Closing Bell - Closing Bell Overtime: Exclusive Interview With AMD CEO; Y Combinator CEO Garry Tan Talks Reddit, OpenAI 3/11/24

Episode Date: March 11, 2024

Jon sits down for an exclusive interview with AMD CEO Lisa Su, talking adoption of AI PCs, growth expectations for AI and more. Y Combinator Garry Tan talks exclusively about Reddit’s upcoming IPO, funding for private companies 1 year after SVB’s collapse and whether he has had talks with OpenAI about a board seat. 

Well, the Dow eking out again as the S&P 500 and Nasdaq extend losses in a seesaw session for stocks ahead of a key inflation reading. That is the scorecard on Wall Street. But the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fork, who is in Austin, Texas. Indeed I am, Morgan. Good afternoon. Materials, the best performing sector, while industrials and real estate lagging. Meanwhile, the Red Hat semiconductor sector cooling off as names like NVIDIA and AMD, that's actually where I'm sitting right now,

underperform the broader markets. Coming up, I'm going to speak exclusively with AMD's CEO, Lisa Su. Again, I'm at the campus here in Austin. She just got off the South by Southwest stage just a bit ago. We're going to talk about the health of the chip industry and the outlook for AI. Don't want to miss that. Speaking of AI, Y Combinator CEO, Gary Tan, gives us his take on that explosive growth as well as the outlook for startup funding one year after the collapse of Silicon Valley Bank. And don't forget, we are just moments away from Oracle's earnings.

We will have instant analysis of those results as soon as they are released. But let's begin with our market panel. Joining us now is Schwab Asset Management CEO and CIO Omar Aguilar and CNBC Senior Markets Commentator Mike Santoli. Good afternoon to you both. Omar, I'm going to start with you because we saw NVIDIA and some of the other semiconductor names sell off further today. We talked so much about the dominance of the MAG-7 last week. We actually saw the equal weighted S&P reach a new record, too. Safe to say we're seeing a pullback here or is this really just a broadening out of the rally?

Well, you know, this is a healthy broadening of the rally. I think when you put all together the macroeconomic environment, meaning the decisions by the Fed, everybody's waiting about the CPI rate tomorrow, with the fact that we're seeing still that rotation towards energy, materials, financials, and small caps doing much better, you can actually see those are typical signs of the last phase of the cycles starting in what the Fed wanted, which was that soft landing scenario they all dream of. Yeah. And Mike Santoli, with the CPI coming in tomorrow, I mean, we saw what happened in February when that reading came in hotter than expected. The market sold off pretty aggressively on the heels of that. And that's really when you saw a bigger re-rating, a deeper re-rating within the bond market around

anticipation of what Fed cuts could look like, pushing those out into further into the year. Because that's already happened, is this a largely de-risked event tomorrow or is it still spring loaded for downside movement if it were to come in stickier and hotter? Yeah, Morgan, I don't know if it's de-risked in terms of, you know, the nuances of exactly when the Fed might start to cut rates. But I do think that the memory of the fact that even though the stock market had a little bit of a jolt when we did get that hotter than expected January CPI, it didn't exactly last, right? It proved to be just another one of these wobbles on the way up. So I'm not sure that people are acutely

sensitive obviously a big outlier number. That really gets. Yields ramping and starts to. Start up the conversation of okay what's Powell going to say in the press conference next week after the Fed decision. Yeah

sure I think that could provide an excuse. For a you know a market to have a proper. Little pullback we haven't even had a three percent one as I keep saying so. At this sure. I think that could provide an excuse for, you know, a market to have a proper little pullback. We haven't even had a 3 percent one, as I keep saying. So at this point, I think that there's enough in the forecast that say, OK, don't expect great things in terms of disinflation tomorrow. Would suggest we could take it in stride. But, you know, we have to see. Yeah. Omar, I mean, if we do see inflation continuing to come down here and cuts that aren't happening until at the earliest, potentially June.

I mean, this is a situation where real rates are essentially increasing even as the Fed does nothing. How much does that matter to the market narrative here, especially as we do talk about the possibility of a soft landing? Yeah, and I think that's a great question because I think people forget about the effect of the real rates and exactly how the Fed is balancing out the fact that, you know, looking at inflation trend, that despite, you know, anything that we can expect from it outside of a big surprise tomorrow, you know, the trend continues to to stay higher without any Fed rate cuts, which is in a way the tightening mode that we are already, which, you know, allows, you know, the economic cool down, allows inflation to continue to have its trend. So in a certain way, you know, depending on how the sources of this inflation number tomorrow, the Fed is in a great position to basically understand what the next move might be. Yeah. I just want to get your thoughts, Mike Santoli, on the fact that we have been so range-bound

when it comes to Treasury yields here. We had a three-year auction that went well today. Again, we have all this macro data that's going to unfold over this week. We did have a White House budget request today as well, too, which, of course, speaks to the fact that spending will continue even as you have an administration that's looking to potentially offset that with tax increases and the like. The fact that we haven't seen more volatility in the bond market, surprising? I mean, it's always surprising when the market sort of calms down and starts to ignore some factors that felt like it was very agitated about not that long ago. So we are absorbing the supply. That's one thing. Now, I don't think in a big picture way,

you know, 10-year Treasury yields just above 4% make a lot of sense considering that, you know, 10-year Treasuries tend to track nominal GDP, and that's not too far where nominal U.S. GDP is right now. And there is still a little bit of a premium to current inflation rates. So therefore, you have positive real rates. So things fit in pretty well together on that. I think we can welcome the fact that we're not as tightly sensitive to exactly when the Fed does what as we thought we were a few months ago. And that also goes for the bond market. Now, does that mean you can be complacent about it?

No. And that also. Goes for the bomb market now do up. He does that mean you can be complacent about it no. It was just you know a couple of weeks ago we were challenging the upper end of this range. On tens. At four point three. So it's still going to be a suggestible market. Are you have had some rotation I think like. Pension accounts and things out of equities locking in. Their fully funded status and just buying fixed income so. The bid on the long end of fixed income, including in corporate credit, has definitely been a pretty big backstop for the equity market as well. Okay. Oracle earnings are out. We're going through those numbers right now. We'll bring them to you as soon as we have them ready to go.

Meantime, shares of Oracle are up about 4% right now in overtime. Omar, I want to get your thoughts on what Mike just said and perhaps just as importantly, what it means in terms of how you should be positioned as an investor in this market. As I look at your notes, you talk about staying disciplined, staying invested and staying diversified and using short-term volatility to rebalance in a tax-efficient way.

What does that look like? Well, you know, this is great. You know, we expect a lot of volatility to continue already going into the next, you know, few weeks and months. A lot of that has to do with just past the earnings. We are waiting to see the response on CPI data. We see what the Fed reaction might be and what the Fed response and the Fed rhetoric might be going forward. And that volatility allows investors to reposition their portfolio. We see that the Magnificent Seven has taken a significant amount of assets. And therefore, you know, it's always healthy to rebalance their portfolio and look

at areas that allow you to do that. And these volatility periods are great for both fixed income equities and staying in high quality. Don't take too much of chasing yield and stay very disciplined in the approach to long term investing. Okay. As I mentioned, shares of Oracle are higher and they're moving higher as we go here, up about 9%. We're going to go to Steve Kovac for those details. Steve. Yeah, we got some mixed results here. EPS is a beat though for Oracle, $1.41 adjusted versus the $1.38 adjusted the street was looking for. And revenue is just a slight, slight, slight miss here. $13.28 billion versus the $13.3 billion the street was looking for and revenues just a slight slight slight miss here 13.28 billion versus the 13.3 billion the street was looking for you see shares up quite healthily

here there there's some comments on uh from safra cats the ceo here morgan a large new cloud infrastructure contracts uh in q3 uh saying they drove oracle's total remaining performance obligations up 29%. Also some commentary from Katz on AI progress, but not a little fuzzy on the details here. But we see shares up about 8%, guys. All right. Steve Kovach, thank you. Mike Santoli, it was pretty interesting because after the last Oracle earnings back in November, we saw shares fall. Expectations had been high. We're basically flat since that last report. A lot of analysts, I guess, commentary coming into these results that it really wouldn't take that much for this company to jump the hurdles. And I guess you're seeing that here with the stock up 7% in terms of posting results.

The expectations have been, I guess, more muted or have been lower. How does Oracle speak to what we're seeing more broadly in tech right now? And how important is it to this market when we have been debating what happens next with the momentum trade? Yeah, Oracle would be in that category of obviously kind of legacy tech that has exposure to AI and the debate on the street is exactly how much of that, how fast can it grow to be a bigger part of the whole, what multiple do you put on that? So on the absolute bullish end of that spectrum is you have Broadcom re-rating and then Dell Technologies trying as well, HPE, not so much. So you do have this kind of back and forth. So Oracle's somewhere in that mix. It's

got a 20 times multiple, really relatively modest within software. And the question is just how much of it is going to be realized sooner than later. So they did sort of clear this bar. There was a little bit of a once bitten effect in there going into this number because it was a pretty ugly response last quarter. So, so far, so good. It's not clear that it's really going to be the moment when this one is taken much higher just because I also feel like it's happened as we're kind of rethinking exactly how far things like NVIDIA and Supermicro and the other pure AI plays have run. All right.

Mike Santoli and Omar Aguilar, thanks for kicking off the hour with me. Mike, we'll see you again in a few minutes. In the meantime, speaking of tech and momentum trades, let's get to Austin and to John's interview with the AMD CEO, Lisa Su. John. Morgan, thank you. Yeah, Lisa Su, thank you so much for having us here on Overtime here at the AMD campus in Austin. We're just talking about Oracle's report. Of course, we need to be careful that they always give their guidance on the call, but so much of what they're reporting is coming out of data center, which has been just a huge growth area for you. Today at South by Southwest, though, you were talking also about the AIPC, about the client side. So hoping to start there.

Yeah, absolutely. So, John, thank you for being in Austin. We're very happy to host you on our campus today. Look, it's been a great day. I really enjoyed being at South by Southwest. It seems like everyone is in Austin this week, all the movers and shakers. And, yeah, what we talked about today at the keynote was really a bunch of different things. I mean, first of all, AI is really still at the very beginnings of what we can do in technology.

We can talk a lot about the data center. I usually start there. But I did spend some time talking about AI PCs, and I'm very excited about this continuum of AI products as you go from cloud to edge to PC and really trying to get sort of the user experience such that everybody has AI somewhere in their lives. Help me with my skepticism here, though, on the AI PC itself, because it seems like this latest boom in interest in AI and some of the

economic activity came out of OpenAI's chat GPT release. And investors really started to realize, OK, this is going to be big. See it happening in the data center. But when we start talking about inferencing and the client side, I don't see my kids saying, oh, I need a new AI PC to run this new AI version of Fortnite, right? They're still asking for the graphics cards, AMD, where AMD plays, to do the same kind of thing as before. So do we need to see new software that's putting demands on the hardware in a new way before the AI PC gets momentum if it does? Yeah, well, let me take a step back, John, and kind of tell you, describe a little bit of how I see the market evolving. So true, like, you know, chat GPT and all of these large language models have showed us that you can

get access to a tremendous amount of capability with all of the training and inferencing that you do in the cloud. But it turns out that people really have a lot of personal data, and the way you use your PC, it's actually a personal productivity tool. So what I see is that we're at the beginning of the era where we can make much, much more capable personal assistants in the PC form factor. And things like, you know, I can ask my PC, when was the last time I saw John Fort? What did we talk about?

Remind me what he was interested in. Those types of things, which today I'd have to spend, you know, probably an hour looking through like all kinds of things. That's one example. Actually, on the South by Southwest stage today, we showed a really good example of, you-to-image where you could do it locally. So you don't have to connect to the cloud.

You can do it right in your own PC. And again, these are things that as the technology gets better, I am absolutely sure that everyone's going to want an AI PC. Also on stage, you're joined by Weta, the really high-end special effects creators. Does the AI PC, to your point about text-to-image, really catch on with professionals first in their iteration ideas, and then that filter through the way it has with so many other graphics-powered capabilities?

I do think that there is a thing about expert users will start first. So we actually had David Connolly on stage from Whata FX. Actually big congratulations to them. They won an Oscar last night for Wars Over that was entirely rendered on AMD technology. So we were very excited about that. But what you see is, you know, again, for whether you're a Hollywood, you know, movie studio or you're a content creator or you're just a, you know, sort of a regular person who has lots and lots of data, AI can help you sift through that, can help you use it in a more productive way, can take things that used to take, you know, days you can reduce it to minutes in terms of finding things, whether it's text-to-image or now you saw text-to-video. It's really an opportunity to just become much, much more productive. And the technology that we're putting in today's PCs, I'd like to say that we've had CPUs, GPUs, now we have AI accelerators that are there just to make it much more powerful in very small form factors.

So now we've talked a bit about the PC, let's broaden out because a lot of the analyst world has been abuzz for the past several weeks about this $400 billion total addressable market for AI-related technology that you laid out. Again, my job to approach these things skeptically, we just went through this pandemic period where we saw this huge surge in demand for PCs, for e-commerce, for goods, and a lot of companies said, oh, this is going to continue up and to the right, and it didn't. So how can we be sure this is an exception? So, John, the way I think about AI, and you've heard this from others, is AI is actually the most important technology that we've seen over the last 50 years. It's arguably the most important.

And when you think about what it can do for enterprises, for all of us, for research, for development, all of that capability, you need more compute. Now, most people would say they've been really surprised at just how AI has taken off over the last 12 or 14 months. It is true. We've taken a technology that has been around for a while, but was frankly very difficult to use. And we've turned it into something where everybody on the planet can use AI technology, you know, because it's language based. And it's you don't have to be a programmer. You don't have to be an expert. You can be you can just ask the AI what to do. Now, the truth is AI is still in its infancy. So we're still at a place where we know that it will get better. Like we know that you can make these models better. We know that you can make this inference faster. We know that we can make it more accessible. So I do see a place where

we're going to see tremendous growth over the next three, four, five years. We are super excited about the partnerships that we have in AI, in the cloud, and really trying to deliver all of that infrastructure, as well as in the edge and in the client form factors. Speaking of partnerships, one of those was Microsoft, which has been using AMD chips in the cloud. I like to look at the calendar. We marked 10 years since Satya Nadella was named CEO of Microsoft back in February. It's going to be 10 years since you were named CEO of AMD in October. And I was also looking at the stock chart. We were around $3 a share on AMD when you came in, just shy of $200 today. It's pretty good.

Also to note about those two 10ures, data center has been key. You know, Satya Nadella's Azure and work there that transitioned from server and tools into that, into cloud. And then your work, I think when you came in, 90% of AMD revenues were in PC. In fiscal 23, less than half. Okay?

So why was data center for both of these companies in retrospect so important over the last decade? Well, I will say, you know, it's been a great 10 years. It feels like it's not been that long. But one of the things that's most important with every company is to decide what you're best at. And you're absolutely right. AMD has always been a very good company. But frankly, we needed to decide what we were best at. And back then, the bet was high-performance computing. When it may not have been the sexiest part of the business, I fundamentally believed that high-performance computing

was going to be the most important technology trend for us going forward for the next five to ten years. I think we've seen that. We've seen data center become much, much more important. You've seen cloud become more important. It's really difficult to build these chips. We talk about new Zen 4 and Zen 5 cores. We talk about chiplet technologies. We talk about our MI300, our latest AI chip,

has 150 billion transistors. So these are hard technologies. But once you put them together, you realize how much they really drive computing overall. So yes, we love PCs. I can talk to you all day about that. But we also see a world where high-performance technology really is the most important ingredient for solving some of the world's most important problems and, frankly, working with some of the most important partners out there. And so I'm very pleased with the progress that we've made. And data center is a place where you need the biggest iron, and it's hard to build these systems. So since you frame it that way, I have to ask you, what is your least popular current important bet? Since everybody else is caught up on high-performance computing. Well, the beauty of our portfolio now is it's a very broad portfolio.

We are in the largest data centers. We are in the client devices. We also have a very broad embedded portfolio. So, you know, I'm super happy with the acquisition of Xilinx. We just passed the two-year anniversary where we brought in an incredible embedded portfolio, 6,000 new customers. We're in the Mars rover. I didn't say it's my least favorite. We're in the Mars rover. We're in lots of cars. Your least favorite. I'm saying say it's my least favorite. We're in the Mars rover. We're in lots of cars. Let's say your least favorite. I'm saying your most underestimated piece of your portfolio strategically. I think the most underestimated piece, John, is how all of these pieces come together.

So it is not about just what you do in the data center or just what you do at the edge or what you do in the PC. It's the fact that we are one of the very few companies that have all of the pieces. So we have all of the compute engines that you need to optimize for your application. And I don't know that people really understand that. They don't understand necessarily yet how cloud influences client. That's going to become a lot clearer over the next several years. I'm very excited by that, by the way, because when you think about where technology is going, as much as the largest data centers in the world are filled with these high-performance computing chips, you realize that there are so many other places. And

if we can get these systems really integrated synergistically, And that's why when you ask me, you're a skeptic about AI PCs, I would love to talk to you a year from now and see how you feel about it. Because I feel really that this is probably one of the most important inflection points for the PC form factor. And this is how people are going to experience AI at a personal level. You talk about vertical integration, makes me think of Supermicro, which is a company that you've known well for a long time, but they were like a specialty muscle car maker. And now, in part because of AI, they've gone mainstream. And a

lot of people are wondering, is this high performance computing wave changing the overall demand, mass market demand for hardware, where performance and that kind of integration that they're doing, and it sounds like you're talking about for AMD in a different plane, is just going to be mainstream? Well, we love the partnerships that we have. Supermicro is a great partner. Dell is a great partner. Lenovo, HP Enterprise. We work with all of these guys. But I think what's different with computing today is there is a need for lots of different types of solutions. So as long, you know, as you think about the hardware solutions, it's not just one size fits all. And the fact is, you know, people

are willing to invest ahead of the curve in AI. You know, when you looked, you know, four or five years ago, yes, infrastructure was important, but now AI is essential. Every boardroom is talking about how you use AI. Every nation state is talking about how you use AI. People are willing to invest ahead of the curve. Our job is, frankly, to make sure that there's more supply out there, the opportunity to work closely with our partners to give you lots of different solutions depending on what you're trying to do. And yeah, I think it's a good time to be in computing. Well, you're having a good time here in Austin.

So thanks for having me here on your campus here to talk about it, Lisa. I appreciate it. Thanks so much, John. Morgan? All right. John, thank you. That was fantastic. And our thanks to Lisa Su as well.

Well, let's get another look at Oracle because those shares are up in overtime, about six and a half percent right now. Joining us now is Angelo Zeno from CFRA. Angelo, I want to get your thoughts on what we did get from Oracle, including the fact that, as I pull this up, they talked about in the release the demand for Gen 2 AI infrastructure substantially exceeding supply, despite the fact that they're continuing to open new and expand existing cloud data centers. And even going so far as to say that they expect 43 percent of current $80 billion of remaining performance obligations to be recognized as revenue over the next four quarters. And how does that speak to how Oracle's positioning itself,

not only throughout its cloud transition, but into this AI moment? Yeah, no, you know, thanks for having me. So, you know, as far as the results are concerned, I think they were, you know, they were good, better than expected. And, you know, following, I'd say the last two quarters out there, I think that was probably enough for investors out there, given kind of the downtrend that we've kind of seen on the cloud side of things, specifically on the infrastructure side of things, their OCI business. And when you kind of look at the numbers here, this quarter looks like definitely we've seen some stabilization in terms of the growth trajectory on the cloud side of things versus the prior quarter.

And you kind of alluded to some of the RPOs out there and kind of some of the momentum on the Oracle Cloud infrastructure side of things. That's really what investors kind of want to see, where they want to see the momentum right now, because clearly as that OCI business kind of continues to see strong growth, eventually kind of, you know, we think it kind of leads into that SaaS business as well. So I think overall, the indication here is better than expected momentum as we kind of go into the next couple of quarters. We do want to see what the guidance looks like. We'll hear that on the call. You know, a year ago in the May quarter, there was a very difficult comp in terms of the

infrastructure side of things. But for all, you know, when we kind of look at this, it looks pretty good. Okay. What to make of Cerner, which we know has been a drag on growth. It says here as well in the release, it's talking about moving a majority of Cerner's customers over to Oracle's Gen2 cloud infrastructure. Is that a situation that can reinvigorate that part of the company after underperforming perhaps more than expectations with that deal closing back in 2022? Yeah, no. And as far as the Cerner business is concerned, I'd say kind of that's been kind of the area, other area of disappointment out there for investors, right? It's been that infrastructure side of things and deceleration, as well as the Cerner business. And, you know, again, we'll get a little bit more color in terms of what the guide looks like in the

breakdown, you know, with or without Cerner here next quarter. But for all indications, I mean, again, yeah, it looks like, you know, in our view, you know, Cerner should start, you know, stabilizing here. We probably see some good momentum in the coming quarters. You know, they are going to, you know, clearly kind of put more kind of Gen AI capabilities that you kind of saw here. They allude to over the next couple of quarters. And we'll see what type of momentum that kind of builds on Cerner's side of things. It probably will take time. But that being said, I think you're probably, you know, past the worst of it as far as Cerner is concerned.

OK, well, we'll be awaiting more of that guidance and those details to look ahead on the call, which starts at the top of the hour. In the meantime, Angelo Zeno, thanks for joining me. Thanks for having me. Hold rating on the stock. Shares are higher, though. We have news alerts on Dan Loeb and Steve Kovac has the details. Steve. Hey, Morgan. Dan Loeb's third point has taken a stake in advanced auto parts and is getting three new independent directors on the board. This appears to have all happened behind the scenes that we don't know the size of the stake they've taken, but they are getting those three new independent directors on the board. This appears to have all happened behind the scenes. We don't know the size of the stake they've taken, but they are getting those three new independent directors. And we saw the stock before the markets closed. It was up better than 3%. The Journal had broken that the story was about to happen. And we see just moments ago,

this came in and we see shares up a little over half a percent now on the news. But Dan Loeb with now a stake in Advance Auto Parts. John, I'll send things back over to you. Steve, thanks. Up next, Mike Santoli is going to take a closer look at the recent unwinding of the momentum trade. Plus, it's been a year since the collapse of Silicon Valley Bank. Coming up, Y Combinator CEO Gary Tan on the impact that's had on startup funding in Silicon Valley. Be right back. Welcome back to Overtime. Momentum stocks have lost some steam recently, and Mike Santoli is back with a look at what is getting hit.

Mike? Yeah, John. Well, the stuff that was up the most certainly is getting hit in the last couple of days. What's interesting about these momentum-driven markets is seeing things that seem like they're disparate move together and then vice versa. So take a look at here. This is the S&P 500 Momentum Factor ETF. So this is basically just screening for the highest momentum stocks of the last trailing several months or year and then putting them in one fund. And so you see it's run exactly with the Nikkei 225, right?

The benchmark for Japan, which had been one of the strongest markets here. That's also against the equal weighted S&P 500. So just as a benchmark here, you see very similar angle. This goes back to the fall of 2022. And then you see them curling down together at the same moment. So that shows you just a lot of co-ownership, or at least the factor was something that was being played by similar pools of money. Now, take a look here at things that should be somewhat similar, Meta and Alphabet, right? Both digital advertising driven businesses here. And they were

moving together pretty well. And then you see the momentum jolt that we got starting several weeks ago in meta and then the decline in Alphabet. So, again, trying to converge a little bit just in the last couple of days. So it's not to say that this is just, you know, the machines playing one factor, but it shows how things can diverge for a while. Now, partly this is earnings momentum, too, when it comes to these two companies. And then they'll try to come back and come back into alignment, though it doesn't mean that they have to sort of close that entire gap. John, it seems like the opportunities happen when those things diverge. Right. So any trick to figuring out when that's happening or about to happen?

I mean, usually people are trying to measure just exactly how extreme things have been stretched. And that was something going on, you know, in even a couple of weeks before we got that Friday downside reversal in NVIDIA that took a lot of the rest of those names down. People saying, look, we have the ingredients here. We are in the 90th percentile of history of the outperformance of the momentum factor. The interesting thing right now is these factors or characteristics, as we call them, whether it's momentum, high beta, value, quality, all of those things, low volatility, they can be owned much more easily than they used to be. They used to just be descriptive. Now, sometimes they're prescriptive. And, you know, I think what we see here are some of the fastest horses in the market. They broke stride, but it doesn't mean

that the race is over. Well said. It's also pretty incredible when some of the biggest momentum players are some of the biggest stocks in the market. I mean, the 10 percent intraday decline in NVIDIA, that represented a decline of a quarter of a trillion dollars in market cap in just a few hours. Easy come, easy go. I guess so. Mike Santoli, thank you. Up next, Y Combinator CEO Gary Tan on his outlook for the IPO market as Reddit gets set to go public. And of course, we're going to get his take on this AI boom. Stay with us. Welcome back to Overtime. It's been one year since the collapse of Silicon Valley Bank. Y Combinator CEO Gary Tan warning last year of the ripple effects the crisis would have, not just on financials, but on tech more broadly.

This is not, some people might be looking at this as a bank problem. Certainly, SVB is beleaguered, but you shouldn't be worried about them. You should be worried about their depositors because this is the future of tech in America and the world. So joining us now for an exclusive interview, Y Combinator CEO Gary Tan. Gary, I can't believe it's been a year. It's great to have you back on. And I do want to start with your reflection on those comments that you did make on the show a year ago, we talked so much about the impact that the demise of SVB had on banking, but it also impacted venture debt as well. Absolutely. I think that's something that's a little bit ongoing that we're still worried about. Ultimately, first, I'm really concerned that an independent bank that was doing incredible work is sort of getting gobbled up by bigger and

bigger players. And then secondarily for the startup venture market, especially for bio, I've heard a lot of basically difficulty with startups that were expecting to be able to have a certain cash flow, a certain plan for their financial future, and really SVB going down, put all of that on hold. And we're lucky last year, we were in a moment where literally thousands of, about 10,000 small businesses possibly couldn't make payroll, were going to furlough workers. And so we're lucky to sort of escape that. But we're still sort of a year later dealing with the fallout of consolidation. And ultimately, you know, we're really hoping that SVB under First Citizens does actually step up to the plate, you know, builds again the venture debt relationships that support both small business and startup innovation.

So how does that speak to the funding landscape and this moment that we're in right now? And perhaps just as importantly, because to realize funding, you could argue, you also need to be able to realize exit strategies. When you do have Reddit, for example, on an IPO roadshow about to become the largest tech IPO that we've had to date, how important is that to? I think Reddit is an incredible property.

It is just an incredible and very durable company. I can't tell you how often it is that when I want to find out about something going on in the world, whether it's news or a product, I'm literally typing in those keywords into Google, but then typing Reddit right afterwards. So I think having liquidity and, you know, companies going public like Reddit, that's, you know, really a boon for all of tech right now. And I'm really excited for, you know, Steve and the team there. Gary, the SVB collapse also seemed to dramatically change the fintech landscape and some of these fintech startups that are quite large, unicorns, etc. What kind of opportunities did you see open up because of that moment and because some of the startups and small businesses who are focused on the fin side and not so much the flexibility of tech

were now thinking about more flexibility and capability? Yeah, I mean, I guess one of the things that is a little bit more surprising to me, you know, with the increase in interest rates, you know, fintech was super hot during the zero interest rate years. And right now we're in a little bit of a lull, but, you know, I guess we're going to have to ask Jerome Powell, you know, what is in the cards for fintech broadly?

I think it's going to be back. And I think a lot of it is going to be driven by the ongoing sort of boom in artificial intelligence, which we think is incredibly durable. I mean, Anthropic, Claude, 3 just got announced last week. That hit 103 IQ by the IQ measure. If you looked at open AIs, GPT-4, you know, that was in the 70s or 80s. GPT-3.5 was in the 60s. So this is sort of a really powerful moment where the thinking computers literally are now just barely above average 103 IQ. And later this year, I fully expect some of the cutting-edge large language models will be able to reason at 120, 130, you know, clearly above

average, and then perhaps in the coming years, genius level. So we're sort of at a very interesting inflection point moment for software embedding itself in all the aspects of society. And we're still trying to understand, well, what's next and what are those businesses? FinTech is certainly one, but I think you could look at the overall pie of GDP. And this wave is as big as any of the other ones that came before, whether it's the internet, cloud, smartphones. About 50 or 60 percent of our 200-some companies in the current YC batch are building on AI, and they're getting real revenue. So the revolution is on. Well, about that, about Y Combinator,

I wanted to ask you culturally, operationally, how different, if at all, is Y Combinator from five years ago? Because so many more people started wanting to work remotely, but then at the same time, we were talking to Brett Taylor recently about his startup, Sierra, and they were saying, we are unapologetically in-person, an in-person company in San Francisco. Are you doing Y Combinator remote, or is it still important to get these people in a room together with mentors interacting in person as well?

So this is the year that we moved all of Y Combinator to San Francisco. We are super long SF, especially because all of the capabilities that we're talking about, they were built right here in the square 49 miles of the beautiful San Francisco. This is the center of Cerebral Valley, the AI boom. And so the techniques that you use to actually get the most out of these large language models, they're being talked about in the cafes and in the co-working spaces. And frankly, right here, we're sitting in Y Combinator on Pier 70 in the dog patch.

And so our founder cafe is full of the same conversation. How do we eke out every last bit of performance from the large language models that Anthropic and OpenAI and Gemini, all of the different, you know, sort of tools out there. You know, how do we get the most out of it? And it's happening right here. The gold rush is on, and we're not calling it the gold rush in San Francisco. We're calling it the boom loop. The boom loop. Okay. So, of course, I'm going to ask the question now about the fact that the information had an article just last week saying that you had,

at least earlier this year, been approached about perhaps, possibly, and I realize talks, according to this article, were preliminary, not clear if it's still ongoing, but possibly joining the board of OpenAI. Is that true? Are those talks ongoing? I had those talks, but, you know, I think OpenAI is an incredible mission. And I really hats off to Sam Altman and the team there because they opened up a new capability that did not exist, you know, two or three years earlier. So, you know, can't comment on ongoing plans, but I have the greatest respect for that whole board. You know, they did a great job finding three new board members. All right. Gary Tan of Y Combinator, great to have you on. Look forward to having you back to talk about this boom loop in the future.

Can't wait. Thanks. Still ahead, AMD CEO Lisa Su just told us she expected three to five more years of tremendous growth for AI. We're going to ask a top chip analyst for his take on what it means for tech investors and take another look at shares of Oracle, now up about 9.5% in overtime. We'll be right back. The truth is, AI is still in its infancy. So we're still at a place where we know that it will get better. Like, we know that you can make these models better. We know that you can make this inference faster.

We know that we can make it more accessible. So I do see a place where we're going to see tremendous growth over the next, you know, three, four, five years. That was AMD CEO Lisa Su here in Austin at their Austin campus just moments ago. Joining us now to discuss is Bernstein Senior Research Analyst Stacey Rasgun. Stacey, part of what I was trying to get at there was this gap between the $400 billion total addressable market figure that Lisa and AMD are pointing to for accelerators in 2027 and where some others are at $250 billion. And I asked her what her most underappreciated portfolio asset is. She said the integration of the stuff we've got. So what does that mean, you think, from an investor perspective? I guess first I would say, does it matter if it's $400 billion or if it's

$300 billion? Again, I think she's right. There's $100 billion in there. That's a lot. Well, yes and no. But both of those numbers are a lot bigger than where we're running now. So whether it is, I don't know that the actual number matters. And to be fair, I know they're putting a number out there. Nobody has any idea what the number is going to be. I think it's enough, personally, to say, is the number big relative to where we're running right now, or is it not? I think the number is big relative to where we are right now. And how big, I guess we'll find out in 2027 and beyond.

But I don't have any problem believing that the number or the opportunity is big enough to warrant excitement, given where we're sitting today. Increasingly, some of these CEOs, Jensen Huang right after earnings, Lisa Su just now are trying to get us to look beyond the chip that's right in front of our nose and look at the integration of multiple technologies, including their software and perhaps services, how much of the growth from here, if they're going to live up to these valuations, has to come from there? Well, I mean, there's lots of different pieces to enable this, right? And again, I'll move off of AMD. I'll talk about NVIDIA for a minute. But I mean, it has a relation to AMD as well. I mean, NVIDIA has developed an entire ecosystem around this. So they're not just selling chips, right?

They're selling the chip. They're selling the hardware and the server and the board and everything the chip is on. They're selling the networking. They're selling the software. They have their own software environment for the programming, right? So they've got the entire, this is why NVIDIA is doing well. AMD recognizes this too, right? I mean, they're putting a lot of incremental effort right now onto things like the software ecosystem to try to get to parity versus where some of their competitors are. A&B is no longer just selling the chip. And Lisa's right. They're selling lots of things along with that. They are selling boards and servers and hardware and everything else. So I do think

you need all of that. Ultimately, this needs to be easy to use and easy to deploy. And the more pieces you have put together and ready to deliver to the customer so they can get them going, it's much easier and more effective to deploy it. I think we're beyond a world where we're just selling the chips. And I think all of these guys have acknowledged that. Stacey, one of the other things Lisa Sue said is that people are willing to invest ahead of the curve when it comes to AI. Basically, every boardroom is sussing out and every C-suite is sussing out how and where to invest in this new technology and this new capability.

It raises the question, especially as we saw Broadcom sell off despite robust AI earnings last week. I realize other parts of its business not so strong. And a broader sell-off in chips just in the last couple of days. How much more fuel, at least near term, is in the tank around this AI trade for the semiconductors if, from a macroeconomic standpoint, other businesses are slowing? Yeah, it's funny. AI is doing really, really well. Lots of other parts of the semiconductor market are not doing all that well, right? I mean, so you mentioned Broadcom. They're non-AI businesses. They have things like broadband and storage, and even their traditional non-AI

networking are all pretty lousy this year. They're not the only ones in those markets that are doing poorly, but it's a cyclical trough. For Broadcom, at least, the AI piece of it is strong enough to bridge the gap. So, I mean, our numbers went up for Broadcom, not down on the back of AI as well as some other stuff they have going on in their software business. But you're absolutely right. Like outside of AI right now in semis is not necessarily pretty. It's, you know, there are parts of the market that are doing very well and some they're doing OK and some that are doing lousy. Yeah. All right. Stacey Raskin, thanks for joining us.

A key reading on inflation could be a major market mover tomorrow on Wall Street. We've got those details on overtime returns. Welcome back to overtime tomorrow, the February consumer price index CPI will be released. Wall Street expects prices to rise three.1 percent from a year ago. That's the headline number when you exclude food and energy. The core rate is seen increasing by 3.7 percent, which is actually down slightly from January. John, that's going to be obviously one of the big market movers this week, especially since we saw that January number for CPI come in so much hotter than expected.

The S&P sold off something like 1.4% on the heels of that report. Another big thing to watch on the heels of Oracle reporting, we get Adobe reporting later in the week. Those are two big software names that report off-cycle. And we're going to hear from Shantanu Narayan, the CEO of Adobe here on Overtime. Yeah, looking forward to that. We also get a number of retailers as well, particularly on the discretionary side. So some more read into the consumer.

That's going to do it for us here at Overtime. Fast money begins right now.