectors that, you know, that

we would underweight. Yeah, I mean, you're underweight for the financial sector as well. And I just wonder what you think. We had a flurry of deals and announcements, some of them having to do with the credit space today. But the thing that seems to have gotten traders' attention the most is this SL Green deal, saying that, you know, the REIT saying that it's going to sell a 49.9 percent stake in one of its big office towers in New York City to Mori Trust with a gross asset valuation of $2 billion. REITs overall and also regional banks reacted to that news. And I wonder what you think right now of financials, of real estate, of whether we're actually hitting an inflection point here when you start to see deals like this being made and that maybe fears won't be as bad as realized.

So financials are going to be exposed to whatever economic softness that we might expect, whether that softness has been pushed out a couple of quarters. So that's one of the concerns that we've had within the financial sector, and it's particularly cyclical sector. As it relates to the regional banks, they have a particularly large exposure to commercial real estate. I think that's one of the reasons why they may have reacted more positively to the transaction that you referenced, Morgan.

But in that sector, there's still, in our view, needs to be regulatory and will likely be regulatory changes that are going to put more requirements on the part of regional banks to either hold more capital, hold more liquidity, essentially the framework that was applied to the larger banks, you know, 10 dozen years ago in the wake of the GFC. Joe, what do you make of folks who are saying now we're at the start of a new bull market, perhaps AI driven? You didn't mention tech or AI as being one of the things that you're leaning into over there at Neuberger Berman equities wise. How do you read that? So as it relates to AI, it's going to be, as I think we all realize, an absolutely profound and significant impact on the economy, on productivity. Many of the innovations that

we're going to see are going to be extraordinary. Now, you've seen a lot of run-up in those stocks over the course of the past six months or so, and it's likely going to follow the typical sort of boom-bust period for innovative introductions of new technology. So if you think back to the internet, the internet, whether it be late 90s or what have you, you had a huge boom period, incredible movement in stocks, but then you had a shakeout and you had a pullback. But then out of that foundation was built a long-term profound set of economic changes. And that's likely what we'll see in AI. I wouldn't necessarily chase AI stocks here because they've had such incredible run, but they could move higher because there's

certainly a lot of momentum still, a lot of bullishness broadly in those stocks. You've seen a little bit of pullback here in the last couple of weeks, but the long-term trend is still going to be attractive, but I would be careful because it's inevitably going to have a lot of ups and downs. All right, Joe Amato,

it's always great to get your thoughts. Thanks for kicking off the hour with us from Neuberger Berman. Of course, the Dow finishing the day flat. The S&P down 43.28, so down about half a percent. The Nasdaq, though, as we see that profit-taking continuing tech finishing the day down about 1.3 percent. Let's send it over to Senior Markets Commentator Mike Santoli for a closer look at where the S&P 500 could head after its second down day in a row. Hi, Mike.

Hey, Morgan. Yeah, just trying to frame it out in a little bit of a broader timeline here. Two-year chart of the S&P. A few things worth noticing here. One, we've recaptured roughly 60, a little more than 60% of the total losses from the highs in early January of last year

down to the October lows. And also, I think that the pattern here that we've seen of these kind of series of higher lows, definitely significant to the trend turned positive a few months ago. I'm looking at this pullback that we've seen so far as being nothing but routine as long as it holds, let's say, above 4,200. So we have some room to the downside a few percent before you really even jeopardize this latest little breakout. Another little bit of curiosity is that the levels we're trading at right now are even with this first correction we got off the all-time

high in January of last year for a lot of people say, wow, that was a pretty violent sell-off. Let's buy the dip. You've broken even right here. It's been a tough road. But I do recall at the time people thinking that that was actually a pretty good opportunity to get in before we knew what was going to really unfold with the Fed and rates and everything else. Now, take a look here at this comparison Morgan Stanley put together of the current earnings yield of the S&P 500. That's the inverse of the P.E. against the three-month Treasury bill yield. So essentially, it's comparing the valuation of equities to cash. And it's pretty low on the chart here.

It's slightly below zero. So that means that the earnings yield is a little bit below the three-month treasury yield. Now, you would look at this and say, well, when it's high, as at the bottom of the bear market in 08 and 2020, that seems to be when you want to buy stocks. That's when the relative valuation for equities is favorable. And Morgan Stanley is making the case that not so much right now. It looks like cash is a pretty good alternative to equities. I would just point to this period right here, which is like the entirety of the 1995 to 2000 period in which we kept going lower.

Stocks kept going up like at 20 percent annualized. Now, you'd say that's just the building of a bubble. So you don't want to see that replicated. I would say that maybe there's nothing too precise about the comparative math between an abstract earnings yield and the yield on cash. Both can be correct for a while. It can be right to own some cash and also to participate in the stock market, Morgan. Yeah, I mean, it's a fascinating chart right there, Mike. And I just wonder, and we probably don't know yet, and it's going to be one of those rear view looking things, but like what the lag effect of monetary policy, the role that plays in a chart like this. Right. Exactly. We don't know. In fact, if we're going to get

a more pronounced broad based recession that does take a hit to earnings, then, you know, stocks are even more expensive than this makes it look. On the other hand, if we're going to get a little bit easier by the Fed, if yields are peaking at the short end right now, and if you own that three-month bill right now, if you roll it a few times every three months, and you're going to be rolling it at lower rates if the Fed starts to cut,

then that changes the equation as well. So, yep, you never know. This is a moving target, and we're all just trying to take kind of a snapshot of the moment. You never know, but the charts help. Mike Santoli, thanks. After the break, Eurasia Group founder Ian Bremmer joins us with his take on the instability in Russia following a short-lived mutiny over the weekend and new comments moments ago from Vladimir Putin. And later, we'll talk to the CEO of Lucid Motors, which is trading higher today

after striking a battery technology deal with Aston Martin. Overtime's back in two. Welcome back to Overtime. Wagner Group leader Yevgeny Prigozhin speaking out this afternoon for the first time since the weekend's stunning rebellion, saying he acted to protect his fighters and not to topple Vladimir Putin. And Putin giving a speech moments ago from the Kremlin thanking Wagner commanders and soldiers who avoided bloodshed. Joining us now is Ian Bremmer, Eurasia Group president. Ian,

I've been trying to figure out from investors' perspective what this means. Do you think the events of the weekend make it more likely that the Ukraine war will last longer because Putin can't compromise and anger nationalists and Ukraine's allies maybe are less likely to back off? Or what's going on here? Well, I think it makes it a little more likely that the Ukrainians will have a more successful counteroffensive, and that will put them in a better position to be willing to negotiate and to potentially accept a ceasefire by the close of the year. But that doesn't mean Putin will be willing to, and he's going to be facing a lot more pressure, both internationally and domestically. And that certainly came across from his speech

just an hour ago. One other thing that matters for investors is I think it is now less likely that we will get the next extension of a grain deal, which is quite important, of course, for global food and fertilizer costs, in part because a more confident Ukrainian negotiation stance will want the Russians to be more punished economically, will want Putin under more pressure as they are driving to improve their lie, as it were, before they wrap up the counteroffensive that is really just getting started right now. And what, if anything, does it mean for energy? Right now, it doesn't mean much for energy. But, of course, I mean, if Prigozhin had kept going and if there was a broader fight between the Wagner forces and the Russian forces

and then the Russian front lines collapsed within Ukraine, then you can imagine fights over critical infrastructure and port facilities. And then the Russian front lines collapsed within Ukraine. Then you can imagine fights over critical infrastructure and port facilities. And I think that would have actually brought much broader energy disruption, at least for a short period of time. We are not there. We are not likely to be there anytime soon. But the tail risks around Putin, what happens if he faces, you know, some kind of serious internal palace instability or coup and how might he react to that domestically in Ukraine or even against NATO? I mean, those tail risks have all grown in the last 48 hours. Yeah. And I mean, just to game out some of those tail risks, say something like that were to happen. Say say Putin's weaker. Say, you know, he's now facing his own his own challenges to power and leadership in Russia at some point, whether it's now or later in the year or down

the road in the wake of this. What does that potentially mean on the world stage? Because Putin is a he's an he's a known entity. Right. So if you if you were to see some sort of power vacuum emerge, how does that play out between all of the different chess pieces on Earth, including between the U.S. and China, when we're talking about such a resource rich part of the world as well? Well, one is Putin, as much as he is a war criminal and a leader of a rogue state from the perspective of NATO, he still has been stable and there for some 15 plus years now. And that means that you have command and control over the nuclear weapons and over their biological capabilities and over, to a degree at least, the world's largest criminal cyber network.

So, I mean, if suddenly that's no longer true or in serious question, what happens with the proliferation of those weapons and the decision makers accordingly? Are they just going to be sold out to the highest possible bidder? I mean, if Putin were to fall apart, just on the Wagner Group side, I mean, what happens then with all of those mercenaries who are quite highly trained in a whole bunch of countries, North Africa, Sub-Saharan Africa, Middle East, you know, what might they do to destabilize those countries? Take that and expand it significantly

with a question around Putin himself. And, you know, you start to see how problematic this could be. Another question, very related, but very different is if Putin starts to collapse and he can no longer ensure that the defenses can hold in the occupied territory of Ukraine, we already saw the destruction of this dam that has flooded out and killed so many on the ground, Russians and Ukrainians. What happens if they decided to blow up the nuclear plant in Zaporizhia? I mean, there are really quite significant, even catastrophic tail risks in the worst case scenario, which has become more thinkable over the last three days. Which is exactly why I asked the question,

because heaven forbid to see a situation like that play out, but it would be a black swan event. Ian Brimmer, thank you for joining us. My pleasure. Shares of American equity investment Life jumping 6% after hours on a report that Brookfield Asset Management is nearing a deal to buy the company. It's actually up 8% now. This comes as the insurer rebuffed a $45 per share offer from Elliott Management's Prosperity Life back in December.

But one to watch, certainly, John, because this space has been busy, not just this year, but in years past. Okay, yeah. Well, coming up, a new deal with Aston Martin is recharging shares of Lucid Motors today, though the stock did close well off its best levels, finishing the day up about 1.5%. We're going to speak to Lucid's CEO about that deal next. And from autos to boats, take a look at shares of Carnival today. By far the worst performer in the S&P 500, despite earnings and revenue that topped estimates. Analysts at Stiefel calling it a sell the news reaction after a big run-up

this year. We'll be right back. Welcome back to Overtime. Lucid shares getting a boost today, though closing well off the highs after striking a long-term deal with British car maker Aston Martin to provide battery and electric powertrain technology. The partnership will give Lucid a 3.7% stake in Aston Martin. Joining us now for an exclusive interview is Lucid CEO Peter Rawlinson. Peter, great to have you on the show. Thanks for joining us. Thank you. So let's talk a little bit about this deal specifically and why it's so meaningful. It's a hugely exciting deal where we have a technology supply partnership, a true long-term partnership between Lucid and Aston Martin, where Lucid's technology is going to propel Aston Martin into a new era of electrification. And for us, it's a validation point of the supremacy of our technology because Aston selected us in a competitive process, found that we were the best technology to use for their cars.

So we know it's a new source of revenue for you. And it's certainly one that analysts have been eagerly awaiting a deal like this to happen. It's deal number one. How does this speak to the pipeline for future tech licensing and more deals to come along? Well, that's what's so exciting about this, because I laid out a vision for the company a few years ago, and that's what we call Lucid Group. There's our cars, energy storage, and technology transfer licensing agreements. So we started with a high-end product with Lucid Air, and we started

with this high-end partner, the ultimate reach for the stars, Aston Martin, no less, a truly iconic luxury sports car brand. And I think this paves the way now for, in the future, moves to more affordable echelons within the market. And that's what's so exciting about this. Okay. Speaking of more affordable, I want to talk about China. And just today, Mary Barra was talking about the EV market over there. Take a listen. We're starting to see our EV sales now grow. I think we were a little late on having some of the right EVs in country. We're doing that now. We have a Buick that's launching right now that's doing very well. And our Cadillac

brand in general has done well there. So, but it is a shift because, and so we're working through that. I don't know if we'll ever, with that many new entrants, I don't know if we'll ever be at the, you know, 14% that we were, but, you know, I think we can have a sizable business there in China for China. Peter, I believe you just made a hire over there not long ago, Zhu Zhang, to lead the business over there. But it's expensive to gain market share overseas. You've got this capital in this relationship now. How high a priority is China for you? Well, right now we're focusing on domestic markets.

We've just started deliveries of cars into Europe and the Middle East. So I'm really excited about that. And so tell me about the demand picture right now and what success you've had generating it as Tesla has lowered prices over the past several months several times. A lot of people think to try to hold competitors' heads sort of underwater. How has the demand environment evolved as you've seen that happen and seen competitors' vehicles get more affordable? Well, it's difficult for me to talk about that because we're in a quiet period right now as a public company. You'll have to wait for our Q2 earnings call for me to address those issues. I mean, today is all about the exciting news heralding this partnership, a true technology sharing partnership where we've

been selected as the best partner in a long-term deal. Okay. Then let me get your sense of the sort of runway that this capital gives you in an environment where demand is uncertain. Well, it's a useful addition to our portfolio. But I see it more valuable as a validation point than the actual capital, although it is of value. The deal is of over $450 million. So it's quite sizable. So just staying along those terms, then, how does this and this pipeline of maybe future licensing agreements that you're working on, how does this improve gross margins? How does it move you on the path to profitability? I think it's too early to determine that. I think this is a very useful shot in the arm for us.

Okay. Peter Rawlinson, thank you for joining us. Thank you so much. After the break, we'll check in on the Bellwether steel market when we're joined by the CEO of Nucor, whose stock is up nearly 20 percent just this month. Stay with us. Welcome back to Overtime. The CEO of steel giant Nucor is in New York this week for the Global Steel Dynamics Forum. This comes two weeks after the company outlined strong guidance for the second quarter.

Shares ended the day up 1% today. Joining us here on set is Nucor CEO Leon Tappali. And Leon, it's so great to have you here. Welcome. Thank you. Nice to be here. So let's talk a little bit with the fact that you did put out that forecast for the second quarter that was so much stronger than the street anticipated. Part of where you're seeing that is the steel products segment is continuing to deliver some strong results. I guess just walk me through where the demand is coming from.

Yeah, I think it's a few pictures. One is the, you know, the investment over Nucor over the last several years, about 14 billion. So we're coming to the close of a very significant campaign. The non-res construction has been incredibly resilient really since COVID hit, and that remains incredibly robust. Towers and structures, the energy sector, renewables, all very positive signs in the marketplace. And again, is the largest steel and most diversified and clean to steel producer. Nucor is really capitalizing on that and aimed to continue to deliver the needs of our customers. $14 billion in investments.

I want to get into that in a little more detail. But first, when you do talk about non-residential and infrastructure spending, I mean, we've certainly seen the policy, the government policy here in the U.S. and the spending going towards that. But I wonder how you think about this trend. How much of it is that policy? How much of it is nearshoring and reshoring that we're seeing take place? How much of it is also tariffs that went into effect a number of years ago now? Yeah, the tariffs went

into effect, 232, in the spring of 2018. And so they've been around for a while. But really, they were a bridge, a bridge to better trade deals with different nations, USMCA, course agreement with Korea, Brazil. And obviously, we're working on the global arrangement with Europe right now. So that's certainly a benefit. But the other part of that is, as you mentioned, is the Chips and Science Act, infrastructure spending, as well as the IRA. Those three pieces of legislation alone are going to account for somewhere between six and eight million tons of steel annually. It's a significant amount. And again, Nucor stands at the ready.

If you think about Chips and Science Act, for example, $55 billion legislation. Today, there are 34 semiconductor facilities on the books to be built, totaling $374 billion of investment. That is a massive, singular investment in the economy and reshoring. And again, as one of the cleanest steelmakers on the planet, we're poised and positioned really well to be able to serve them in the end markets that they serve. You talked on the last earnings call about Nucor's history of operating profitably during downturns. It kind of stands in contrast to a lot of tech and other industries that sort of overbuilt during that period. Talk for a bit about what you've done over the past couple of years and how that positions

you, what you've invested in versus not. Yeah, it starts with our A word mission statement to grow the core, the core of who we are, expand beyond and live our culture. So we're investing in new plants in Lexington, North Carolina, for example, on the Atlantic coast and a new micromill technology rebar. And that will facilitate the build out in that region. We're building the largest sheet facility we've ever built with the largest project in the state of West Virginia, a new sheet mill in that location that'll really be well poised to serve the energy automotive in different agriculture, heavy equipment, that sector. But the other side as we expand beyond, moving into adjacencies and those steel-centric businesses that operate somewhat out of the cyclicality of steel

to provide a much more stability of our earnings cycle through cycle. And then the last piece is we don't get over our skis. We're very prudent with our accounting and how we think about growth, how we think about stewarding our valuable shareholder capital and don't ever get too far out. We want to maintain a triple B, double A1 credit rating. And that's very important to us. And taking care of that is part of our job. Historically, steelmaking has always been a, dare I say, dirty business. And you're talking about, you know, making steel in a more clean way and how some of the billions of dollars you've invested is going towards that process. What does it entail? You know, one of the advantages Nucor has is a recycler. We are

the largest recycler in the continent and the fifth largest in the entire world. So, you know, the ESG movement over the last several years is something that we've been doing for a very long time. And so we're starting from an incredible advantage point to this, you know, where we stand now. Other nations and countries and industries are investing billions to arrive where we're at today. So at the end of that whole picture, Nucor is not staying where we're at. We're doing things like carbon sequestration and partnerships with ExxonMobil. We're investing in technologies around the world to make sure we can deliver a net zero product to our major end customers that need that steel today and those that are going to need it

tomorrow. So how does that factor in with your view, not just on the domestic economy where we see some of these secular trends taking place, but also globally when we know China is not only the biggest consumer but also biggest producer of steel and there's a lot of concern about growth there and how that dictates this market more broadly. Yeah, we've been in an overcapacity situation for many, many years and will remain in that situation for a long time. So how we think about border adjustment tax, how we think about making sure that the products coming in to build our renewable energies, the solar, the wind farms, the new nuclear plants, the SMRs that are coming online in the future

are built with the greenest steels in the world. And so, you know, China has 1.3 billion tons of capability in many of those millions of those tons are looking for a home. And that home is going to look for the strongest economy in the world, which is the United States. So we've got to be strong advocates in D.C. We spend a lot of time. Secretary Raimondo, Catherine Tyer, USTR, understand our industry, understand the trade remedies that are being looked at, and we have great confidence that they're going to continue to make sure that we create a level playing field, not a free trade agreement, but fair trade.

All right. Leon Tappelian, thanks for joining us here on set, CEO of Nucor. Thank you. Good to see you. Thank you. Up next, a tale of two drug makers. Find out why shares of Pfizer and Moderna are heading in opposite directions when Overtime returns. Welcome back to Overtime.

Let's take a look at some big movers in the biotech space. Pfizer, one of the worst performers in the S&P 500. After announcing it is ending development of an experimental obesity and diabetes drug because it increased liver enzymes. Shares fell 3.5% today, but the company will continue developing a separate rival to Ozempic. Meantime, Moderna getting a little pop. UBS upgrading the stock to buy from Neutral, citing valuation and underappreciated pipeline, MRNA pipeline. You can see those shares finished up about 1.5%.

Keep in mind, though, Moderna shares still down more than 30% so far this year. But we know, John, that name and that stock has been on an absolutely wild ride since the pandemic. It has indeed. Yeah. Meanwhile, Databricks, it's private, but it's big, big enough to make a $1.3 billion acquisition of a generative AI startup. And up next, the CEO of that enterprise software company, the buyer that is, Databricks, he's going to discuss that deal and whether an IPO could be on the horizon.

And take a look at the biggest decliners in the NASDAQ 100 today as we head to break. It's the big winners on the air taking a step back. It's Tesla, NVIDIA, Meta on the list of decliners today. We'll be right back. It is a big day for data inspired M&A. Private cloud data software company Databricks, which helps customers centralize their data and build machine learning tools. Announcing a $1.3 billion deal to acquire a generative AI platform, Mosaic ML.

It comes on a day when we also have IBM's $4.6 billion deal for Apptio and startup ThoughtSpot's $200 million deal for Mode Analytics. Joining us now exclusively on the heels of the biggest deal in Databricks' 10-year history is the CEO and co-founder, Ali Godsi. Ali, good to see you. So you at Databricks, you've been telling me you're well-capitalized, leaning into growth even in 2023, as others have sort of shied away and tried to show profitability.

This is an aggressive buy, is it not? It's not a little bit of money. Yeah, but seeing how fast they're growing and the customer demand for Mosaic ML, it's totally justifiable, even on Rational. Just using multiples of, say, 10 to 20x, looking at their forward revenue, this is justifiable easily. with OpenAI here and leaning into the need for individual industries and businesses to really know what training is going into AI models? Yeah, so if we take a step back, we've said for 10 years we want to democratize data and AI. And in the last six, seven months, it's been crazy. Every company we talk to, they're saying, can I have my own generative model and can I own it and can I do it on my own private data without it leaking and can I afford it or do I have to call a centralized model such as open AI or others and it's no

longer going to be my personal IP intellectual property so that's the number one thing that's top of mind on everyone and that's what mosaic ML enables people to do so together with m, we can cut those costs down and democratize it. So to what extent do you at Databricks plan to sort of own the custom model space because there's a lot of companies of all kinds of sizes competing in this including Microsoft, Amazon, Google? Yeah there are those really really big players but we really believe in large ecosystem where anyone can actually come in and build their own models. By the way, let's not forget about the thousands of startups that are getting funded every day now,

and they're all very excited, and they're thinking, can I afford building my own model? Can I do that? And we want to say yes to them. We can democratize this. We can cut down those costs. You can do it. It's absolutely possible. Ali ali last year you had this big milestone you reported more than a billion dollars in annualized revenue what where are you in that process of growth now especially now that we know investors and companies are so much more focused on ai than they were a year ago yeah i mean we're seeing tailwinds with ai we're also seeing tailwinds because everybody wants to cut down their costs so both of those things are happening at the same time and our lake house pattern helps these organizations Cut down their costs on their data warehouses and then now they can also do generative AI with us

So there's a two tailwinds. We also shared a new statistic, which is that we're the fastest growing enterprise above a billion Revenue so it's fastest growing software business above a billion revenue. So it's fastest growing software business above a billion revenue. So we're definitely seeing the demand and everybody's very, very excited about generative AI. Not a day goes by where I meet a customer where they don't, all conversations eventually end up being about generative AI and them owning their own models and becoming competitive in their market. So I was kind of surprised to see these three announcements all on one merger Monday, given that we've been hearing for the past several weeks, at least, how valuations of AI startups have been soaring, right? So talk to me about that justification that you referenced at the

beginning of this interview, based on the growth that you're seeing in the space and how the combination with Databricks you think is going to continue to fuel the growth of Mosaic ML that's going to justify this? Yeah, it's really simple. So everybody's talking about, wow, these companies are so valued and, you know, things are kind of back to 2021 and so on. But what they're not looking at is that also their revenues are growing very steeply at a very, very fast pace. So if a company is over tripling the revenue, you should actually take that into account and see, okay, where will they be a year from now? And then let's say you just put a moderate 10x multiple on that. And then you can see that you can actually justify valuations such as $1.3 billion easily. So that's the thing. So it all has to do with that revenue growth. Now, will it sustain?

Well, in these days, no one knows what's going to happen with data and AI, but there's so much pent-up demand. I was about to say, it sounds like what the e-commerce players were saying a couple of years ago about that inflection during COVID that didn't last, and they ended up building up and then having to cut. What makes you think this is different? Yeah, good point. So I think just the number of applicability of use cases that this kind of technology

can do is just mind-boggling, right? We have at Databricks, we have customers like JetBlue. They're using this and they're able to now communicate using language, English language with their customers what's exactly happening with each plane? Which terminal is the plane at? Where is it late? And this brings so much customer value to them. We have a customer like Rivian is able to use this to actually build self-driving cars.

They can figure out when to swap planes and so on using these kind of models, right? So customer after customer is getting so much value out of it. And I think that's the difference, right? E-commerce, that was a pandemic pull forward and then things went back to normal. Here, I think this is going to be sustainable value that's going to be around not just for a year or two. sized startups stripe is another one there's a few who investors are really looking to to say uh when the window opens back up how soon might you come out what are you thinking well if the window is open it's an opportune moment uh we will of course

seize it but honestly right now the focus on how do we actually satisfy this crazy demand for generative AI? How do we do that? And how do we do that best? And then focus on the long term. Okay. Door's not closed. If the window opens, Ali Godsi. Thank you. And by the way, folks, Databricks is number 31 on this year's CNBC Disruptor 50 list. You can find the full list at cnbc.com slash disruptors. Up next, Council on Foreign Relations President Richard Haass and what the revolts in Russia could mean for the defense industry and so much more. And some news just crossing on Robin Hood. Wall Street Journal saying the company's laying off about 7% of full-time employees. That would

be about 150 staffers. The company telling the Journal that the cuts are meant to, quote, adjust to volumes and better align team structures, unquote. We'll be right back. Welcome back to Overtime Wall Street, monitoring the next steps coming out of Russia. Vladimir Putin thanking Wagner fighters for avoiding bloodshed in a speech earlier from the Kremlin. And he is now reportedly meeting with the minister of defense. Joining us now is Richard Haass, the president of the Council on Foreign Relations and the author of the newsletter Home and Away. Richard, it's great to have you back on the show.

You just published a special edition of Home and Away that's focused on this. I guess key takeaways, what to make of this extraordinary situation. Does it weaken Putin? And what is the read through to this counteroffensive that's taking place in Ukraine right now? I guess as it slightly weakens him, because it shows that this veneer of uh unapproachable power it has been punctured that said i think a lot of the observers or critics or experts call them what you will are exaggerating how much he's weakened regimes fall when leaders lose their nerve and they lose the loyalty of the security forces i haven't seen either either happen yet in Russia. So he's still there. He still has, from what I can see, the support of China and others. So even if he is somewhat

weaker, I'm not quite sure what that translates into. Indeed, he could do something aggressive in Ukraine just to signal that he's not a pitiful, helpless giant. So my own view are people is that people are reading way too much into this and projecting way too much going forward. Ian Bremmer on our show earlier this hour suggested that maybe you don't see another extension of this Black Sea grain deal because perhaps Ukraine feels a little more emboldened here. I wonder what your thoughts are on this, especially since we know that food inflation, not only in the U.S., but globally,

has been so tenacious and been one of those many thorns in the side of central banks. Look, I think Ukraine has to decide how they want to react to this, you know, rather bizarre set of events the last 96 hours, how much they see this as a real opportunity. I don't see it yet translating into massive military gains. They're counteroffensive. They're still proceeding quite slowly. What happened does not seem to have changed the

disposition of Russian forces in Ukraine, which are essentially in defensive positions, what makes them hard to dislodge. The Wagner forces had largely already left the theater of operations. So we've obviously avoided something of a civil war. So if I were Ukraine, I would be somewhat wary of thinking that suddenly they can rethink all of the assumptions they had a week ago, that somehow this is a fundamentally different world. Maybe, but the evidence isn't there yet. Richard, even if we don't have a significantly weakened Putin, do we have a Putin who's likely to want to reassert strength? And if so, what, if anything,

does that mean for winter in Europe in the second half of the year and natural gas if we don't have another extraordinarily mild winter? Well, I think, you know, when he wants to assert himself, it will be more domestically. I think he wants to demonstrate, you know, to the Russian people that he's very much in charge. That's his first, second and third priority. So don't be surprised not only that you see some tough measures on his part, but also some handouts. I wouldn't be surprised if he suddenly becomes the generous populist leader. There's that. I don't think he has all that much leverage right now vis-a-vis the Europeans or anybody else on the energy front. Winter's a long way away. Stocks are fairly high. So I think it's simply too soon. If you're Vladimir Putin, what you're going to do

come November, December, looking that far ahead is probably not a luxury you have. I think he's much more focused on the next couple of days, weeks or most months, mainly internally, thinking about Prigozhin, thinking about the war in Ukraine. How much do the events of this past weekend suggest that this war is going to be longer than many might have hoped? It's a really interesting question, John. Until now, everyone said that Putin assumed, was operating under the assumption that time was his friend, that time worked better for him than for Ukraine, Europe, the United States. And the question is now maybe not so much. So there are those who think this may lead him to think about some compromise to essentially define success down in Ukraine so he can focus on the on the home front.

On the other hand, as I just mentioned, he might also think this is a moment to strike out to show that he's not simply on defense. He can still play offense. He may also be waiting for another year and a half to see what happens here in our politics. And he may be waiting to see if we once again have an occupant in the Oval Office who's not going to pursue this war with vigor. So my own guess is, again, he's going to still play for time. Yeah, I mean, just sticking with the politics piece of this, we did see defense stocks actually end the day lower. Does this do anything, whether it's in the U.S. or among NATO allies,

does this do anything to change defense spending and the policy we've seen put in place there? Not a whole lot. We were never worried about Russian attacks on NATO or the United States. The big driver of defense stocks is either new technologies, it's China, potentially Iran, scenarios like that. So no, what this does do, though, is it adds to a general sense of unease, uncertainty, unpredictability. Well, that's pretty good for defense stocks. But no, I don't see Russia emerging somehow as a qualitatively different or more dangerous military threat as a result of this. All right. Richard Haass, great to see you. Thanks for joining us and sharing your insights.

Thanks, Maureen. All right. Now, looking ahead to tomorrow, we're going to have some key data on the calendar. 8.30 a.m. Eastern, we'll get durable goods. Nine, the latest read on Kay Schiller home prices, followed later by new home sales numbers. And then we'll also get a read on consumer confidence. Three earnings reports to watch tomorrow as well.

Walgreens Boots Alliance before the bell. Jeffries Financial, AeroVironment after the close. I suspect you're going to pay special attention to that military drone maker. I am to the defense contractor and a drone maker, yes. We'll be watching that one, especially given the conversation we just had with Richard Haas and with others this hour. All right. Well, all of that considered, that's going to do it for us here on Overtime. Fast Money begins right now.