Closing Bell - Closing Bell Overtime: Founders Fund’s Keith Rabois On Instacart IPO; Is A September Rate Hike Off The Table? Breaking Down Today’s Powell Speech; Marvell Tech CEO On AI 8/25/23

Episode Date: August 25, 2023

Markets steadily climbed higher during the session after digesting Fed Chair Jerome Powell’s speech at Jackson Hole. Wilmington Trust’s Meghan Shue, Jefferies’ David Zervos and our Steve Liesman break down what it means for markets and your money. Evercore’s Krishna Guha on the next steps for the Fed and if a September rate hike is off the table. Marvell Technology CEO Matt Murphy on his company’s latest quarter and the AI demand. Sunnova CEO John Berger on solar power’s role as extreme weather becomes more frequent.

Well, there's your scorecard on Wall Street for the week, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort. Morgan Brennan is off today. Stocks closing out the week on a high note as rate hike fears took a backseat following Fed Chair Powell's speech in Jackson Hole. And despite today's gains, the Dow is still on track for its worst month since February. Marvell Technology, one of the few stocks in the red, despite an earnings beat. The Chipmaker CEO is going to join us in an exclusive interview.

Plus, Instacart just filing for an IPO. Just talking about that, we will get reaction from venture capitalist Keith Raboy. We'll talk about whether we could finally see more tech startups going public. But first, let's get to our market panel. Joining us now is Wilmington Trust Head of Investment Strategy, Megan Hsu. Jefferies Chief Market Strategist, David Zervos, and our own Steve Leisman. Steve, first to you, to extend the metaphor from yesterday, it looked like Powell's hawkish tone might wake the baby with the market.

But then did it just sort of roll over and go back to sleep? You know, John, there's a lot of babies out there. Most of the babies were kind of sleeping. One of them is sleeping a little better now. The stock market feels like it maybe dodged a bullet here. Yields look a little flat here, except for one market that I'm following that seemed to wake up as Powell tiptoed into the room, which was the outlook for November Fed funds futures.

Now, this is very volatile and it's a big hedging market. But if you look at the probabilities for November, we're up quite a bit over the last couple of days. 56%. Remember, we were at 50% this morning, even after Powell spoke, down in the 40s below. That could change a lot. There's a lot of data to come, as they were just talking about in the last hour. But what I think the on-balance conclusion was is that Powell's maybe a little bit more likely to hike than maybe we thought early in the morning. There were a bunch of triggers. Like he said, if the labor market fails to ease more than we expect, that could lead to higher rates. If the economy fails to cool as much as we expect, that could lead to higher rates. And you'll notice he didn't say the word cuts at all.

He's not talking about that. He's talking about holding steady at a higher rate. So that's the choice for the market to figure out, not if the Fed is going to be cutting any time soon or even in the near horizon, but are they going to hike at least one more time or are they going to just hold steady? That's who the doves are these days, the hold steady group, John. Okay, but not very dovish anyway, Steve. Okay, David Zervos,

also a bit of a vagueness in the wording here. You think that's pretty intentional? I do, John. I mean, we've been writing a little bit about bringing some of the Greenspan era purposeful obfuscation back into the market lexicon or the Fed speak lexicon. And I think he's done that. I think he left himself a lot of options. He definitely gave us a Volcker-esque hawkishness, but he also had that kind of confused Greenspan tone. And the market reaction,

I think, would have made Greenspan proud. He didn't really move the dollar. He barely moved the front end. Steve's talking about a few percentage points here or there. And the equity market barely about half a percent, a little bit more. I think that's kind of what he wants. He wants to be sort of in a world where he's not really giving a lot of indications. He's not forcing the market into taking big positions either way and maybe having a pretty diverse market view out there, which in the end, I think should reduce volatility. Talking tough, but not not waking the baby. Megan, strategy then is what or should be what for investors, especially after the market didn't

really rally at all post NVIDIA earnings? I I mean, this has been something that's been cautious from here. Do you stick in fixed income for a while? Yeah, John, I think you have to be patient when it comes to the equity market. We've been really focused on rates. That's been the story of August and not just the increase in nominal rates, but the increase in real rates. And that's a major headwind for equities going forward. I think as we look at where rates are today and kind of that risk reward for fixed income, it's pretty attractive. If rates move maybe a little bit higher, you're still getting a nice total return given where rates are for investment grade fixed income. But we think that it's more likely that they're going to move lower because a lot of what has driven the equity market through the summer, as well as the increase in real rates, has been this expectation that growth will come in much stronger than we expect.

You know, the Atlanta Fed GDP now at five to six percent, we think, is way, way too high. And the economy is more likely to be growing at a run rate of about one to two percent. So that says rates should move lower, even if we don't have a recession. And that sets up nicely for fixed income. I would just be really careful on duration, looking at short duration and long, but staying out of the belly of the curve, as well as really being focused on quality, investment grade, not taking too much credit risk. Steve Leisman, we get a jobs report in a week. More attention to wages now versus the overall employment number, given that everyone seems to be just accepting that the labor market is still pretty strong. Yeah, I mean, I think we take it all in, John.

I don't think there's going to be any particular, we've been emphasizing the issue of wages for a while, so you're right about that, but I think the level of payrolls is going to matter. The level of the unemployment rate is going to matter. We're looking at those revisions we had, which weren't all that huge, but they did save $300,000 off the year ending in March 2022. So that's an issue. Sorry, March 2023. So that's an issue. I'm not sure, though, I completely agree with David on Powell being a kind of Greenspan obfuscation there. I think there are real unknowns here. And I don't think he knows about these issues. For example, one of the big questions here, how is it that growth is coming? Growth has been so strong and inflation has been coming down.

It's not really supposed to work that way unless almost all of it comes from the supply side, not necessarily from the demand side. So there's a lot of big questions. I just don't think Powell knows. And I think, you know, we have Christine Lagarde, who is in here, not too long ago, speaking at the lunch here. And she said, look, the changes going on in the global economy require clarity from the central bank, flexibility and humility. And those three things, I think Powell embraces that idea, too, especially right now after we leave this era of forward guidance where the Fed told us what they were going to do every month, every meeting. And now we're in a kind of wait and see attitude because there's a lot of stuff that needs to settle down. David, what do you think?

I think the 90s is a great example, Steve. You're talking about a period that was very low inflation and very high growth, and Greenspan was bringing in the new paradigm and keeping us very confused and throwing the Phillips curve under the bus, which was fantastic, and it should be under the bus decades longer. I think it has, but some people keep trying to revive. Nevertheless, I will say – I think we're seeing all sense away from very specific forward guidance, very specific usage of things that were important at Europe or the UK or the US, and they can afford to be more purposefully obfuscating in terms of how they're setting policy, not to try to drive the market. Okay. I honestly think this is a very healthy, it's not been the easiest of time when everybody has the same position in the market

and then they have to go to a taper tantrum or something to get us to the other side. I think Jay's responding to this a little bit, and I think he tiptoed into that Greenspan story. But we'll wait and see, Steve. Maybe I'm wrong, or maybe he's going to be much more clear than I think he is. Dazed and Confused in the 90s, starring David Zervos, Megan Shue, Steve Leisman. Thanks to all of you. Now it's time to bring in Senior Markets Commentator Michael Santoli. He is here with us in Inglewood Cliffs, CNBC headquarters.

Mike. John, good to be here. Of course, the S&P 500 actually firmed up at the end of a week where it looked like it might be losing its footing yesterday. You see where it sits right here, though? We rallied up almost to that 50-day average earlier in the week. Actually, intraday more or less touched it and finished the day 4405. That's been a level we've been oscillating around 4400 for a while. And it's exactly just about the midpoint of the high and low for the week for the S&P 500.

So just a few things to look at is that level back there from late May into June. That was your jump that you got off of the prior NVIDIA earnings report. That blockbuster got the whole market excited and actually had a broadening out effect on the rally as well. And we're still 4,200. There's a lot of cushion below to that point. But that's something to keep in mind in terms of the range that we're working with at the moment as we size up this pullback. Now, the one-year Treasury bill, we don't look at it a lot. Usually, it's the two-year that tells you what the Fed's up to. But the one-year is kind of interesting because we are trading at highs for this cycle just about. But 545, that's right in the current Fed funds range. It's 5.25 to 5.5.

So it's essentially saying the market thinks in one year's the current Fed funds range. It's five and a quarter to five and a half. So it's essentially saying the market thinks in one year's time, Fed funds will probably be where it is right now. That's our best guess. Maybe it goes up a quarter or half, maybe comes down after that. But I don't think that this is a market that needs to be heavily persuaded that rates are not going to come down fast, even though some of the futures contracts next year show the potential for rate cuts if things turn a certain way. Now, Powell did focus on that wage growth number as an element of core non-housing services inflation. This is from Indeed's wage tracker. This is basically posted jobs. What are the implied wage growth in there? And you see it's come down nicely here, maybe in the 4 percent range, tracking roughly got core PCE inflation. It's a hopeful signal, but you're still above the, you know, sort of pre-COVID level. So that's what Powell was saying. We still have to wait

and see if that comes down, even as many folks will say that core non-housing services is not really wage driven in terms of the inflation. It's a lot more about financial asset fees and other stuff that doesn't seem necessarily to be about wages, John. Yeah. All these strikes going on at the same time. You wonder how and when that eventually ends up translating in. But also, August is almost over. Yeah. Maybe volume, more volume comes back to the market soon. What's there to be excited about to the upside or the downside in September, whether it comes to data or corporate earnings? What? I mean, obviously, the turn of the calendar

doesn't really help you going into September because it has typically been a weak month. I always think of it in terms of the market set up as its own catalyst. And I'm not sure that we're quite there yet to where we've had enough of a pullback that really puts the risk reward in buyers favor on a tactical basis because so many people have given up. You've gotten valuations and sentiment so down so low. But I really think it's a matter of if we get more evidence and we become more more believing in the idea that the economy can be resilient without rekindling inflation, bond yields don't blow out, you know, the market could probably find its way in that scenario until we get toward earnings season. All right. Mike Santoli, thank you. Up next, Evercore ISI Vice Chairman Krishna Guha on what's next for the Fed, how it could impact the markets and the economy. And we'll get

Insta reaction to Instacart's IPO filing when we're joined by venture capitalist Keith Raboy. Overtime's back in two. Welcome back to Overtime. Now that Fed Chair Powell's Jackson Hole speech is in the rearview mirror, what's next for the Fed? Joining us now is Krishna Guha, Evercore Head of Global Policy and Central Bank Strategy and head of that team and central bank strategy and head of

that team and a former New York Fed vice president. Krishna, you say Powell sounded especially hawkish when talking about the upside surprise that we've had on growth. So what are you looking or going to be looking most closely at in the next labor report? Well, I think that really the only part of Powell's remarks that you could remotely characterize is on the newly hawkish side was that language around growth, where he clearly indicated that there are limits to their tolerance for that upside surprise in growth, concern that that could, if it went too far, reignite some inflation pressures, also potentially stall out or reverse the labor rebalancing. So that's obviously something that we're going to need to keep under close observation.

But this was not a hawkish set of remarks overall. The tone was hawkish. The content was very moderate, middle of the road. This feels like a Fed chair to me who thinks more likely than not he's done here and shifting carefully on hold. Yeah. And so that's got me thinking about that next jobs report coming out, because that's pretty important data if you're drawing attention to wages and the services sector and you're concerned about the impact of growth, especially as we're getting new strike authorizations, it seems, just about every

week these days. So I think that's right. But I think we also need to pay attention to the language Powell used about the fact that having done a lot of work already, the Fed could, quote, proceed carefully. He said that at the beginning of his speech. He said it again at the end of his speech. What that is telling me is that they are not expecting to go again in September unless something forces their hand, maybe November, maybe December. My best guess, they're done here. But certainly Powell's keeping that option open in part because he wants to monitor where that growth data is going, but carefully suggests a fairly high bar for doing anything at that next meeting. So what forces their hand if something does?

So again, I don't think they're going in September. I don't think they're probably going at all. But this formulation is one where you'd want to accumulate some evidence. So what would force your hand to go quickly, say in September, rather than accumulate evidence and then make that call for November or December? It would have to be something pretty blowout, I think, by way on the labor side or some unforeseen big setback in terms of the next inflation print. The sort of thing that would set alarm bells ringing at the Fed, that the growth surprise isn't just staying in growth space, but it's starting to move either labor or inflation or both in the wrong direction. So that points to labor and CPI. And aside from that, I mean,

those are I guess we'll get a little bit of that at the end of next week. But what what besides that? Nothing really. We're just watching corporate earnings, then you think, to understand what's happening in the economy? I think we certainly want to be keeping a close eye on corporate earnings as you and your colleagues do so well. My read on today is that in truth, this feels like the beginning of a transition to rates on hold. And so the question is, does the data continue to support that going forward? Powell gave us some tripwires that could force them to come back in and hike again. If that growth acceleration gets out of control, threatens to push inflation back up. If the labor data turns back the wrong way, perhaps because of too much growth.

But the default path to me looks like a transition on hold. And there you hear Powell saying all the predictable stuff about how they'll set a high bar for cutting rates, how they won't cut until they're confident inflation is going back to target. What would you expect? Of course, he would say that. In expectation, they're on hold for a long time. After the fact, they'll be flexible. If inflation comes down faster, they will cut sooner. Well, interesting steady hand from the Fed here compared to where we were a year and a year plus ago. Krishna Guha, thank you.

Thank you. Shares of chipmaker Marvell Technology tumbling despite an earnings beat and better than expected third quarter revenue forecast. Up next, the company's CEO breaks down the quarter and the outlook for the semiconductor industry when overtime returns. Welcome back. Shares of Marvell down 6.5 plus percent today. The worst performer on the NASDAQ after the chipmaker posted earnings yesterday that didn't impress investors. The report coming just a day after NVIDIA crushed expectations. NVIDIA was also down, by the way. Joining us now in exclusive interview, Marvell CEO Matt Murphy. Matt, you had beats here, but data center and automotive look strong. The rest of everything else still got

some inventory to burn out. How quickly does that happen and do things get going? Hey, John, great to see you. Thanks for having me on. Yeah, you're right. The two very strong markets for us were in data center as well as automotive. In the data center, that was driven actually by strong growth in AI. And we could talk about that later, but we also raised our outlook for our revenues from that segment, as well as actually traditional standard cloud infrastructure was strong. And then automotive was up 32% year over year in our second quarter. And for our third quarter, we guided it to be up 30% year over year for the third quarter. So those two were standouts. The way

to think about it, John, is we have a diversified set of technologies at Marvell and market orientation. And so the areas where you noted we had some inventory and some slowdown were both in the traditional enterprise area as well as in the carrier market which includes our 5G products and if I just take a quick step back and you look at the last few years basically our enterprise business has roughly doubled over the last few years and then 5G and you and I have talked about that over the years was was a real standout success story for Marvell so those have had incredible runs they're going through some short-term inventory corrections as is kind of across the industry. But the good news is we have a diverse portfolio. So you have things like AI and cloud and automotive kicking in. And that's

why we're able to show sequential revenue growth from Q1 to Q2, guiding Q2 to Q3 up again. And also we signal to investors that we would see the fourth quarter up as well. And this is in the backdrop of one of the largest cyclical downturns we've seen in the semiconductor industry over the last 25 years. Yeah, it's been something else. And you've been doing some acquisitions as well, building sort of your share of wallet in the cloud and among hyperscalers. And sometimes I think with this big shifting macro backdrop, investors can lose sight of what individual companies are doing to try to build advantage. So talk about that for a bit. Some of the areas where you've been building IP that affect both automotive and cloud,

where you've got various technologies working together in a way that you think customers are going to continue to need. Yeah, it's a great point, John. And I think in those two markets, it's actually two very different approaches we took. So in the case of automotive, I'll start there. That is a effectively 100% organic ground up effort inside the company. When I became CEO seven years ago, I think the revenues from automotive were approximately zero. And so we had an incredible engineering team that leveraged some very core technology we have in networking and Ethernet technology. And we've now really proliferated that inside all of the major car companies. And fast forward a few years later,

we said last year that was a $200 million a year business from Arvell going to $500 million and with very strong adoption now across the board. So we built that business up inside the company. In the case of cloud, we've taken very aggressive moves to do organic and inorganic strategies there. So we talked a few years ago, we acquired a company in 2020. We announced we were acquiring it. We closed in 2021 of a company called Infi, which has just been a home run for Marvell and the combined Infi-Marvell effort. That business is driving outsized growth. And in particular this year, we actually said of the $200 million a quarter run rate we were going to see in AI exiting the year, almost all of that contribution actually was from Infi.

And if you look back when we acquired the company, the prior 12 months revenue was, for the whole company, was less than $700 million. And now we're talking about $200 million a quarter just for the AI portion of that type of product line. So we've done those types of things, John, to get ourselves in a good position. When there are moments like this, when there's a big technological shift, architectural shift in some cases even in the enterprise, when there's share moving from CPUs to accelerators, sometimes there are players that gain outsized advantage and then there are players that lose.

So when you look at that, it certainly happened with 5G. How does that play out for Marvell in the move architecturally toward accelerators in the data center? Do you gain sort of share of spend in that scenario? And if so, why? Yeah, excellent question. And it's absolutely happening. We're big believers, and you and I have even talked about this, in the move to accelerated computing as a trend. I think NVIDIA has completely proven that, in particular with their current outlook that they've given.

We've said in our last earnings call that the move to accelerated computing is a massive opportunity for Marvell, one, because the connectivity that's required. We talked about the NFI technologies and portfolio is significantly higher when you talk about the increased computing capacity and throughput of AI systems. But also what we're seeing is in our traditional cloud infrastructure, that's growing as well. And that was a big concern of investors a quarter ago that, you know, as you go to accelerated computing and the shift to AI in terms of the CapEx, what would happen? But you got to remember when you look at these data centers, sometimes there's AI factories,

which are dedicated AI data centers themselves, but most cases it's multi-tenant. So you have AI workloads inside and you also have traditional workloads inside. And all of that ultimately needs tremendous network bandwidth. And so where we play in the standard cloud infrastructure is actually in the networking technologies and the connectivity. So that's seeing an increase in demand, even in the traditional cloud infrastructures. And we don't really get caught up in the CPU, GPU dynamic per se. Although I'd say the final point would be on AI. We also have, and you and I had this discussion several years ago about the move to custom silicon. Yeah. And we've got some very, very interesting opportunities there as well. OK, that should play out next year.

Well, we'll have to leave it there. Given investors a lot to think about post earnings. Matt Murphy, CEO of Marvell. Thank you. Yeah. Thank you, John. Great to see you. Great to see you. Time for a CNBC News update with Kate Rooney. Kate. Hey there, John. Officials in Hawaii are calling on tourists to help boost Maui's economy as unemployment surges after the wildfires. The Hawaii Tourism Authority is asking visitors to come to Maui to support local businesses. Senator Brian Schatz says furloughs and layoffs are spiking because visitors think that the whole island is closed. The west side is still

off limits for visitors through mid-October as search efforts continue in Lahaina. CDC officials announced updated COVID vaccines are expected to be available in mid-September. This is the most specific timeline to date after the CDC director had previously estimated a release date in early October. Vaccines from Pfizer, Moderna and Novavax still need approvals from the FDA and the CDC, which will set eligibility guidelines. Savannah, Georgia City Council voting to rename a town square to honor a black woman who was a nurse and a teacher in civil war

times. Susie King Taylor's name will replace former Vice President John Calhoun, a vocal supporter of slavery in the decades before the war. John, back over to you. Okay, thank you. Instacart just filing for an IPO. Up next, Founders Fund General Partner Keith Raboy on whether we could soon see more tech startups go in public. We'll be right back. Welcome back. Instacart filing to go public on the NASDAQ. The grocery delivery company will list its shares under the ticker CART. That marks the first significant venture-backed tech IPO since December 2021.

Joining us now is Founders Fund general partner Keith Raboy. He's led investments in names like DoorDash and Affirm. Currently serves as a CEO of OpenStore. Keith, it's been a while. Good to see you. So first, let's just talk about Instacart. How do you think it avoids being seen as the lift to DoorDash's Uber, or is that maybe okay? Maybe okay. I mean, Lyft's done pretty well. It's a public company worth $3 billion.

I invested probably when it was worth $4 million. So, you know, depends what your expectations are. So is this the beginning of something markets-wise with Instacart, or is this just a unique Instacart situation where despite the fact that it's going to have to take a massive haircut, it sort of needs to come public, and so it's doing that? Well, I think there's a lot of great opportunities for public companies in the technology sector, and some of them will be opportunistic and go fast and some will go slow. But fundamentally, I think being a public company early is a great thing. So we have several companies in our portfolio that could be public whenever they want. Reality, SpaceX, Stripe, Fair, Ram, all these are wonderful private companies

that will be phenomenal public companies. I was talking to Ariel Cohen over at Navon a few weeks ago, and he was saying, hey, not yet. SaaS companies aren't getting the valuation in the market yet that they deserve. So he was still very much on the sidelines. Is that what you're hearing, too? No, that's kind of ridiculous. If you look at the current multiples, they're over 40, 50 years. They're actually right in the middle of the bell curve, like 50th percentile over 50 years.

So sure, they're not going to get the multiples they got three years ago, but those are artificial fate sort of based on steroids. So reality is technology companies are worth a certain amount and there's a multiple that's appropriate. And over 50 years right now, you're right down the middle, maybe even slightly above the beat. All right. Well, let's talk about the macro environment and its impact on these companies. I mean, there's been a shift in credit availability. What's been the impact on especially consumer-facing tech companies? Well, we haven't really seen it.

You know, you maybe saw, obviously, a firm, I'm still on the board of a firm, reported our earnings, I believe, yesterday. And, you know, people noticed the firm's really dominating. So, you know, the stock, obviously, you know, it's rebounded considerably based upon the performance. So we really don't see the effect of consumer delinquencies or, you know, bankruptcies or anything like that, that people have been predicting for two years. Well, but isn't part of the reason, in my view at least, why Affirm got that boost is there's been this line out there about buy now, pay later, that, oh my goodness, they're extra risky, when actually it seemed from Affirm's results that delinquencies were actually down, whereas with some traditional credit players, credit card players, you're seeing them go up. So maybe the math is actually

mathing. Maybe the algorithms are working the way that Mac said they would. Yeah, no, exactly. Affirm has an underwriting advantage. We've been articulating that for nine plus years, and it's true. There are weaker competitors. You know, some of them are fortunate and they sold, you know, to block. Some of them still compete with us, but they don't really know what they're doing. We do at Affirm, and the world's going to recognize that. The more stressors in the economy, the more Affirm can shine. Though Max did say he's concerned about this student loan thing and watching that very closely. We'll see how, begin to see how that plays out, I guess, starting next month and the month after. So let's talk about OpenStore, which

is sort of your attempt to roll up a lot of Shopify-based small companies. There's been this massive recalibration in the direct-to-consumer ecosystem. You've got OpenStore Boost, where you're trying to help some of these smaller companies, I believe, who've got revenues in the $50,000 to $500,000 range to help themselves. Look, Shopify has been an amazing success story over the last 15 years, directly competing with Amazon and powering the future of direct-to-consumer online commerce. However, in the 2 million stores, there's very, very few that have really broken through and sell more than a million dollars worth of stuff. In our estimate, 85% of the 2 million actually sell less than $50,000 a year. So we've developed tools and techniques and expertise that allow us to empower those brand

owners to grow 510X. So we did this ourselves first. We bought a brand named Jack Archer, which sells men's apparel, men's like leisure athletic apparel. And we've grown it more than 10X in the last nine months. So we want to give these tools and opportunities to everybody on Shopify. So we launched Boost last week, where you can apply and we'll select people who are running brands who have the highest potential. We'll show them how to build and we'll build for them an iOS app which none of these people have. We'll improve their marketing strategies and then we'll see if they can grow their business. But at the end of the day, we are acquiring brands between $10 million or we will

stress-free drive the brand for the owner. We'll guarantee the cash flow and allow the owner to sit back and earn passive income with no stress. Sounds nice. But tell me, what's the new imperative or necessary playbook right now for those kinds of tools? Because it used to be it was about customer acquisition. There was a certain motion with Facebook ads, etc. that worked. And it seems like over the past couple years, because of iOS shifts and some other things, that method stopped working. It sounds like this kind of optimization that you're talking about is using some different, perhaps, levers,

some different data to provide results. What's the different formula this time? Well, first of all, not having an iOS app in the United States is a major disadvantage. So none of the brands we've ever purchased or we drive have their own iOS app. And none of these super small brands have their own iOS app. If you can't use notifications, if you can't retain your customers and boost AOV and ease of purchase through an iOS app, you're really compromising between 20% and 50% of your potential just there. Secondly, you're right that an open store, because we buy these brands, we have what's known as first-party data, which means we're not as subject to the iOS 14 implications and rules and changes that

Apple imposed on Facebook and made Facebook inefficient for many brand owners. So that's been the stress of the ecosystem. There was a sort of a darwinistic learning of how to manipulate Facebook to get users in a cost-effective way for direct-to-consumer brands. And those lessons are no longer relevant. They're dated. People have to go back to the drawing board. And it's extremely stressful, which is why they call us up and say, would you drive my brand for me? Just give me the income. Right. Keith Raboy, want to keep checking in with you to see how that's going. It's pretty important to small businesses online. Appreciate it.

CEO of Opus. Thank you very much. BlackBerry bouncing today after reportedly receiving a takeover offer. Up next, Mike Santoli is going to look at why software could be an attractive area for buyouts right now. We'll be right back. Welcome back to Overtime. Shares of BlackBerry ripe today on the back of reports that private equity firm Veritas made a takeover offer for the company. Let's bring back Michael Santoli for a look at what investors can learn from this.

Mike? Yeah, John. Now, of course, BlackBerry had said it was going to be reviewing some strategic options. This is the chart of BlackBerry going back to essentially the dawn of the iPhone era, 15 years. You see, obviously, it was kind of industry standard, then not. You do see this little blip right over here. It's when it kind of became a meme stock for a brief period in early 2021 as one of these nostalgic brands, very low-priced stock. But I also think that there's something bigger going on beyond BlackBerry.

Now, you would know better than I in terms of specifically what a buyer might be getting with BlackBerry, John. But in general, you've seen software lag hardware and specifically semiconductors over the last couple of years. Now, it was the heart of the tech rally, let's say, in 2020, 2021. But since then, it's kind of flatlined. So valuations have moderated, and yet you've still seen private equity firms in particular quite interested in software businesses. They like the kind of steady subscriber-based cash flows. It seems like it's something you can often get at an advantageous price, and then maybe later on you can reconsolidate and sell it to another company. So this shows you that there may be some more hunting going on in software and whether that really is going to bring BlackBerry

deal to fruition. We'll have to see. Yeah, there's a lot of patent kind of licensing revenue here, some automotive software with QNX and some security as well. It's small in those categories. I don't know. Maybe it's the idea that they think they can sell off a few things, still have a stable source of cash, maybe grow some other things. Maybe this is a kind of environment where that sort of a deal is more attractive. I do think that's the case. A deal that's not really reliant on the company sort of catching lightning in a bottle with new innovation or sort of penetrating some huge growing market. It's sort of picking it up for parts. You feel like there's a bit of a valuation floor under it based on what's installed already

and see what you can make work on the balance sheet in terms of leveraging it. All right. From meme stocks to Metamucil stocks for some of these, perhaps. Mike, thanks. So back to the excitement. What do Mike Santoli, Josh Brown, Jerry Seinfeld and Howard Stern all have in common? Well, they're from Long Island and they have their own shows. But only Mike and Josh's show is tonight taking stock right here on CNBC at 6 p.m. It's the last special of the summer, so you got to watch it. Up next, CEO of solar power company Sanova and why he thinks extreme weather across the U.S. is going to fuel growth for alternative energy solutions. We'll come right back.

Shares of Hawaiian Electric hitting 52-week lows after the county of Maui sued the company for damages over the deadly wildfires. The recent extreme weather we've seen has put a spotlight on alternative energy resources such as virtual power plants, which our next guest calls the future of how we power America. Joining us now is Sinova CEO John Berger. John, welcome. So I want to get to all that, but I want to start on debt because you've impressed some investors for the way that you've been able to grow. You've also, over the last recent months, taken on additional debt to do it at a time when interest rates are high. So talk with me, if you will, about how you're able

to be sure to deploy resources in a way that are going to end you up on the positive side of the ledger there. Well, certainly, John. Thanks for having me. When you look at our history, which is now over a decade, we've done a fantastic job of making sure that our balance sheet is very conservative. And so we watch our leverage rate ratio very closely. And we've done a lot of what they call asset backed securitization. So these are asset level debt entities. We actually just priced another one last week. And these are all non-recourse facilities.

Of course, that doesn't really matter. That is debt at the end of the day, just practically speaking. And we have a very low default rate because we're selling a necessity, power, more affordable power, more reliable power, cleaner power to consumers. So even a recession, we feel very confident that those cash flows will continue to come in at above expectations of the marketplace. We do raise equity as we did recently, just a small amount. But we do have other forms of capital that come into the capital stack as well. So we're sitting very nicely. We've locked out a lot of our debt, like the asset-backed securitization, even our corporate debt. So we feel very comfortable about where we sit right now.

And we're in a nice driver's seat. So how is the sales motion changing? When you're making the argument, I guess, to homeowners, hey, take on this equipment. We'll help save you money on a sort of month-to-month basis and maybe even be able to sell some power back to the grid. Absolutely. So when you're looking at utility rates, I think there's a number of investors and people that think that for some reason, mainly, I guess, natural gas pricing coming off so much that utility rates are going to decline. But this is why utility stocks have for decades traded with interest rates, because the other thing that goes up with interest rates is utility rates. And so there's a lot of inputs. And when you're looking at the Maui fires, that's another, in terms of climate change, another input that's pushing rates up on these electric utilities across the country. And so we don't actually see that there is going to be much of a drop, if anything, in utility rates next year. And I would highlight that having inflation, where some people think that that's going to rip even higher. It may or may not.

But having inflation rip higher and utility rates go lower has happened exactly zero times in the United States history. Zero. So we see a lot of people coming in as they start to have problems as the economy gets more difficult and inflation still lingering there, particularly in utility rates, and looking for more affordable power, more reliable power, and that's what Sunova offers. And so we're seeing our sales move up. We were quite confident in our sales. We're clearly out-executing everybody in the industry, and that was evident on the last quarter's call. We called for 40 percent growth next year when people are struggling to even grow in this industry and other parts of the economy for next year. And we're already booking into next year. We're very confident of that

growth. We're doing extremely well on the execution side. All right. John Berger, the CEO of Sunova, thank you. Thank you. Up next, find out what's at stake for the market and your money when Commerce Secretary Gina Raimondo makes her highly anticipated trip to China this weekend. We'll be right back. Welcome back. Wall Street will be closely watching Commerce Secretary Raimondo's trip to China next week. Our Seema Modi looks at what the visit could mean for investors. Seema.

And, John, it's not just China's slowdown that is worrying emerging market investors. Deteriorating relations between U.S. and China is also weighing on sentiment. Just take a look at deal flow. Outbound investments into China slowing to a nearly 20-year low. Ahead of her trip to China, Secretary Raimondo removing 27 Chinese companies from the Commerce Department's unverified list. That is seen as a sign that she's trying to ease tensions a bit as she gets ready to meet with Chinese leaders next week. Topics, according to experts, include tariffs on agriculture goods and those export controls on technology companies. It follows high profile visits from Secretary Blinken and Janet Yellen earlier this year that didn't really yield any big wins. Meantime, Goldman Sachs pointing out that Chinese stocks are experiencing one of the sharpest drawdowns this month and that the pace of selling by hedge funds has significantly accelerated.

John. Seema, it's interesting. All these government trips to China, it seemed at the beginning of that pace that China was kind of like, ah, you cannot come. It's fine. I wonder if the difficult economic situation over there is making them more eager and perhaps for some reason the U.S. more eager to at least seem engaged. That's so interesting. There was a new note just today, John, from Eurasia that said because of China's sharp deceleration in its economy, that they will likely try to lower the temperature when it comes to foreign policy and not try to engage in harsh rhetoric when it comes to U.S.-China relations. So we'll see how that backdrop, this economic backdrop, could potentially create an opportunity for both sides to come together for some type of progress when

Raimondo visits next week. Perhaps also opportunities for other markets. We saw the warm reception of India. India had that big moment with the moon landing. And then, you know, this Vietnamese EV startup that is having some success in the U.S. market. In a way, all that seems to perhaps communicate that perhaps China isn't as needed as it used to be. You know, listen, these are great developments. And I think we just had the BRICS summit, which was in Johannesburg, South Africa, two days ago, where leaders of the major emerging markets came together. They actually added five new members, John, to the pack, which now makes them bigger than G7. So, yes, the turn to the east is happening. And I

think the fixation on China is also becoming less so in recent months because of the growth we're seeing in some of these other emerging markets like India and Vietnam. I'm sure the acronym makers are hard at work trying to figure out if there's anything we can make out of these new additions beyond bricks. Seema, thank you. Seema Modi. During a packed week of earnings that included reports from enterprise names Snowflake and Zoom, I spoke with George Kurian yesterday. He is CEO of storage specialist NetApp. The company reported an inline quarter, saying demand has stabilized. I think what we saw earlier in the year was a bit of optimization of customer spending, not only for our technology, but all cloud

technologies. After a couple of years of real hyper growth, I think everybody started to look at how much they were spending. We've seen a bit of stabilization of that trend. And now there's lots of new customers and new applications coming online in the cloud. What we saw this past quarter was some of our subscription offerings, not the consumption offerings, but more of the subscription offerings going through some of the same optimizations where people were saying, listen, I'll monitor and use some of the advanced capabilities on my most mission-critical environments and maybe for the less important ones, cut back a little bit on spending. AI also a factor here.

Some of those newer workloads, he was saying, really call on storage to remain online. So there's some hopes there that that will stabilize things. Also, analysts are hoping that there be some other upside for NetApp over the next few quarters in cloud, which was up for them just 6% year over year. NetApp might get a boost from an extended partnership announced the day after earnings with Google Cloud, which happens to be run by Thomas Kurian, George's twin brother. Don't worry, NetApp already has partnerships with other hyperscalers,

so it's not that kind of thing. But I want to know what the Kurian brothers got in their lunch boxes growing up so I can fill my boys up on that. Speaking of Thomas Kurian and Google Cloud, he's going to join us next week on Overtime from the Google Cloud Next event in San Francisco. We will talk about AI and more. And this AI story is going to continue to be important, not just for NVIDIA, but across the market, because is the demand durable? Well, it's going to take software and development of new models that companies can actually get productivity out of to prove that one way or another. We'll see what we get from Google along those lines next week. Well, that'll do it for Overtime. Fast Money starts right now.