Closing Bell - Closing Bell Overtime: Disregulating Commercial Space, iPhone Demand & Investing in International Markets 10/18/24

Episode Date: October 18, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Well that bell marks the end of regulation. Direct women ringing the closing bell at the New York Stock Exchange. Link Bancorp doing the honors at the Nasdaq. Passive aggressive men no doubt silently stewing that they weren't asked to ring the bell at either. Well we got record closing highs for the Dow and the S&P 500. Major averages locking in six weeks in a row of games. That is the scorecard on Wall Street, but winners stay late even on a Friday. Welcome to Clemson Bell Overtime.

I'm John Ford with Morgan Bray. A direct woman. Well, coming up this hour, Flint Strats Tom Lee and Jefferies David Zerbos gets you set for the next week's trade, and Tom Lee explains why his new big call is on the homebuilders. Plus, CVS getting crushed today after replacing its CEO and issuing weak guidance. We'll talk about whether or not this pullback is a buying opportunity. And Apple getting a boost on a report saying iPhone demand is strong in China. But one analyst says to take it with a grain of salt. He's going to tell us why. But we begin this hour with a news alert from the Treasury Department. Our Megan Casella has the details. Megan.

John, we have new data on the Treasury's budget for the fiscal year that ended in September. And it shows the U.S. deficit hit $1.8 trillion for the year. That's the third largest deficit on record after only the COVID years of 2020 and 2021. Now, overall, revenue was up 11% for the year, hitting $4.9 trillion. That was an all-time record, too, partly due to more taxes coming in as wages and employment grew.

But part of it was also deferred individual and corporate taxes, both of which would have originally been received in 2023 and were delayed due to weather, mostly out in California. Now, spending was up 10% to $6.8 trillion, and that was mostly due to a 29% jump in the amount spent on interest as rates rose and the debt piled up. So Treasury then spent $882 billion on net interest alone for the year, well over a trillion dollars in gross interest. Both of those were also all-time records, and that made interest the third biggest line item in Treasury's budget, meaning the U.S. spent less on things like Medicare and the national defense. The only things that cost more were Social Security and health care. And one last

note here, interest as a percent of GDP came in at 3.9 percent, and Treasury says that is below the record of 4.7 percent that came in back in 1991. So they do say, whether you want to believe them or not, even as these deficits grow, they still say that it's manageable. Thank you, Cassella. Wow. Thank you. Let's bring in our market panel as we did set those new records for the Dow and S&P 500. Joining us, Fundstrat co-founder Tom Lee and Jefferies chief market strategist David Zervos. Both Tom and David are CNBC contributors. Guys, happy Friday. David, coming off that rates impact

for the government there, what do you see coming for rates? How long will it take us to get to neutral? How will that affect stocks and fixed income from here? Well, I think that is actually one of the biggest questions out there, not just for fixed income investors, but for equity investors. I think the speed with which we get to about three and a half is probably pretty quick. It could be as fast as mid-year. And then I think the debate about neutral starts, and that could be a pretty kind of risky, bumpy, messy debate. I think a lot of people around the FOMC table have raised their neutral rate forecast. And as we've been writing at Jeffries for the last couple of months, we think that might be a pretty big mistake as the balance sheet contracts and gets back to a

more neutral level. So I'm looking for actually rates to go back to 2019 levels eventually, which would be music to the years of commercial real estate, private equity and venture guys, and probably my friend Tom over there for equity multiples as well. But I think it might take a little while and there's going to be a big debate as we go through 2025 and into 26. All right. Well, Tom, speaking of equities, I'm going to do something rare, mostly because it's funny and give you a hard time for not being bullish enough. Six weeks ago, you warned about a potential 10 percent pullback in the S&P in the next eight weeks. We're up six and a half5%, I think, since then.

Now, you did say to buy any dips if that were to happen, but do you see any more potential icebergs? What do you think got us this far? Well, John, the stock market in the last six weeks has proven its character, which it's had all year. The S&P is incredibly strong this year. It's been up now nine of 10 months. And you're right, we got fooled by seasonality because I figured, well, between now and election day, there's a heightened possibility of some type of correction. We weren't saying you want to sell stocks.

I think it's always a mistake when people panic sell because we, in the same, literally in the same paragraph said, but if it does pull back, you want to buy that tip. And I think we're still in that tricky period until after election day. But that doesn't mean I think investors should be bearish right now. I think we have a really good fundamental back drop. I mean, look, if David's view is correct, 3.5% tenure, sorry, 3.5% fed funds rate is very supportive of the economy. It's going to really take housing and autos and durables out of a recession. And that should be

good for not only earnings growth, but for PE multiples. So to me, all of this, I think, is a pretty good backdrop. That doesn't mean turbulence couldn't happen. So to me, all of this, I think, is a is a pretty good backdrop. That doesn't mean turbulence couldn't happen. So, Jod, I guess, you know, I think people kind of view the idea that there could be caution as like a dirty word. It shouldn't be. I mean, this is a stock market and people should be prepared to buy dips if there are. Yeah. And we're coming into the two weeks of peak earning season, Tom, to your point. Plus, right behind that, we do have this election. So the next couple of weeks will be ones to watch here for investors. You just mentioned housing, though, Tom.

And I do want to get your call on that because you're bullish on the homebuilders and you say there's historical precedent for this. Yes. You know, the reason we highlighted the trade today is that since 1999, believe it or not, there's a six-month window when homebuilders enter a golden six-month period. It's something we've been writing about at Fundstrat for the better part of a decade, and the trade's worked 12 of the last 15 years. But from October 20th to April 29th, homebuilders have outperformed the S&P by an average of almost 1,900 basis points. So all of the gains homebuilders make typically occur those six months. I can't explain the seasonality, but the backdrop is better today because the Fed is cutting at a time when there's pent-up demand,

and the homebuilders have actually done a very good job of capital management. So to us, it looks like a trade that should work this year. Another trade that's been working this year, David, that has actually been working better than the S&P 500 has been gold, which hit another all-time high today. It's now up 32 percent on the year, even as interest rates remain a little bit higher here. And the dollar certainly seems to be relatively strong. What do we attribute that to? So we talk a lot with our clients about gold. It's a question that comes up all the time. And I think it's people thinking that there may be some credibility issues, some latent hidden inflation risks that people aren't measuring correctly, maybe in the tips market.

I don't think that's it, Morgan. back to us in the U.S. geopolitically conscripting the dollars that were held in reserve accounts, particularly for the Russians. But that threatens, I think, a lot of other governments who think about the safety of holding the dollar in reserve accounts in the U.S. So anybody that's a little bit shaky with their relationship with the U.S. or the EU or Western Democratic alliances, I think is probably shifting out of dollars and treasuries and maybe even euros as well and into something like gold. It's not endemic of the entire commodity space. You saw oil today back down to, I think, 68 bucks for Dease. It's not a commodity story like the 70s where you're losing touch with inflation or you're losing inflation. This is a gold specific story. And I think it really is reserve managers. And I think it's affected

crypto as well. I think it's a big part of both gold and crypto, which are making a move as reserve assets in a world where people feel less comfortable with dollar holdings at the reserve asset level. It's a very specific clientele. Yeah, quickly, David, and that does, of course, raise questions longer term about what it does to dollar dominance. But does that mean that you hold gold and or crypto here at these levels? And if so, how much? I think there's a story that is this is a multi-year, multi-decade story where, you know, there's going to be reserve managers that need to diversify out of dollars. It doesn't mean the dollar loses dominance, but that cohort of holders in the ones that are more divisive, those governments that are in more divisive situations with Western Democratic alliances, I think that's a story. So I wouldn't

expect it to be stopping anytime soon. I think there's a story there, and that's a secular trend. I don't know how much you want to put on a macro trade about gold, because I don't think there's a story there, and that's a secular trend. I don't know how much you want to put on a macro trade about gold, because I don't think it's a macro trade. I think it's, I wouldn't call it a regulatory trade. I'd call it a geopolitical trade. Okay. David Zervos, Tom Lee, thank you both for joining us. As we did get a record close for the Dow,

and we are up for all the major averages on the week. Well, let's turn to CVS, because that finished at the bottom of the S&P 500 today. Shares sinking after the company replaced CEO Karen Lynch with longtime executive David Joyner. CVS also issuing a warning that higher medical costs are pressuring earnings. You can see shares fell today 5 percent. Joining us now, Deutsche Bank Managing Director George Hill. George, it's great to have you on. What struck me about this announcement today,

and I wonder how much of this actually added to the selling we saw, is the fact that apparently these leadership changes happened yesterday, but the company didn't actually disclose them until today. How does that speak to succession planning, transparency, and sort of the direction of this company? Yeah, yeah. Morgan and John, first, thanks for having me. And yeah, this decision made yesterday and being announced this morning, I don't know, is that unusual? Just giving a morning disclosure is normal

for a company the size of CVS. And CVS typically discloses events in the morning and not after the close. I do think the issue with the shakeup is really the way the board approached this. CVS is a company that's underperformed for a handful of years now. We've been very critical in writing of current management's execution. And this is a situation where we would have expected the board to be a little more transparent in the process, maybe naming an interim CEO, maybe doing an executive

search around a new person who really had strong executional skills in the managed care space, which is where the business has been falling down, as opposed to just kind of hand-pointing an executive who's been with the company for more than 20 years. That's not to say that David is not the right guy for the job. We think there just should have been a more process-based approach to his selection as opposed to the board just picking somebody, especially given the underperformance of the company over the last several years. So looking at this warning about higher medical costs pressuring earnings, what are attributed to the higher medical costs? I mean, it is still post-pandemic hangover and the fact that you have a lot of folks that are uninsured, for example, who are now seeking medical care. I mean, you have a lot of these

different components that are being talked about, particularly in this election cycle. Is that showing up here in results as well? It is, and it's showing up in the other managed care plans as well. And I have what I call a funny narrative I like to tell about this is, you know, this is the post-COVID utilization increase. CVS and other managed care plans are particularly seeing it among seniors. They're particularly seeing it among supplemental benefits. You think about seniors, everybody's grandmother and people over the age of 65 or 70. They've essentially been locked up in their house for the last three or four years. And COVID is finally ending.

The utilization is opening back up. You know, I joke, Grammy, you know, grandma wants to go on that cruise. She's getting her knee done. She's getting her hip done. And that's leading to the explosion in utilization that we're seeing amongst the MCOs that service the senior population, which is driving a rapid increase in medical costs that we just don't think that they've been prepared for and that they haven't anticipated. And CVS, you know, CVS and the other managed care companies that are focused on the Medicare space have just seen this rapid increase in medical utilization that they haven't priced for and been prepared for. And, George, that's the part that, you know, for the uninitiated, it probably doesn't make sense. Like if you had said to me a decade or so ago, oh, look at how the population is aging. Do you think drug stores would be a good bet? I'd say absolutely. But we're in a situation, whether it's CVS, Walgreens, a slightly separate issue,

where the more older people are utilizing health care, the worse it is for these companies. What kind of business model shift might fix that? As it relates to the retail pharmacies, we don't know. And we see, and again, we have the advantage of kind of trafficking in this data every day and kind of being in the weeds on them every day. The problem with the retail pharmacies is number one, there's too many retail pharmacies in this country. And number two, there's three payers that basically control the retail pharmacy channel. And pharmacies are forced into being a position of a price taker each year as it relates to how much they get paid for prescriptions. Quite simply, the people who pay for prescriptions want to pay undifferentiated pharmacies less money to fill those little orange bottles every year because there's just too many pharmacies out there. For what is the right business model on a go-forward basis, I think a lot of these

companies are trying to figure that out. You've got the big managed care companies buying into provider organizations and trying to take risk. You've seen the retail pharmacies try to buy into the provider businesses and take risk. Historically, provider businesses, doctor-based businesses have not been great at taking risk. That's been more the business of the managed care companies, but they're trying to vertically integrate. And kind of from a top-down perspective, I think you hit on something that we're all very focused on. Healthcare in the United States is very expensive. Nobody wants to pay more for it. We're all trying to figure out how we get more value out of the healthcare dollar. And what happens in that environment

is there's going to be a lot of businesses that get squeezed in that pursuit for value. You called out retail pharmacy, where CVS is the largest pharmacy chain in the country. They're going to be one of these companies that get squeezed for value. But in every subsegment of the health care market, you know, you're just you're seeing this drive for value and this drive to get the most for your health care dollar. And a lot of the companies right now are just that they're falling victim to that. Well, families in the federal budget getting squeezed to George Hill from Deutsche Bank. Thank you. Thank you. Well, the Dow and S&P 500 just set record closing highs, but our next guest says investors should be increasing allocations in other parts of the world. We'll

find out the regions that could be set for big returns. Plus, Apple setting a record close as well. That's as enthusiasm grows about iPhone demand. We'll ask an analyst if the move is justified and if more upside should be expected ahead of earnings. Overtime is back in two. Welcome back to Overtime. Chinese markets ended the day sharply higher after China's third quarter GDP beat estimates, though it was the weakest pace since early 2023. Now, this comes as investors await the stimulus measures announced earlier this week by the Chinese finance minister. Joining us now is Lalu Aganga. She is Mercer's U.S. CIO. It's great to

have you back on the show. And that is really where I want to start with you, which is international markets, especially at a time where, as the Fed begins cutting, emerging markets, frontier markets seem to be catching a bigger bid. How would you invest in this? How would you play this? Now, I've come on the show a few times, and we've been talking about emerging markets, international equities. We've been overweight since the fourth quarter of last year, actually, emerging market equities, Japanese equities. And now that we're seeing a pretty strong bid, stimulus acts out of China lifting up broader emerging markets in September, markets now essentially at all-time

highs across the board and lifting. We have recently taken money off the table as a result of that because given the position that we've had the last few months, we're doing pretty well. And the increased uncertainty that we're starting to see causes us just to take a little bit off the table. Interesting. So where would you be putting that money you take off the table to work then? I mean, we've been reallocating back. So if we're overweight, equities meant that we're short in some of the other areas like fixed income. We're reallocating back there. But holistically now, obviously, we had 25 basis point rate cut. We're watching the Fed again. We're expecting another 25. So yields are coming lower. It's one place that at least tactically for now in the front end, we still have capital there.

Olalu, great to have you back. So you mentioned the U.S. retirement system is in crisis. What are the implications of that for investors and for stocks, really, where, I mean, the general expectation these days is pensions aren't happening. You need to invest for the future. Absolutely. Thank you for that. Like, we just came out with our 2024 report. And right now, the one place that at least has bipartisan support is retirement. There are some proposals on the table looking at pensions and those types of investments. But roughly speaking, to your point, they're not making any new pension funds. So, some of the takeaways there, we know that there are DC plans that are forming. We have different options according to both the risk profiles for the individual clients. We're seeing rising longevity, the higher interest rates,

the escalating cost of living, particularly in healthcare, straining those budgets. So, depending on the demographics, if you're younger, you tend to just invest in higher returning assets, even if they are a little bit more volatile. So, equity markets just broadly in general, even though there are highs, that's where we're allocating capital to. And then if you start getting closer to retirement, you want to really start looking at de-risking. But as you indicated there, the retirement study that we recently published is both global, so looking at the U.S., where we do have a C rating, ultimately, so less than some of the other regions. Now, question back to international markets. Specifically, what do you see as the impact of China on Asia X China on those markets,

both the rebound in some Chinese stocks, it's given a little back over the last few days, and just the possibility of further stimulus out of China? Yeah, so the Chinese market has, the stimulus has really helped, as we mentioned, that we were overweight emerging markets for some time, with China being a semi-decent percentage of that. So the boost has been helpful. If you were to separate EMX China, the region has been doing well. So Taiwan, Singapore, India, the equity markets have been pretty strong.

And that type of bifurcation that we've been seeing has been helpful. China's playing a little bit of a catch up, but the policy and the stimulus that's coming in place right now is showing the commitment that the government has towards bringing capital back into the markets. That has been a place that's been a little unloved. So for us, we were allocating capital there when it was unloved. And now that there's a bigger focus, as I mentioned, taking money off the table. But the stimulus is needed and really bringing a little bit more focus on the work that they're doing to attract capital back.

Olalu Ogonga, thank you for joining us. Thank you so much. Still ahead, Andreessen Horowitz's partner, Catherine Boyle, tells us the company she's most excited about right now in the aerospace and defense sectors. But first, Apple matching a record close after a new report said the latest iPhones are seeing strong demand in China. But one analyst says the research should be taken with a grain of salt. He'll join us to explain why. We'll come right back. Welcome back to Overtime.

Apple setting a record close today. Research firm CounterPoint out with new numbers claiming the latest iPhone models are seeing strong demand in China with sales of 20 percent in the first three weeks versus last year's launch. That follows a number of bullish calls from analysts this week. But our next guest says any individual report on iPhone demand should be taken with a grain of salt. Joining us now, DA Davidson, Managing Director, Gil Luria. Gil, happy Friday. So a few weeks back, I looked back at past iPhone super cycles and which sorts of features or conditions were consistent with them. Let's see, network and AI features, which iPhone 16 seems to have. Screen and camera quality improvements that are significant. It's got bigger screen, better cameras. But global expansion, to me, seemed to be missing in the sense that Apple

intelligence won't show up in China and some other markets until sometime later. It's English only. So do you think this report is legit from CounterPoint? How much does it matter if out of the gate China sales are strong? As you pointed out, I think any individual data point should be taken with a grain of salt. It's like saying how big an elephant is based on weighing a couple of hairs that fell off its back. In fact, a very similar report was out a couple of quarters ago indicating Apple was down double digits in China and Apple ended up reporting up 5% in China. So these types of reports are often not even directionally correct. They have to be viewed in the context of all the information we're collecting in the marketplace from various checks from their suppliers, from Apple suppliers that have

reported contradictory data points as well. Which is all to say, in the December quarter, we don't expect significant growth for iPhone because, to your point, Apple intelligence has yet to be introduced. Apple intelligence will drive an upgrade cycle. It just won't happen until those features are actually released to the market. It's also unclear, Gil, how much data and even color we're going to get on new iPhone sales when we get Apple's earnings at the end of this month, right? Our producer, David Gernonon looked back at some transcripts from previous fiscal Q4 reports, and maybe they'll talk about how long before they get into supply-demand balance

so you get some sense of what's driving the lack of supply, whether it's big demand or less supply. But that doesn't necessarily tell us regionally how strong the iPhone is. That's right. So when they report on October 31st, we may get some indications if there's supply issues, if there's a particular trend that Apple wants to highlight,

but we're not gonna really know what holiday sales are, which is the key selling season until they report three months later. So all these reports about individual countries, individual markets, individual channel checks can only be seen in the whole and have very limited predictability. And to your point, we may not even have them confirmed on that October 31st report. So does this mean that Apple's valuation has gotten ahead of itself, or do you still buy at these levels? So Apple is up 20% since Worldwide Developer Conference. I think the understanding now is that the iPhone will have an upgrade cycle.

I resist the term super cycle because super cycle was iPhone 12 when we introduced 5G and iPhone sales grew 40%. That's not what we're talking about here. We're talking about the fact that of the last four upgrade cycles, this should be the most meaningful one after three flat cycles. So again, maybe 10% growth, which is enough to justify the Apple stock going up this much. But now Apple's trading at 35 times forward earnings. That's on the high end of historical ranges. Okay. Bill Luria, thanks for joining us. Thank you. We're going to have to find a term somewhere between super cycle and regular cycle, I guess. Well, we'll see how super it is. We'll see.

I don't know. All right. Well, time now for a CNBC News update with Kate Rogers. Kate. Hi, Morgan and John. A setback in the courtroom today for Metta. A Massachusetts judge rejected Metta's bid to dismiss a lawsuit brought by the state that alleged the social media giant used features on Instagram to addict young users and deceive the public about the dangers its products pose to teenager mental health. Meta has yet to

comment on the decision. Even as North Carolina continues to recover from the devastating effects of Hurricane Helene, the state board of elections said today more than 350,000 residents cast their ballots statewide on Thursday. That's nearly 5,000 more than the number cast on the first day of early voting in 2020. Officials say the numbers are preliminary and are expected to rise even more. And the tide might finally be turning on deadly drug overdoses across the U.S. Preliminary data released this week by the CDC showed in the 12 months ending in May, overdose deaths fell nearly 13%. The White House said it's the largest recorded reduction of deaths and it's the first time

numbers have fallen below 100,000 since early 2021. Back over to you, Morgan. All right, Kate Rogers, thank you. Thank you. Well, American Express was by far the worst performer in the Dow today after quarterly revenue missed estimates. Up next, what the results say about the consumer more broadly. And check out some of the stocks hitting record highs today. Netflix, T-Mobile, Hilton, McDonald's, and Blackstone all on that list. Overtime will be right back. Welcome back to Overtime. American Express, the biggest drag on the Dow today, despite beating profit expectations, raising full-year guidance, quarterly revenue, missed expectations,

and in an interview with Barron's, the credit card company CFO, warned that affluent customers are starting to show signs of caution. Our Hugh Sun is here with us. Hugh, so what does this mean? Because the luxury consumer has been really keeping a lot of things afloat, it seems. Amex is one of the best signals of that continuum. Yeah, the narrative for a while has been that the lower end of the consumer has been struggling, showing signs of strain,

and the affluent has been strong and going strong. And I think what Amex tells you today is that there are limits to their spend growth as well. Their spend growth overall in Amex cards was about 6%. That is below the historic average of 7% to 8%. And that flows into their revenue growth, which was disappointing today. So Amex CFO Chris Stoff, the kayak, telling me that their guidance today was 9 percent revenue

growth. And that's also a bit disappointing. That's on the low end of the spectrum that they've given. And that is because of the environment that they're in. The environment they're in is what they call a soft spend environment. John. The stock finished down 3 percent. We just talked about the fact that it was the worst performer in the Dow. They did raise their full year EPS guidance, though, and core revenues did grow 8% year over year. I realize slightly lower than expectations, but it's not like it was a bad report either. So, I mean, how much of this is steady as she goes and big expectations going into it? A lot of it is that big expectations going into it. Now, recall that before today they were up 54 percent, which, you know, puts even the

likes of JPMorgan to shame, which is, you know, a big gainer among the big banks. They're saying that EPS is going to be higher for the fourth quarter. But if you look at the year, the full year, that's actually just what analysts had expected. So they're just saying that we're going to hit our marks for this year. And I think, you know, the analyst community understandably is very concerned about 2025. Now, is credit costs, credit has been immaculate, credit costs have been very low, which has helped them beat on EPS, even though revenue is not great. Is that going to start showing signs of fatigue and strain there? So, you know, there are some concerns, you know, stocks being priced

to perfection. And this is a concern that we have going forward for them. So maybe no pony for Christmas. We'll see. Thank you. All right. Up next, Andreessen Horowitz, general partner, Catherine Boyle, on where she sees the biggest investing opportunities right now at the intersection of tech and national security. And check out shares of Lamb Weston, a real hot potato, having its best day in nearly four years. Activist John Ed Partners disclosing a 5% stake in the French fry maker and plans to push for the company to explore a sale. It finished up 10% today. Welcome back to Overtime.

We've got a news alert on Cigna and Humana. Our Angelica Peebles has details. Angelica? Hey, John, that's right. Cigna and Humana are resuming talks to merge. Now, that's according to a Bloomberg report citing people familiar with the matter. The companies had reportedly been in talks last year, but they walked away. And so now they appear to be coming back to the table. If you take a look, Cigna's down about two and a half percent

on the news and Humana's up about three and a half percent. So we'll have to keep an eye on this and see what happens from here, John. Yeah, it kind of goes back to those conversations we're having about higher health care costs pressuring CVS, for example. Angelica Peebles, thank you. The Commerce Department paving the way for the deregulation, some deregulation, of commercial space after easing export restrictions for some space companies to ship satellites and related items to allies and partners. So what does this mean for investing in space? Well, joining us now is Andreessen Horowitz, general partner and co-founder of their American dynamism practice, Catherine Boyle. Her piece this week in the Free Press is titled The Fall of the Century. A rocket took off, came back to Earth and restored faith in the

American dream. Catherine, it's great to have you back on the show. Welcome. It's great to be here. Thanks for having me. That's exactly where I want to start with you, because, yes, we had this Kramersk Department news yesterday, but we kicked off the week with SpaceX doing what was thought to be impossible, which was catching a 23-story tall booster with its chopstick arms at its launch pad back in South Texas. I mean, how does it speak to, we teased you before the break saying, you know, you're sort of at this intersection of national security and tech, but how does it speak to we teased you before the break saying, you know, you're sort of at this intersection of national security and tech. But how does it speak to that very topic?

It is truly the catch of the century. I mean, we should start by just acknowledging that this was probably the greatest engineering feat of the last 25 years. I don't even think engineers on the ground realized that it would happen that day. But the data showed that they should attempt it and they caught it on the first try. And what I think, you know, we see it as Americans as inspiring. It truly is, I think, sort of the crown jewel of American engineering. But China is also looking at this and saying, wow, because of SpaceX, the U.S. is much, much further ahead on space launch and on launching satellites into space. I think it's something like 84 percent of mass launched into space globally is launched by SpaceX and something like 15 times what is being launched

from China is being launched by SpaceX as a company. So this is a singular important company for defense interests. You know, it is it is, you know, changing the course in terms of are we able to go back to Mars and are we able to go back to the moon and then go to Mars? But it is also a very important defense contractor that not only has a very important launch business, but also provides communications infrastructure for the ground, particularly in warfare. Yeah. And I would say SpaceX, along with Palantir, are now increasingly and will have really forged this path forward for defense tech investing, which you have been on the forefront of, but which we know is growing with more investors and also more startups coming into the mix now, too. It seems to me that this broader defense tech sector, which I'm considering SpaceX

a part of, is shifting, though. We're moving into a new chapter, and it's away from this idea of proof of concept and all of these outsiders and so-called disruptors having to prove themselves and try and break into being able to compete for contracts with the government to now these companies beginning to mature and having to scale and actually produce at a much larger level. Your thoughts? Absolutely. And I think, you know, for the for the first years of this sort of new defense movement, which you could argue started around 2015, 2016, there was sort of this question from the government. Are you able to produce the prototypes? Are you able to produce the technologies that we need? And the resounding answer has been yes. I think even before that question, there was a question of our engineers in Silicon Valley excited to build for the Department of Defense. And Ukraine certainly changed the course of history on that one. It is one of the most exciting sectors coming out of Silicon Valley. But now the question that the DOD is asking is not just can you create one to 10 of a product, but can

you create 10 to 100 and then 100 to 1,000 to tens of thousands? How do you increase the rate of production? And so as you're seeing with companies like SpaceX and Anduril, they are focused on production. They are focused on reusability. They are, in the case of Anduril, they are certainly focused on mass manufacturing of the products that the DoD need. And the companies that are coming up in their wake, certainly the ones that were founded in the last few years, have been focusing their design for production. So the way in which they're building the products are very much focused on doing it in mass, which is what the DOD cares deeply about. Catherine, finally, I wanted to ask you about probably the smallest part of the American dynamism portfolio, and that's education.

If we look at some of the public tech names, Chegg, Coursera really have not performed well as stocks recently. Duolingo, an exception, has done quite well. What do you see as the most investable area of education that's actually going to have great ongoing performance? Well, I think there's an incredible change that's happening in early childhood education and happening in primary education around the homeschooling movement. And actually, if you look at a number of states across the country, they are investing in what's known as ESA's education savings accounts that allow for parents to be given a fixed amount of capital to invest on their children's behalf and whatever education products they want. And so there are a number of technology companies were invested in a company called Odyssey Education, which creates the plumbing for government to provide those grants and provide those funds to parents around the country so that they can spend the capital for their students in

the way that they believe is best fit. And I think particularly after COVID, we have seen more and more parents saying, I don't want to put my children into a traditional education program. I believe I can do it better. And you're seeing a host of ways in which parents are doing micro-schooling, doing the programs themselves, or kind of building their own curriculums for their children using government funds. And it's a way in which the government and the families can work together hand in hand. And I think we're going to see a lot of innovation in education over the next few years, particularly around parents that want to take control of their children's education. Yeah, we're increasingly seeing this collaboration around

energy, too, including nuclear, which has been a big hot topic and part of your investments as well. Unfortunately, we're out of time, but I'd love to get you back to talk about that as well. Catherine Boyle of Andreessen Horowitz, thanks for being with us. Thanks so much. We just talked about SpaceX and commercial space. So nearly two years after or two years ago, Advent International announced plans to acquire Maxar Technologies and take that space company private. Now, the deal, which we covered on CNBC, closed last year. And since then, the private equity firm has split that portfolio into two separate companies, Maxar Intelligence, which collects and sells Earth observation data, and Maxar Space Systems, which makes satellites and other space hardware.

Maxar Space Systems CEO Chris Johnson says that split has enabled more focus and faster investment. We're big enough and been around long enough to do real things like part of the space station for the moon. But we're small enough and agile enough in order to adjust to customer demands and market demands without having to go up three or four or 10 layers of management. I've got a direct access to my private equity board. We want to go do something. Here's the business justification. Let's go. And so I think that focus on core satellite manufacturing business

has been really great to drive additional investment, additional focus on my business in particular. So that Maxar manufacturing business has been around for six decades. It's really one of the first, call it commercial space companies, if you will, since it's best known for building big geostationary satellites that are used for broadcasting, including for DirecTV and Dish and the Constellation for SiriusXM's radio business. The proliferation of low-Earth orbit communication satellites, though, like SpaceX's Starlink, coupled with the surge in streaming and over-the-top television, has put pressure on that market.

But Johnson actually sees that stabilizing now. That's a real core piece of our business. And right now, the deal flow on that Geocom market is actually higher than it's been probably in the last 12 to 18 months. So we're excited to see, you know, the Geocom market used to be 30 to 35 a year. Back in, you know, 10, 15 years ago. It's kind of stabilized at 8 to 12. And right now we've got a big spike where we've got four active kind of proposals into customers and a number of others that are kind of right on the doorstep there. So Maxar Space Systems is moving beyond that as well, though,

developing the Earth Imaging Worldview Legion satellites for its sister company, also playing a key role in NASA's Lunar Gateway, building out the power propulsion infrastructure for that moon-orbiting space station that's expected to be delivered by Maxar to the space agency next year. Now, Maxar Space Systems is also one of the companies that could be poised to benefit from those new regulatory changes unveiled by the Commerce Department

that we just touched on a few moments ago that would open up new markets for American space companies and satellite manufacturers. But for more, check out my podcast, Manifest Space. You can get that wherever you get your podcasts or check out that QR code. And, John, we just had two segments with American flags in it. There you go. Well, up next, a look at the software companies that could potentially see a top line boost from AI this earnings season. And an update on last night's earnings here on Overtime.

Intuitive Surgical finishing higher by 10 percent. One of the biggest winners in the S&P 500 today after beating estimates yesterday during overtime. Be right back. Welcome back. As we get deeper into earning season, investors are looking for signs that AI will provide a significant boost to more software stocks. Well, today, John takes time out with a founder whose company is in on that hunt. John. Well, Dharmesh Shah is co-founder and chief technology officer at HubSpot. It's a $28 billion market cap company with software that helps small businesses grow sales and marketing, kind of like a sales force for SMB.

Shah started HubSpot 18 years ago with fellow MIT grad student Brian Halligan after selling his first startup. One of Shah's stipulations in starting the company, he would focus on technology, the product, continuing his decades-long love affair with computers. He didn't want to manage any people. Once I met my first computer, this is the equivalent. The only other time I've had this feeling is when I met my wife. It was this kind of feeling of love at first sight. I'm like, this was actually meant to be. You know how you have that first date? It's like, I hope this works out. I hope they like me too. As it turns out, computers like me back. Well, computers seem to love him back. The product growth has helped their stock gain 20% in the last 12 months. From here, though,

the company's banking on generative AI features to help customers write copy for things like social media marketing and customer support. HubSpot's Breeze AI agent will be front and center there, along with HubSpot's platform that also integrates third-party apps. Our mission is to help millions of organizations grow better. And right now, what they need from us is they need from us the educational support to help them kind of hold their hand as they adopt AI. They need for us to continue to evolve our platform, to continue to get more partners in. So if they pick third-party products that all integrate with HubSpot, the idea is to have this easy-to-use, fast time-to-value, unified offering that was cohesively built and we're very inspired by Apple, right? The way to get non-consumers to consume is you have to simplify,

you have to make it easy. And the only way to make it really, truly easy is you have to kind of control the boundaries and the edges. When Apple launched the iPod, they didn't say, oh, we're going to have this other company that's going to do the music relationships. We're going to do other things. We're going to have the partnerships. We're going to do the thing. We're going to make the device.

And we're going to give you iTunes on Windows. All of it comes from Apple. And that's what allowed them to take millions of people and get them into the game and enjoying digital music. HubSpot, our thesis is exactly the same. We're going to make it easy, fast, and unified, so millions that should be benefiting from all the advances in technology, including AI, will be able to benefit and grow their businesses. That's why we're here. So the timeout takeaway for investors here, measured marketing. I do mean measured. Two powerful questions are going to start getting answered this holiday season.

One, can companies save marketing dollars on copywriters and social media managers by deploying AI? And then two, can that AI learn and mass customize messages to be more effective than humans in certain tasks? If so, companies like HubSpot, Klaviyo, not to mention giants like Adobe and Salesforce could have some wind at their backs, Morgan. We'll be watching. Well, up next, all the big names on next week's earnings calendar that need to be on your radar, including Tesla and IBM. Welcome back to Overtime. Earnings season kicks into an even higher gear next week. Tuesday brings 3M, GM, GE Aerospace, Texas Instruments and Verizon,

AT&T, IBM, Boeing, Coca-Cola and Tesla are the big names on Wednesday. And Thursday features UPS and American Airlines. But you look like you want more. So on Monday, right here on Overtime, we're going to speak with Qualcomm CEO Cristiano Amon, first on CNBC interview from the company's Snapdragon Summit. Morgan, they always have it in Maui. I'm disappointed that I never get to actually go.

Yes, never get to actually. But AI is going to be a big topic there, right? Because they've got the mobile chips. They've got cars. They're doing a lot with Snapdragon. It'll be interesting to hear what he has to say, especially coming off of what's been a wild week for semi stocks after everything sold off with ASML and then everything ran back up with Taiwan Semi, including NVIDIA, to all-time highs. And, of course, we're going a lot deeper into tech from here.

Will the mega caps maintain? Will the smaller stocks get boosted? All right. Well, everything finished higher today except for the Russell 2000. All the averages are higher on the week. That does it for us here at Overtime.