Closing Bell - Closing Bell Overtime: Dow’s Record Day 5/17/24

Episode Date: May 17, 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.

I don't know Scott, maybe the Dow definitely ends the week with another record close, but is it over 40K? We've got to wait, we've got to shake it and let it settle. That's the score cut on Wall Street, but winners stay late, especially to see if we closed above 40K for the first time. Looks like, looks like maybe we did it. Welcome to Closing Bell Overtime, I ford morgan brennan is off today and the blue chip index now in a five-week winning streak while the s p 500 and nasdaq are higher for four straight weeks coming up mercer's u.s chief investment officer olalu aganga on where she sees buying opportunities as the market keeps heading higher and later the ceo of massimo speaks for the first time since the latest proxy fight back and forth against the health technology consumer products company. But first, we begin with the markets finishing a strong week of gains with the Dow.

Yes, closing above 40K for the first time ever. All three major averages are up well above 1% for the week. And joining us now is Deepak Puri of Deutsche Bank. Deepak, good to have you. So I won't necessarily ask you to talk just about Dow 40K, though we do have to mark the moment. It was a strong week overall. We're probably in a stronger position

than a lot of people thought we would be at this point in the year. Any significance to the tech news we're getting next week in getting this to continue? No, absolutely. John, first of all, great to be with you. It's a historic day, 40K up on Dow. I think part of the rally that we have seen is really driven by the fundamentals, and we're going to see big news on the fundamentals come next Wednesday. So I think the market is a little bit, you know, preparing itself because it expects a pretty bumper draw, I guess. OK, let's let's add in Scott Cronert,

city research head of U.S. equity strategy. Scott, happy Friday. So we're right there, right there at fifty three hundred on the S&P edged up today. You think the CPI read we just got this week, not too hot, might warrant a move higher from here? So I think the CPI read, in addition to the employment data from last week, all just kind of set the stage. And you mentioned earlier, we've seen the bond market rally, which has kind of given this rally some new life. And so as quickly as we sold off heading into Q2 around the earnings period, you know, beginning of mid-April, the data and the conviction that this incrementally hawkish Fed narrative is receding has been enough, I think, to stimulate new money flow to equities. Interesting. So, Deepak, I do want to go back to the Dow right now

because it's a big headline maker on newspaper front pages to the degree that we still look at newspaper front pages. But to a large degree, the big stocks we've been talking about for the past several years have been the once-named Magnificent Seven. What's the significance of the Dow in the environment that we're in right now? Well, it just tells you that the rally has broadened a bit. It's not just because of the tech. You know, Dow has much more industrials,

a little bit more value to it than, let's say, the S&P. So I think this earning season, we have seen how, you know, some of the other parts of the markets are also pushing their weight. So, be it financials, be it industrials, utilities is having a moment. So, I think it is just not a max-seven rally anymore. It has broadened out a bit, which is heartening to any bull out there. And the only thing I would say is, and I completely agree with Scott here, that, you know,

just the markets might be a bit premature to start factoring in rate cuts just because we've gotten, you know, one non-farm payroll number, you know, below 200K or a slight miss on the nominal CPI does not mean that the Fed is just ready to start cutting rates from our estimate. Probably it's not going to happen until the September meeting at best. Okay. Okay. And Scott, on a day where we do see the Dow hitting 40K at the same time, the Russell 2000 smaller stocks are a little bit in the red. Is this enough broadening? And what does it tell us the relative lack of action in the Russell, though it is higher for the year, of course, and doing OK. What does that tell us about the state of this market? Yeah, I think the broadening discussion has been going on for many months.

Heck, we've been talking about it since last summer in terms of an earnings broadening. And early on, the view was, hey, you know, we want to be barbell growth with cyclicals as a means of getting to an eventual change in the Fed hawkish paradigm. Now, what you get with small cap is a higher degree of economic sensitivity. You even get a higher degree of debt leverage, if you will. And so the impetus on small cap to more purely reflect underlying economic conditions is there and is more relevant than it is for the S&P 500. So essentially, what you're getting here, well, I think a small cap has been volatile of late.

But I do think that as you get closer and closer to this inflection in Fed, we have to be aware that what's going to come with that is a little bit more concern regarding economic trajectories. But all told, the valuation for small cap is setting up for this to become an ongoing broadening and rotation trade as we go into the second half of the year, in our view. Okay, Deepak, in that context, you like tech and comm services sector-wise. Why? Well, it's a secular growth story here, John. I mean, when you look at, you know, earlier this year, there were concerns that the prices might be pretty much ahead of fundamentals. But the earnings season has shown us, you know, when you look at EPS growth,

revenue growth, capture of market share, a lot of these companies are still doing great. We have the AI tailwind with us. So it really warrants thought that how you could have somewhat of a positive opinion in S&P without the tech and communication services not performing. Calm Services, for me, has been a standout. If you look at from March 31st till now, the number of positive revisions that we have seen has been the best out of all the 11 sectors. And EPS growth year over year is also the strongest. So really, I think interactive media, wireless and calm really spotlighting that,

but both the sectors look really positive to us from here on to the rest of the year. Scott, is there a point where politics on the calendar potentially becomes a more important part of the narrative? Well, I think it's going to become part of the narrative the further we get in the second half. And this is going to be an issue, I think, for many strategists such as myself and thinking about your full year price targets. I think we're going to get to a point here, John, where we're going to be flipping ahead to 25 earnings growth expectations. And there's probably going to be plenty of reason to be

optimistic on that premise going in the back half of the year. But we're still going to have to contend with what we think is probably a lose-lose situation for U.S. equities based on what we know about policy platforms right now. So the volatility aspect around the election probably will continue to become more and more of an issue as we go into the second half. All right. We'll look for it. Scott, Deepak, thanks to you both. Have a great weekend. Now, NVIDIA might be getting a lot of buzz ahead of earnings next Wednesday, but rival AMD is experiencing some bullish headlines this week. Christina Partsenevelis has the details. Hey, Christina. I want to say move over, NVIDIA. AMD is in the spotlight, which shares up almost 8% this week.

Microsoft is an AMD customer, and at an analyst briefing just last night, Microsoft said it's going to make AMD's AI GPU chips, the graphic processing chips, available to cloud customers as early as next week. This is according to TechCrunch. This signals two things to the market. That first, Microsoft may not be cutting its orders of AMD chips in favor of NVIDIA. That was a rumor in the chip world just over the last few months. And why you actually saw the stock drop? Because so many sell-side analysts turned negative almost on AMD.

And then you also had some hedge funds that took larger short positions as well in AMD. The second signal from this Microsoft move is that it's actively looking for an alternative to Nvidia. A lower price is clearly key and something that we're going to see more of, competition between the two names. Wolf analysts, for example, even taking Nvidia off of its tactical list, replacing it with AMD. Don't worry, it has nothing to do with fundamentals for Nvidia. They still like the stock. They just point to Nvidia's share price surge just this year alone, which is up, what, 87 percent. And they believe that AMD actually has more upside potential, especially in the next few months or so, given the launch of its AI chip, the MI300X accelerator. And that would provide a path to even higher revenue guidance, especially

in next year, 2025. Interesting. Now, just because Microsoft might be adding AMD chips to the menu at the restaurant doesn't necessarily mean that customers are going to order it, right? So they've got this massive hyperscale cloud infrastructure. They want cheaper alternatives, but with all of the software moats that NVIDIA has, we're not yet sure what customers will choose. Yeah, I love your analogy. That's great. And often that's the argument for NVIDIA. They we're not yet sure what customers will choose. Yeah, I love your analogy. That's great. And often that's the argument for NVIDIA. They have the entire ecosystem, especially the software and CUDA. But as we start to see more software programs that can, or more programs available, AMD is offering, that could be the shift. But I do think price could play a role

maybe in the near term, especially when you start to realize how much CapEx is going towards Nvidia. But then you have Blackwell, which is the next iteration of its GPU, and rumor has it that Nvidia is going to be really competitive with pricing on that, which would be a negative for AMD, to your point, John. We'll have to wait and see what happens and watch your reports. Christina, thank you. Let's turn now to CNBC Senior Markets Commentator Mike Santoli for a look at the subtle signs of caution in the market right now. Hey, Mike. Yeah, John, and they are subtle because I would say this rally that we've come off the April has been pretty broad and inclusive and you've had things like financials working. So it's not as if the

overall market is defensive, but there has been a little bit of a shift in tone. This is the lower volatility parts of the S&P 500 in ETF form, and it has actually started to outperform the higher beta or more aggressive and volatile parts of the market. Now, this comes off of, you know, a relative underperformance for a long time for low volatility stocks, so it is just a little bit of maybe the pendulum swinging modestly back in that direction. But a lot of this is, you know, semiconductors, for as well as NVIDIA has done, are even a little bit below their highs. And so you want to be conscious of the fact that the market might be internalizing the idea that there's been some decelerating economic growth, at least in hints in the U.S. Now, take a look at where the consumer cyclical stocks are strongest. They're actually not in the U.S.

at the moment. This is also year to date. So this is the global consumer discretionary ETF. Now, global means it includes the U.S. Half of this is U.S. stocks. And this is just U.S. consumer discretionary. So you see that spread on a year to date basis is pretty significant. Asian consumer cyclicals doing really well. European ones have come back as well. So you have this, I think it might be just sort of a virtuous asynchronous type of expansion where U.S. consumers may be getting just slightly less aggressive while the rest of the world sort of picking up the slack. So far, it's working as yields have also cooperated, John. OK, Mike, so that first chart was low volatility versus high beta, right? And it looked like for just the last month, almost exactly the low volatility really opened up that gap that really hadn't existed for quite

a while. What was the shift there that preceded that? It's not clear that there was a particular shift, except that's about when the economic data started to soften up relative to expectations. If you look at the economic surprise index, it did roll in that direction. So it could just be, you know, that the market's taking back some of its economic overheating optimism that we had, you know, about a month ago from there, because also from there, yields have declined. So some of the yield sensitive parts of low vol probably were helped out as well. We've been talking about the utility sector, which have had this really springy comeback rally and have not acted like, you know, calm, low volatility stocks, but they're in the ETFs. Interesting stuff. See you again in a bit, Mike. Thanks. Up next, Mercer's U.S. chief investment officer and whether she prefers

value or growth stocks and why she's so bullish on alternative investments right now. Plus, why shares GameStop are stopped. They're sinking again as this week's meme mania rally fizzles out. Overtime is back in two. Welcome back to Overtime. Another record-breaking day for the Dow. It closed above 40,000 for the very first time in history. Here to share where she is finding opportunity in this market is Olalu Aganga, Mercer's U.S. Chief Investment Officer. Always great to have you, Olalu.

Thanks for coming in. Thanks for having me back. So, I mean, your clients aren't really focused on the Dow, though, are they? No, not usually. I've been here a few times. We are very much focused on the long term. I'll talk about value growth just quickly because we mentioned that. Those are factors that alternate somewhat frequently, except in the last, what, 15 years where we've seen low rates. So growth has been the clear driver. But now in this environment, we're seeing it flip.

So what value has been outperforming since February? And now Dow, where it is, right, a lot of these names are valued. But our clients, as we mentioned, are longer-term type of investors. From a strategic standpoint, it's always been alternatives. I feel like I'm coming and saying alternatives. But we issue surveys to be able to get a sense for where clients are looking and trends. It's called a large asset owner survey. So some of the directives show that it has been the private equity, the private credit.

But then also at Mercer, our platform sees the flows. So we're able to see where clients are allocating. So our private investment platform, for example, the last fund was about $4 billion, and it was across a number of those areas. So we're seeing clients telling us where they're looking for opportunities, and then we're also seeing the flows as evidenced by some of our funds. How much of that, based on the headlines and just what the market did last year, you think is fear and a desire for capital preservation and a little bit more, I don't want to say of a sure thing, but a sense that, okay, in alts,

maybe I can be less exposed to the vagaries of valuations in the public market. Valuations, the mark-to-market, all of that. So usually when you have alternatives in the portfolio, it's hard to think about it this way, but you would think it would be more volatile, more risky, but because it is marked so slowly, it actually brings the stability that you need. So the asset owner survey is one way we're looking at it. Other clients for themselves, if they're like, okay, this may be hard to do. We're also seeing trends in outsourcing. I think

there were some headlines for big institutions outsourcing as may be hard to do. We're also seeing trends in outsourcing. I think there were some headlines for big institutions outsourcing as well. We see that. We're a beneficiary of that at Mercer. So it may seem scary, but it really isn't. So on the other side of long-term, perhaps, Europe, right? It's been underperforming the U.S. for a long time now. And we had somebody else saying this earlier this week.

Is it time to look more closely at Europe again, even given what we've seen happen with Russia, Ukraine and everything else? So strategically, we've been neutral. So the strategic is the long term asset allocation. We've been more neutral tactically, though. We've been looking internationally, but I think I've been talking about China. And, you know, when you have valuation distortions that are that wide, it's three years of underperformance in that particular market. Those are where we're starting to see, and we've seen it recently, some of the outperformance. So we're watching some of the other areas, but we tend to not move as fast. There needs to be more data points to support. How do you think about China in the long term, though, given that in the near term, in an election year, nobody loses points for looking tough on China, right?

Like, so is that, does that create buying opportunities that you see long term? Are you thinking about it that way? Or does it highlight dangers in getting too bullish long term on China? Yeah, so I'll say two things there. Usually with elections, we see volatility across the board. It doesn't matter which country, which region, it's volatility, but it's shorter term. So it happens. It's a shock. And then people sort of move past it. So the studies that we've done have seen no lasting impact with regards to elections. But we look at policy actions. Those could be longer term and we're seeing tariffs and those types of things. So, again, the China where we're looking at is tactical, not from a strategic longer term holding. It's the valuations are cheap today. You can insert, but then you should also be mindful

that we may need to get out. What are you doing with India, given that so many demographic trends are moving in India's direction? I mean, India has been doing really well. So if you were to split up emerging markets to EM, ex-China and then China, we've already seen a lot of the outperformance across the board. So Korea, Taiwan, India, Brazil, you name it, like the emerging market countries, ex-China has already been doing well. China's the one that's been, you know, from a valuations perspective, really depressed. All right. Took us around the world. Olalo Oganga, appreciate it. Thank you. From Mercer.

Well, now check out GameStop today. It is off by about 20%. Investors being dealt a double whammy here. Not just Mario smaller, Mario dead. In a filing, the company is saying it plans to sell additional shares while separately reporting preliminary results that showed a drop in Q1 sales. So let's look at the wild week to date move up 27 percent. But the stock opened Monday at more than 26 bucks a share after closing Friday at about 1750. That's, of course, because Roaring Kitty resurfaced over the weekend. So at these current levels, the retail traders that made this meme trade so famous,

they're likely in the red for the week if they bought any time before today. Well, up next, Massimo CEO Joe Chiani speaks out for the first time since the latest round of the poxy fight against his company. Plus, we'll get the latest on the plan spinoff of Massimo's consumer business.

And anticipation is building for next week's Microsoft Build Conference and the company's latest AI announcements. Find out whether it could move the stock later here on Overtime. Be right back. Welcome back to Overtime. Well, the battle for control of Massimo's board is heating up. Last week, the company offered the single vacant board seat to one of activist investor Politan Capital's two nominees in an attempt to end the second proxy fight. Politan responding in a letter to the board writing in part, we think it falls well short of resolving the fundamental governance problems at Massimo

while simultaneously introducing others. Later, they say your proposal of seating one Politian nominee will simply deadlock the board, something broadly criticized by governance experts, which would merely continue the status quo. Well, joining us now for his first comments, some of them since this round of proxy fighting began, is Massimo founder, chairman and CEO Joe Chiani. Joe, welcome. So this is going to a vote, you think? I think so. Nice to see you, John. But unfortunately, yeah, I think it is going to go to a vote. It's a shame because we're going to spend a lot of energy, a lot of money fighting this thing, but the shareholders will have to decide what they want for the future.

How much does this spinoff and the timing of it, you think, matter to your argument to essentially keep control of your company? Well, we began talking about doing a spinoff after my CFO and I went on a listening tour meeting our major shareholders. And what we realized, short term, they were going to be right. Long term, I was going to be right, that the best thing for Massimo is to keep it all together. But short term, we're a health care company and our health care investors don't know how to deal with the consumer side of our business. So at the time, we decided there might be a way to separate the consumer health without giving up the dream of what we're hoping

to accomplish for patients, people and our shareholders effectively. So you're going to separate. You're at least you're moving in that direction. You're willing to shareholders effectively. So you're going to separate, you're at least you're moving in that direction, you're willing to do it, but you don't think that total separation is necessarily the right thing long term. And it seems to me like this stork baby monitor is maybe an example of why you think that. Now, I haven't actually seen it, but it sounds like it's this silicon boot that you can put on the baby's foot and pulse oximetry is involved. And it essentially not going to just tell you when the baby cries, but if there's a problem health wise with the baby that can be picked up by that kind of equipment that you have the IP for. Am I am I understanding that correctly?

You are right. This is actually, this is the boot. It wraps around the baby's foot. And if the baby during the night has a drop in their saturation, which happens a lot, unfortunately, with patients that, with babies that have sudden infant death syndrome, it'll send an alert to the family, their parents, about the drop in SpO2 and hopefully we can avoid these types of problems. So yeah, we're very excited about it. This is something I'd envisioned, I'm not exaggerating, 35 years ago.

May is the 35th anniversary of Massimo. I'm so happy we're finally getting it out. But it's this product and other products like these wearables. That let me know that we're on the cusp of doing some incredible things for the future. But also things we're doing in the health care system like the new generation

route that we're going to be creating. That will hopefully launching this year as our anniversary. Present our customers and stockholders. Well I want I want to go back this stork booth, though, because, I mean, watches, there's already Apple Watch out there. I know how you feel about Apple watches. But this new parent stuff, I mean, you know, 13, 15 years ago, I was a new parent.

I know what that can do in the market. What's the expected price range for this sort of thing? And I can't think of anything else in the market in this. It's like hospital equipment at home. I mean, it seems to me like it could be pretty expensive. Well, that's the thing. We worked for many years to make it smaller, make it lower cost. We're offering the boot monitor without the camera, and this is the camera that has its own cool edge AI built into it to tell you if the baby's rolled down face down or other issues in the future. But the monitor itself for pulse oximetry drop is going to be about $200. With the camera, you're talking about $300. It should change everything. There has never been a hospital grade, let alone Massimo, which we're

the most reliable pulse oximeter on the planet, been available for parents at home. So yeah, it should be big. It should change things and it should be great for Massimo stockholders. So if I'm a stockholder, I might ask you, why not just license that out and be in every baby high end baby monitor practically in the developed world? Why do it yourself? Well, number one, I have started I started Massimo to be an OEM company, meaning I didn't want to make our own end user product. I wanted to be integrated in other people's products. I used to call it Dolby.

I know Intel inside is more modern. And what I learned, if you try to OEM, it's like taking a shower with your raincoat on. You get in there, you turn on the shower, you don't get very wet. You have to be in there with your own direct products and work with OEMs. You've got to do both. It's a push-pull strategy.

It's worked for us in the healthcare. We're now the leading pulse oximeter company in hospitals because of our own direct products and OEM strategy. And we're trying to replicate that with the consumer world. All right. You've got a fight on your hands, and we're following it. Joe Chiani from Asimo. Thanks for joining me. Thank you. Well, now it's time for a CNBC News update with Kate Rogers. Kate. Hi, John. White House National Security Advisor Jake Sullivan will travel to the Middle East this weekend. At a White House briefing, National Security Spokesman John Kirby said Sullivan

will head to Saudi Arabia on Saturday to meet with Crown Prince Mohammed bin Salman and then visit Israel for talks with Prime Minister Benjamin Netanyahu, where Sullivan will continue to advocate a more targeted approach in going after Hamas militants in Gaza. disbanded its artificial intelligence team that focused on its long-term risks, just under one year since the group's creation. That's according to sources who confirmed to CNBC. It comes days after both team leaders for the group announced their departures from the startup. One of the leaders said that safety had taken a back seat at OpenAI. And as President Joe Biden marked the 70th anniversary of the Brown v. Board of Education Supreme Court ruling that desegregated public schools across the U.S. Biden announced a new 20 million dollar grant to further desegregate magnet schools in seven states. The Department of Education recently released a report that found gaps in education among black and Latino students and white students in high school math and science. Back over to you. OK, thanks. Well, up next,

Mike Santoli is going to look at whether another negative reading of the leading economic indicators is raising a red flag for the economy and the market or not. And Robinhood is a big winner on Wall Street today. See up more than 12 percent B of A double upgrading the stock from underperformed to buy and hiking its price target from 14 to 24 bucks a share, citing a spite in retail investor activity. Be right back. Welcome back to overtime. The conference board's leading economic index fell in April, a sign that softer economic conditions lay ahead.

But is the reading really that bad? Mike Santoli, what do you say? You know, the leading economic indicators for this entire cycle have really not been worth following. If you wanted to know where the economy was headed, we've looked at this gap before that's opened up. So this goes back to 2000. The blue line is the year-over-year change in the economy was headed. We've looked at this gap before that's opened up. So this goes back to 2000. The blue line is the year-over-year change in the leading economic indicators.

You see that plunge below the zero level a while back. I mean, that's going back like a year and a half. And yet, real GDP has stayed solidly positive. You haven't seen another example of that in this history. The closest we got is this sort of mid-cycle slowdown in the mid-2010s that never did result in any kind of a significant downturn in the economy. So what does it mean? Well, now you have actually the indicators becoming less negative. So it's almost as if it's better than it has been, and yet the real economy hanging in there. I think there's a lot of reasons for this. One is

the LEI is based on significantly on survey work, like consumer sentiment, the ISM surveys, as well as the treasury yield curve, which has been inverted and therefore supposedly a recession signal for over a year and a half. That has not necessarily applied. The last recession we had, John, during COVID, it's the only one we ever had where household finances got better because of fiscal support. So who knows? Maybe we just fouled up a lot of these signals. So, Mike, I'm reading this book called The Anxious Generation. And, you know, social media's impact on teenagers. It just makes me wonder, there's so many people feeling bad about the economy, even though the numbers say the economy isn't bad. Can we blame social media

for that? Is that why in these surveys people feel bad, even though the numbers say the economy isn't bad. Can we blame social media for that? Is that why in these surveys people feel bad even though the numbers don't show it's as bad as we feel? I think that you've seen it in actually the last couple of cycles, so arguably yes, the idea that people anchor to a general mood that they're seeing reflected back to them. I do think this time, though, inflation is particularly abrasive to collective sentiment. And that has been something that we haven't been used to generally generationally.

And people just can't let go of it, even though inflation is eased and real wages are rising again. It just doesn't seem that way. So maybe it's because of how we're getting our information and sort of reinforcing those impressions. OK, so maybe we won't blame Instagram and TikTok. We can blame shelter inflation. That's right. That's all that matters. Well, up next, the one industry that's leaning into China, as so many others are diversifying away from that country, and Snowflake might be leaning into a deal.

The company's reportedly in talks to acquire startup Reka AI, which makes large language models. That would be an acquisition of more than a billion dollars. We'll see. Over time, we'll be right back. Welcome back to Overtime. We've seen a lot of U.S. companies nearshoring, trying to reduce their reliance on China, but some travel companies are flying the other way. Seema Modi has the details. Seema. John, that's right. If you look at hotel projects in China right now, they're up 18% versus the same time a year ago, with a record number of rooms, a half a million

currently under construction. Now leading the hotel expansion efforts, Marriott, Hilton, IHG, Hyatt has more than 75 hotels in the pipeline. Revenue in Greater China for that company increased 12 percent in the first quarter. The company's CFO also cited strong outbound travel from Greater China to Japan, Thailand and South Korea. It's a similar trend for booking holdings, while Airbnb CEO Brian Chesky on the call said China or he listed China as one of the countries he's looking to expand in. If we take a step back, though, cross-border travel between the United States and China is still 30% of pre-pandemic levels. The number of flights to and from China is steadily

increasing. It's seen as actually one of the few areas of cooperation between Beijing and Washington. Now, according to Nomura, Beijing is trying to fix some of the obstacles foreign tourists are facing on the ground, like using U.S. credit cards and accessing their payment system, John. Sima, do you have a sense of what is really driving that? Is it the economic activity in general, or is it that there's a certain amount of aging hotel stock in China, so there's demand for newer stuff based on who's going there

now. I just wonder what some of those dynamics might be. You know, even though the economy is slowing down, the data shows that the Chinese are still traveling not just across the mainland, but outside the country as well. So it's one way, one place where the Chinese are allocating a significant portion of their budget towards. And then there's also the rising middle class that just creates more opportunities for these hotel operators that pre-pandemic were doing extremely well on the country. They're chasing that same level of growth that they're hoping will come back in the coming years. Oh, I guess I shouldn't assume that this is people from outside China coming in. Is maybe the middle class within China traveling within China more too. And so that's

what some of these U.S. hotel operators are trying to capture. This is really betting on the Chinese traveler and also the Asian traveler that it's coming back to China much faster than we're seeing here in the U.S. going there. All right. Makes a ton of sense. Sima Modi, thank you. Up next, the CEO of one unicorn startup on helping speed up the race to create better software to make generative AI. And later, the key earnings that should be on your radar for next week, including a big one. NVIDIA will be right back. One of the earlier areas where generative AI is showing big productivity benefits is software development, with coders using it to write and debug projects more quickly. Well, this week, let's take some time out with Replit CEO Anjad Mossad, a startup founder whose vision is to make AI into a force multiplier for human effort. Mossad grew up in Jordan, where his Palestinian father immigrated after his family was forced from their home. His dad sacrificed to buy a computer for government work, and Mossad

taught himself to code on it when his dad wasn't looking. He eventually figured out how to write software for a gaming cafe and make money, but he dreamed of having a far bigger impact. My dad was very poor growing up. He lived in a single home with 30 plus people and his room was like maybe five or six people. And they had trouble sometimes with even affording electricity and things like that. his brothers, they all went to university, and especially in Turkey and Egypt and other places, because Jordan was still underdeveloped at the time, and became engineers and doctors. And so, you know, Palestinian refugees had like a high emphasis on education, because it felt like education was the thing that's going to be able to kind of pull us out of poverty and allow us to kind of build our lives. So as a sort of second generation, you had parents who really came from nothing, were displaced and built something of themselves. So now they have an even higher expectation of us.

So Amjad had an opportunity to chase those expectations when companies half a world away in Silicon Valley got excited about his work. He created a new way to write code in a web browser. That got him a job offer in San Francisco and a high-tech work visa and eventually a chance to build something far bigger. Well, today, Replit is more than an online coding environment. It uses generative AI agents to help developers fix mistakes and finish projects faster. When we say agent, it's typically an AI that's able to act in a certain environment, that is able to jump in and help people learning how to code, people coding, to recover from errors in their software.

And I think this is really a big part of our strategy going forward, is building more and more of these agents that can help people use our product. So I think there are two visions of AI. There's the AGI vision, right? Artificial General Intelligence, that we're going to build AI that's going to automate all the jobs and we're just going to have sort of whatever luxury communism forever, right? But, you know, another vision for for AI, and what I think is probably the best and what can happen is that agents are under our control. So the timeout takeaway, some of the most promising efforts in generative AI use it as a pit crew that keeps productivity humming, whether that's in the learning process or in the race to create better software.

You can bet Microsoft will talk about this kind of thing next week at its Build Developer Conference. But meanwhile, pure play Replit is disrupting the space. Well, speaking of Microsoft, up next, what to expect on the co-pilot front and whether it could help the stock take off. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. Be right back. Welcome back to Overtime. That's my fake invisible noisemaker. The Dow closing above 40,000 for the first time today.

Looking ahead to next week now. Earnings have come in 8% above expectations so far, and the parade keeps moving. We're going to hear from major retailers like Lowe's, Macy's, and Target, plus tech names like Zoom, Palo Alto Networks, and Workday. But investors are going to be counting down to Wednesday afternoon when NVIDIA, the big one, reports Q1 numbers after the bell right here on Overtime. NVIDIA shares are up more than 80 percent this year. Investors are sure to be watching for clues about the staying power of its own AI boom. Some key economic data points also to watch include minutes from the last FOMC meeting on Wednesday,

plus jobless claims and new home sales on Thursday. We're going to get consumer sentiment on Friday. Well, something else that we're going to get next week is Microsoft's Build Conference. Now, earlier this week, OpenAI and Google made headlines for their AI efforts, but now it's Microsoft's turn to give updates on its AI PCs, AI Assistant Co-Pilot, probably a lot more than that. Joining me now is Nilay Patel, Editor-in-Chief at The Verge, also a CNBC contributor, also an interview of Satya Nadella at events such as this. High bar for them here? Yeah, I'm looking at two things for Microsoft next week. One, we're

expecting a big announcement with Qualcomm to put ARM chips in more mainstream Windows laptops. You know, the reporting that we're getting out of Microsoft right now is they expect to be competitive with Apple's M series chip, which are the industry standard right now. That's a turn away from Intel. So this is a reset of the entire PC ecosystem.

They can be more competitive with Apple on hardware performance, battery life. That kind of changes things, and it could really affect some of their hardware sales. Then they're also going to integrate AI into more and more of these devices and they're going to talk a lot about Copilot, I think particularly in the enterprise. Since you started on AI PC, how much do you buy that whole narrative? I mean, when I look at my laptop and I do use an Apple M series laptop, most of the AI I use is within Adobe software, say in Premiere. Beyond that, is AI PC really a thing or is it relying on assuming that more of these developers are going to come up with stuff down the line that's going to utilize it?

Yeah, look, the only winner in AI right now is NVIDIA. That's where all the money is going. It's all flowing back to NVIDIA. All of the AI workloads are happening in the only winner in AI right now is NVIDIA. That's where all the money is going. It's all flowing back to NVIDIA. All of the AI workloads are happening in the cloud. Most AI applications are being deployed on the web. And we can just see that across the board. So the idea that you need an AI PC that's more than a web browser, it has to be proven. Apple said it with the iPad last week. These are the best AI devices.

They're going to keep saying about the MacBook Air, which is frankly hilarious. Microsoft's going to say it about their PCs now. What we are going to look for, I think, across the board is some of these models coming down to run on these devices locally. I think you need that for low latency voice assistance. I think you need that for just making the computers easier to use, which all these companies have started talking about. And I do think you need it for things like image editing, sort of on the phone level. You take a picture of the phone, makes it immediately better.

So there are a lot of things you can do. It is not proven that people want to do those things on their computer, but making it faster does require it coming down to run on the hardware itself. And I think that's where we're going to see the first improvements. I need to see games that make true use of generative AI. Like if you get a Fortnite-type experience and the kids are like, I've got to have an AI PC, then maybe I'll, but we'll see. I mean, I guess that's what this lays the groundwork for.

I was watching Google in OpenAI last week, and I was looking at their demos, and I was like, who wants to do these things? Who wants to wave your phone around and say, what am I looking at, when you already know what you're looking at? We've got to start seeing some real consumer applications that make sense. I was just talking about software developers and the AI tools that are helping efficiency there. That's an area where there seems to be real rubber meeting the road right now. But investors don't often pay a lot of attention to it. If Microsoft can make a case that Azure and their tools are

better for the development of all this software we expect with AI, how big is the potential benefit? Yeah, you know, I look at where Microsoft's focus is. It is in the enterprise. It is the next generation of what you might call digital transformation, which I know you have covered a lot over the past few years. That was the big buzzword in enterprise computing for a long time. They're not just pitching, hey, put a chatbot in Excel and see what happens to your company. They're pitching wholesale, let's reinvent your back office around these tools.

They're pitching wholesale, let's reinvent your go-to-market around these tools. Let's take your sellers and arm them with data that they can understand because they can talk to it in a chat interface instead of having to go to an analytics department or something like that. Those are big changes. Those are multi-billion dollar efficiency improvements for big companies if they can actually make them work. And they represent, I think, durable value for Microsoft

as the provider of those things. That's years from now. First you gotta build it all. When Apple rolls out new platforms, new ideas, initiatives, they very often will show their own iOS or Mac software, and here's how we made use of these tools, and here's what we were able to do with it. Does Microsoft have to do that with Office and its own software at build as kind of a proof of concept and nudge for developers to be like,

hey, you're going to be sitting on the same platform as this. You better work as well. Yeah, you know, Apple has the great benefit of being a consumer company. At the end of the day, they make consumer products and they can show up and say, look at this consumer application we built that only we can architect because we own the whole stack. Microsoft is not that company.

They are very much a cloud services company with Azure. And at Build, they talk to developers and enterprise particularly. And so their big investment in Azure and AI, it doesn't let them be their own best customer out to the markets like you would expect. I think when they go and make sales calls, they say, we're Microsoft. We have reinvented our business using these tools. Believe that we're our own best customer and you can do it too.

They need some other customers. They need some other stories to sell that are real. We'll see if they have them at Build. You going to be live blogging it? Yeah, I think so. I'm really excited about the shakeup in the market away from Intel to ARM. It hasn't played out yet except for Apple, but it's coming. Well, we're going to be watching for sure. Neal, I thanks. And that's going to do it for us here at Overtime. Fast Money starts now.