Closing Bell - Closing Bell Overtime: Google Cloud CEO Thomas Kurian On New AI Tools; Generac CEO On Hurricane Prep; Why Bitcoin Is Rallying Today 8/29/23

Episode Date: August 29, 2023

Major averages closed higher again and every S&P sector was in the green. Vital Knowledge Founder Adam Crisafulli breaks down the market action. Earnings from HPE, HP and Box. Google Cloud CEO Thomas Kurian on Google’s new AI tools for enterprise clients and custom chips. Generac CEO Aaron Jagdfeld on hurricane prep and residential demand. Globalstar CEO Paul Jacobs on his new job, working with Apple and competing with SpaceX. Our Kate Rooney on why bitcoin is rallying today.  

JOHN FORTENBERG, WALL STREET WONDERWOOD, Well, it's a high score today, and you got your scorecard on Wall Street, but winners stay late. Welcome to Closing Down Overtime. I'm John Fort with Morgan Brennan. Coming up on today's show, we have got a rare and exclusive interview with Google Cloud CEO Thomas Kurian, fresh off Google Cloud Next event today in San Francisco. We will talk about the company's latest push into AI and a whole lot more. Plus, it's a very busy afternoon for late August earnings. We'll bring you results this hour from HP, HPE, Box, PVH, and Umbrella.

But first, let's get straight to today's market rally. Joining us now is Vital Knowledge founder Adam Crisafulli. Adam, great to have you on. I mean, S&P closing at 44.97, just below 4,500. I think the big takeaway is you had some softer data this morning, particularly jolts. Yields moved lower. Stocks moved higher. Do you fade this rally? I think it has a little bit further to go in equities, but I don't necessarily see us hitting freshening lies just yet. I think the jolts report, like you mentioned, was a critical

piece of information today. It's the most important event of the session, drove a big rally in treasuries. This is the second kind of data shock that we've received now in less than a week after the flash PMIs from last Wednesday. And so obviously lower yields are positive for stocks, but I think we have to be careful about what's driving yields lower. To the extent it is a resumption of the disinflationary process, that's going to be positive for both treasuries and stocks. To the extent we start to become more concerned about growth, which is my fear, I do think you're going to start to see a little weakening in growth momentum in the coming weeks and months. I think that you're going to see a divergence then in treasuries and equity. So I think the S&P is a bit further to go in terms of the rally, but I

would be fading in about 50 to 60 points or so. Got it. And then what would you be doing, buying treasuries? I think the Treasury rally is a little bit further to go. I think, you know, we saw the jolts today. Part of it has to do with technicals, too. The Treasury's sentiment was extremely negative. And so I think, you know, to the extent we see further data disappointments, it's going to help Treasuries a lot more than upside data reports is going to hurt them. So I think treasuries have technicals on their side from here, whereas equities don't really have that much of a position in your sentiment tailwind at the moment. OK, so if you're at home and you're looking at your portfolio, we're right about in the middle of the August range of highs and lows. So if you don't have enough cash

or equivalents on the sidelines, what would you say you sell here? And if you have enough, or maybe even a little bit too much, how do you get into the equity market when we are where we are right now? And I don't mean necessarily tomorrow or next week, but throughout the rest of the year.

Yeah, I think some of your yield sensitive names to some of the rest of the year? Yeah, I think, you know, I think some of your yield sensitive names to some of the areas of the market that have elevated yields that are more sensitive to movement rates. You know, I think those groups could outperform if you do see a sustained rally in Treasury. So I think those are some of the more interesting areas now going forward over the coming weeks and months, because I do think you're going to see a little bit of a weakening in some of the growth data going forward. And we have, you know, a ton of more data left this week, including the ADP jobs report for tomorrow. You have the PCE on Thursday. You have the jobs report on Friday, plus the Eurozone CPI, too.

So you have a lot more data this week that's going to be crucial for how Treasuries play out going forward. A couple of people have said to me, in their opinion, wages in particular, this jobs report, get more weight. They just matter more. What do you think? Yeah, no, I think wages are very important. I also think, too, what we've seen in the last, really for the last several quarters, is phenomena of shrinking workweeks. So you have the hourly wage number has held relatively steady, but the work week is shrinking. So total take home pay measured as hours times wages, that number has been coming in. And so I think that's really the crucial one to watch. You know, companies are very reluctant, I think, to wholesale cut headcount just given how difficult the difficulty they had over the last several years of finding people.

But they are shrinking work weeks. They're coming back on the hours worked as kind of a stealth way to rein in some compensation costs. So I think that's going to be the key is the wage times, the work week length for this Friday morning. Yeah. And of course, we know wages have been have been sticky. There's been a lot of labor negotiations and the like that are potentially going to add some noise to this report in particular. Assuming, though, assuming that this disinflation narrative continues to persist in the market based on the data we get in the coming days, from a stock perspective, who stands to benefit? Because I know you've talked about this on the program before, but this idea that it's a double-edged

sword. Yeah, so I think you're going to see kind of the evolution of disinflation is going to is going to shift. So we're moving away from pure base effects from commodity prices onto you're going to see more disinflation services. So especially shelter and housing, but other parts of services as well going forward. So you're seeing retailers call out disinflation as one headwind. You've seen a lot of retailers talk about increased price promotion. So that sector of the market is already feeling some headwinds. But I think

more services areas in the second half of this year and early next year could start to see some more disinflationary pain, just given that they're coming up very, very difficult repairs, just given the enormity of the price increases for the last several years. I can't figure out where the consumer still is right now. And I wonder if you have a strongest takeaway from the latest earnings reports and just the latest data that we've gotten. On the one hand, the consumer seems to be still spending on a few things beyond even the necessities and groceries, Walmart's core. But on the other, Macy's saying that interest rates are having an impact on on credit. Yeah, you have a ton of mixed signals, so it's really kind of hard to get a real firm grasp. You know, I think Walmart provides the

best insight just given that they're so broad. So, you know, they did acknowledge that the disinflationary trend in food is freeing up some wallet space. And that is helping discretionary hardness of goods, which have been in the depression for the last year. You had this huge pendulum swing coming out of the pandemic towards services away from goods. That's kind of starting to level back out. So Walmart called out some pockets of strength in discretionary hard goods. And we've heard that from a few other retailers as well. So Best Buy today talked about TVs and laptop unit sales kind of just barely getting into positive territory again. So I think you're starting to see that pendulum start to equal out a little bit.

It's not dramatically shifting back, you know, but the consumer, they're running down the excess savings. You still have a relatively healthy employment market. So that's providing. I've got to jump in here real quick because Hewlett Packard Enterprise, HPE and Box earnings are out. And our Steve Kovac has the number, Steve. Hey there, John. Let's start with Hewlett Packard Enterprise here giving us an EPS for the quarter of forty nine cents. That's a slight beat over the forty seven cents adjusted adjusted the street was looking for. And revenues generally pretty much in line here, $7 billion on the nose versus the $6.99 billion the street was looking for. And then as for guidance here, the street was looking for $0.49 on EPS guidance for Q4. They are guiding towards $0. expecting between $7.2 billion and $7.5 billion versus the $7.5 the street was looking for. And then let's move over to Box, which we're looking at shares here fall at last night like 9%.

Yeah, 9%. That's mostly due to some weak guidance. But as for the results for Q2, $0.36 for the EPS versus $0.35 adjusted. And revenue is at $2.61 million, right in line with estimates, $2.61 million as well. And then, like I said, that guidance is what's weighing down on the stock here, missing expectations. For EPS, they're looking at $0.37 to $0.38 for the current third quarter versus the $0.39 expected. And revenue looks like it's going to be light versus expectations for this quarter, too. Up to $263 million. Street was looking for $265 million, John.

And down 6% here, John. Indeed. That stock lower, as you said. Steve Kovach, thank you. I also want to mention HPE CEO will break down those results tomorrow at 11 a.m. on Squawk on the street. Antonio Neri. All right, Adam, we want to bring you back in your thoughts to tech names late here in the season. But at least in the case of box, a big move lower because guidance, current quarter guidance is disappointing. Yeah, I think the HPE one was

a little bit more interesting. You know, they do have a fair amount of AI exposure, high performance computing exposure. So that's a beneficiary of a lot of the trends that we're seeing in tech over the last quarter or two. But they also have an enormous legacy server business. And that's part of the business that's suffering in the current environment. So's a lot of puts and takes with that company they are they do seem to be continuing to perform well on the margin front so that's preserving EPS while the overall top line sees some pressure and then Box you know it looks like the guidance fell a little bit short you'll be interested to hear on the call you know if they talk about macro pressures or if it's just another

kind of one-off issue. But yeah, it's unclear entirely what's driving the downtick in guidance for Box. All right, well, we've got more earnings. Ambarella, those results are out. Christina Parts Nevelis has the numbers. Christina. Well, it's a beat on the top and bottom line, but it's the guidance for Q3 that came in much weaker. Keep in mind, Ambarella makes chips that are more well-known in surveillance cameras. They are pivoting towards AI chips as well.

But what they did post for their loss per share adjusted loss of 15 cents a share, that's a little bit better than the 21 cents loss that the street was expecting. They posted revenues of $62.1 million, so a slight beat because the street was anticipating $62 million. But its Q3 revenue guidance came in at $50 million. The street was anticipating $67.6 million. They also had less cash on hand. And there was just one quote I want to read from the press release. The CEO saying the near-term environment is very challenging

as customers are now more aggressively reducing their inventory, and we're now seeing some pockets of weak-end market demand, which further complicates our customers' efforts to reduce their inventory. And so they believe those inventory levels will normalize by the end of the year. So that's a cautious tone and weak Q3 guidance contributing to that massive stock sell-off that we're seeing over 13 percent lower. John? Yeah, Christina, thank you. Adam, with Ambarella, kind of similar to with HPE, people have been sometimes trying to position this as an AI play,

but it seems more closely tied to the device market right now. And we know from Qualcomm, we know from Best Buy reporting just hours ago that devices aren't really selling and there's still some inventory issues there. No, 100 percent. So you have the end market and demand issue, which actually you could argue is stabilizing a little bit in certain end markets of tech. But, you know, the inventory correction we heard from analog devices recently, too, it's kind of moving from PC smartphones where you saw really aggressive inventory destocking over the last couple of quarters. And now it's kind of shifting in to all these other areas of tech. So Umbrella is experiencing, obviously, for the current quarter. I think it'll

be interesting to hear from management about the duration of this inventory correction. So analog devices on their call last week suggested it would be a relatively brief correction. It'll be interesting to see if Ambarella thinks it could be brief as well, or it's going to extend into next year. All right. Adam, thank you. Adam Christofoli. Well, time now to bring in senior markets commentator Michael Santoli at the New York Stock Exchange. Mike, what are you watching? Well, just putting some pictures to what you guys were talking about in terms of the bond market reaction today to some of the big economic data on the jobs market. The 10-year Treasury yield in retreat down back below those October highs. I keep pointing out how both yields as well as oil prices, not to mention U.S. dollar,

have been pulling back arguably from the upper end of a relatively longstanding rate. So kind of keeping the macro cross-asset relationships within the rails there. As you can see, not to say we're going to continue lower on this front, but it did take some of the edge off. Take a look at the quits rate within the JOLTS report today. So this is the job openings, labor turnover survey, quit rate, percentage of total employment, where you had people voluntarily leaving a job in the last month,

and down to below 2.4%, which essentially brings it to the pre-pandemic level. In fact, that's about the 2019 average right there. It still represents a relatively healthy job market. You can see what happens here in true downturns. It gets much lower. But it does show you that the Jay Powell's imagined ideal loosening up of the labor market, you have job openings come down, you have turnover relief, get relieved a little bit, and then you don't necessarily see an uptick, a big one anyway, in the unemployment rate. So far, that's intact. Of course, this continues lower, and we're going to start talking about too weak on the jobs front

and those lagged effects of rate hikes and everything else potentially coming to bear. But for now, very comfortable set of relationships and numbers ahead of the official monthly jobs report on Friday. Mike, underneath the headline numbers on PCE and on jobs, what are the detail numbers that you're most curious about and why? Well, PCE, J-PAL has everybody focused on non-housing services inflation. And that is where we're going to take a look for whether the underlying cost pressures in the very big services sector, which he believes is very related to wages, is getting any relief or not, or it looks like it's on the right path.

And then, you know, by extension, as you were mentioning earlier, probably the wage number or the total aggregate weekly earnings number in the Friday jobs report. It's going to probably be fairly important as well, even if for the most part, you know, we were OK last month with like four point four percent annualized job growth to see if something like that is still acceptable. Can't wait, but have to wait. Mike Santoli, thank you. After the break, a rare interview with Google Cloud CEO Thomas Kurian on Google's latest push into AI and much, much more from the sidelines of the Google Cloud Next conference. And later, satellite communications company and Apple partner Global Star is surging today after naming former Qualcomm CEO Paul Jacobs as its new CEO.

Finished the day up more than 23%. Jacobs will join us exclusively to talk about the role and his vision for the company. Over time, back in two. Welcome back. HP earnings are out. Steve Kovach has those numbers. Hi, Steve. Hey, Morgan.

Yeah, and shares are dropping here after reporting their third straight revenue miss in a row. Let's go over the results here, though. EPS coming in at 86 cents. That was right in line with expectations. Also 86 cents, of course. And then revenues, 13.2 billion dollars. Like I said, third straight revenue miss. Street was looking for 13.37 billion, just a slight miss there. And then as for guidance, kind of in line with expectations. They're looking between $0.85 and $0.97 a share for Q4. That's versus the $0.95 expected.

And no revenue guidance, but they do have some commentary here. Morgan saying the demand environment has just not improved for electronics. Same story I've been hearing from so many other manufacturers. Morgan, I'll send it back over to you. Yeah, even just in the last few minutes. Steve, thank you. We got more. PVH earnings are out. Courtney Reagan has those. Hi, Court. Hi, Morgan. Yes, I remember PVH, the parent company of brands like Tommy Hilfiger and Calvin Klein. They are reporting stronger than expected earnings $1.98 adjusted. The street was looking for $1.76. Revenue is also slightly stronger than expected, coming in at $2.207 billion. The street was looking for $2.19 billion. The company is also increasing its

earnings outlook for the year, reaffirming its sales outlook. They talk about the direct-to-consumer revenue increasing 11 percent, wholesale business decreasing 3 percent, and then total digital revenues also seeing a bit of a decrease. Gross margin was stronger than last year at 57.6 percent. Shares of PVH are higher here in the after hours, though it looks like they've come back down from at least that initial pop. Back over to you. All right. Courtney Reagan, thank you. Now Google making major AI announcements at its Google Cloud Next event today, including a set of AI tools. We've got AI tools in the Workplace suite, enhancing apps like Gmail, Google Docs, Google Meet for enterprise customers at $30 a month,

and AI models from Meta and Anthropic now available on GCP as well. Fresh off the stage from that event is Google Cloud CEO Thomas Kurian. Joins us now in an exclusive interview. Thomas, welcome. So tell us, tell investors, what's the strategic purpose, particularly with workplace, that gets served here with AI that's going to grow the customer base and grow revenue? We made three important announcements this morning, John. Good to be with you. First, enhancements to our AI infrastructure with a number of new products,

including a deeper partnership with NVIDIA to allow people who want to build and train their own models to get the best infrastructure in the world. Second, a broad set of announcements and general availability of our Vertex Enterprise AI platform to help people use models. We enhanced a number of Google's models, as well as we announced models from third parties, including meta, anthropic, and a variety of new open source models. Third, we integrated our AI products into Google Workspace and into Google Cloud Platform with Duet AI, which is designed to help users be able to speak in a conversational system and have this AI system empower them in whether it's creating documents, creating slides, taking notes in meetings or helping them do cybersecurity analysis, data analysis, all of that. What's the impact that you're seeing kind of in the beta here on engagement and on productivity, getting work done for your customers with the addition of these AI tools?

We have over a million users testing workspace in preview. We have over 50,000 Vertex customers that have increased the number of projects 15 times since March. Engagement, people are finding that when they write an email, more than 50% of the content of the email is generated by the AI model. And they typically are doing a lot more communication and collaboration because they have the productivity of the model. We have made announcements with 36 large customers just at this event, as well as with a number of partners, including, for example, Workday, which is testing the use of our AI models for, for example, creating resumes, etc. So Sundar Pichai putting out a note on this, it certainly seems like there's a feeling out there that, I mean, the stock's up more than 30 percent since Microsoft made its announcement in February.

Google stock, Alphabet, that is. You got some momentum here. Where does your custom chip strategy when it comes to AI fit into this? Because you had an announcement with NVIDIA, but you also have your own silicon work that you've been doing. AI is maturing, and there's a range of different kinds of models now. People need a certain set of accelerators for training. They need infrastructure for inferencing.

They need technology to handle things like embeddings, where they're sourcing data into search from their enterprise databases. Each of these require different kinds of acceleration. And we offer 13 different kinds of accelerators, the widest in the world. Today, as a result of it, 70% of AI unicorns run on Google Cloud and 50% of every AI startup that was ever funded run on Google Cloud. So those are big numbers showing you the adoption that our cloud is getting from people who know AI best. Thomas, it's Morgan. It's great to have you on the show. I want to go back to the $30 per user

pricing. What went into that number, especially since it matches Microsoft with its competing services? And when they came out with that price, at least Wall Street raised its eyebrows and said it was aggressive. We did a lot of studies on measurement of productivity that people find in different types of workforces, in the professional organizations, for example, in finance, legal departments, in first-line workers. First-line workers, think of them as nurses, pilots, people who are working in retail stores. In the use of it, after a lot of study and looking at the productivity benefits our customers get, as well as talking to a number of customers. We came to this price, and it is for our enterprise customers. We will be announcing pricing for consumers,

as well as small businesses very soon. I'm going to ask you for some detail here on something that you guys told us about earlier this year, and that's Wendy's. You have this drive-through AI announcement, a pilot in Ohio that's been going on, and I understand you're expanding it. So what are the benefits? Is it working as you expected? We're learning a lot from all the customers we're working with. What we're doing with Wendy's is providing them the ability to answer and take orders in the quick serve restaurant so when you drive up to the drive-through you can talk to our an ai model built on large language models that helps the customer place their order there are over a billion menu combinations that we worked with

wendy's on understanding we're evaluating a lot of factors like background noise, people changing orders, people using short form dialect, for example, to order specific items like specific terms they use when they order at Wendy's. We're working very closely with them. We're very proud of the work that we're doing with them. And we will, as soon as they get comfortable on the quality jointly with us, you're going to see us expanded to many more places. Okay. How quick is the ramp on revenue for the stuff that you announced today, including the Duet AI? When should we expect to see that really showing up in Google Cloud's line in the

earnings? We don't provide forward guidance on revenue. What we are enthusiastic about is the incredible interest we're seeing from customers, actual projects that are being done, and the number of customers that are going live with us. And as they deploy projects and go live and RAM, we will see growth.

MIKE HENRY JR.: All right. We'll be looking for it. Thomas Kurian, CEO of Google Cloud. Thank you. Thank you, John. After the break, prepping for the storm, we're going to talk to the CEO of Generac about demand for generators as a major hurricane approaches the Gulf Coast of Florida. And check out Tesla as we head to break. It has been lagging all month long, but getting a major boost today with risk on and closing at the top of the S&P 500. We will be right back. Welcome back to Overtime. Let's get to Seema Modi for our CNBC News Update. Seema? John, the U.S. announcing a new $250 million military aid package for Ukraine this afternoon. It includes mine-clearing equipment, air defense missiles, and ammunition, according to the State Department.

Walmart is reportedly asking 16,000 of its pharmacists to take a pay cut and reduce their hours. A person familiar with the matter told Reuters the request is happening nationwide in a bid to reduce costs. According to Walmart, it pays its pharmacists more than $140,000 a year on average. And counties throughout Florida, as well as Georgia and South Carolina, have declared a state of emergency as Hurricane Adalia moves towards the Gulf Coast. It is now a Category 1 storm, but expected to strengthen and could come ashore as a Category 3 tomorrow morning. The National Hurricane Center posting catastrophic storm surge warnings along Florida's coast throughout the Big Bend region, with a surge up to 15 feet possible. Stay safe, everyone.

Morgan, back to you. Exactly. Seema Modi, thank you. Let's stick with the hurricane, since climate-related risks are weighing on investors at the moment. Not only are we waiting for Hurricane Adalia, the National Oceanic and Atmospheric Administration, NOAA, says the odds of an El Nino event this fall are high as extreme weather events become more common. Many sectors are likely to be impacted there as well. Among them, airlines, scheduled flights in Tampa. Jeffries says Southwest is the most exposed, making up 27 percent of total flights today until August 31st. Citi pointing out some engineering and construction players. If Adalia hits the Gulf Coast, Qantas services, AECOM, Mastic, Fluor could all outperform in

the short term because of the significant restoration and recovery work that comes after a hurricane. Names like Generac and Herc could also see a boost as demand grows for generators and power equipment. And that is where our next guest joins us. Generac CEO Aaron Jagdfeld. Aaron, it's great to have you on. And as we tend to see coming into hurricanes, for better or worse, Generac stock has rallied this week, up 5.5% in the first two trading days. to see coming into hurricanes for better or worse. Generac stock has rallied this week up five and a half percent in the first two trading days. Just want to get your thoughts and your context

around what you see, whether it is this hurricane or record high temperatures through the summer or other major weather related and climate related events, what that has meant for demand for your products. Yeah, thanks for having me on, Morgan. Well, I mean, obviously, it's not just one thing, right? You pointed it out. It's not just the hurricane threat. It's not just the threat of a heat wave, a particular heat wave brings. There were storms this past weekend in Michigan that knocked out power to 750,000 households. It seems to be a recurring theme here. And we've seen this, we track outages. This is our business, right?

It's been our business for over 60 years. And so we've seen a preponderance of outage events. We've seen an increase in not only the frequency of those events, but also the duration, they're lasting longer. And so, people are looking at this and look, people are smart. They see the challenges that grid operators like ERCOT are having in Texas.

PG&E just issued, you know, a power safety shutoff warning for tomorrow for seven counties in northern California. These are things that are happening more frequently that, you know, even a decade ago, you couldn't have made it up. You wouldn't have thought somebody would send you a voluntary conservation notice by email to say, you know, turn your air conditioning up or the lights are going to go out. And people are investing in products like ours to protect their homes, protect their businesses, protect their families. Yeah. I mean, on the one hand, to your point, power outages drive demand. And certainly in the commercial industrial business, you've been seeing stronger than expected growth. And that's a business that you've been growing out for a number of years now. But then on the residential side, where you control something like three quarters of the U.S. market for standby generators, an inventory buildup and higher interest rates,

and it would seem a consumer that we know from retail earnings, just even in recent days, has been spending more on services than goods. How do you balance that out? What does that mean for Generac? Yeah, certainly, you know, there's pressure on big ticket discretionary items that, you know, are tied to kind of residential investment, whether it be, you know, remodels or, you know, some type of project around the home. You've seen this, you've heard this from a lot of our retail customers as well, like Home Depot and Lowe's have seen those bigger ticket purchases come up against some resistance. So there's some headwinds there. But again, when there are outages, when the power actually goes out, it's interesting to see how homeowners and business owners will prioritize having that backup power in lieu of something else they might

have otherwise invested in around the house or in their business. So it's kind of a reprioritization that takes place when the outages do happen. In the absence of any outages, you're right. I mean, I think those categories like ours would probably struggle. But we are seeing these outages do happen. In the absence of any outages, you're right. I mean, I think those categories like ours would probably struggle. But we are seeing these outages happen with a greater frequency and people are preparing for them. And look, we're talking about it endlessly on all these programs, how the rush to decarbonize our sources and the rush to electrify everything on the demand side is creating these kind of massive imbalances that grid operators are struggling to deal with. So what does that mean at Generac, where I know you are working with utilities, and you're also working with homeowners to try and navigate some of those issues?

We are. I mean, obviously, with a homeowner, we want to get them a product so that they're protected. With a utility, what we want to do is get that product actually enrolled in a program where it can be virtually called upon and aggregated together with other products to supply power to the grid or help take power off the grid, off the demand side during periods of high stress when there are high temperatures, low temperatures, any kind of event that might be happening where the grid is going to be under stress. So we're working on both sides of the equation. And again, I think the utilities, they have a lot to consider when they're putting together programs like that. I mean,

they're all regulated bodies, and so they have to get those through their regulators. For consumers, it's all about where do they get the funding from and how do we get that project going so that we can get ready for the next, you know, whether the next hurricane season or the next winter storm season coming. Aaron Jagdfeld, great to have you on, CEO of Generac. Thanks, Morgan. Still to come, Qualcomm's former CEO, Paul Jacobs, has a new gig and Wall Street's taking notice. We will talk to Jacobs about his just-named role as head of Apple partner Global Star. Up next, I just took a drink of water. Mike Santoli returns with a look at one of the sectors that's been outperforming all month long.

He's going to break down the charts. Can you guess which one? We'll be right back. Welcome back to Overtime. Michael Santoli is back with a look at the S&P 500 and if August's downtrend has come to an end. Mike. Yeah, Morgan. The market's making a bid for that conclusion, at least right now. Among other things, this rally today enabled the S&P

to recapture more than half of the losses from the peak to the trough that we saw so far in August, basically made a two week high. Also, you know, at least for now, broke that little mini downtrend that we had in place from the high from very late July. So, so far, so good. Obviously, going back above the 50-day moving average, also constructive, but not really decisive. As you can see right here, sometimes, you know, it takes a couple of tries before it will sustainably recover, even if that's the way we're headed, tilted higher. Did want to also point out, though, an area of the market that has been a standout even during this choppy period. Of course, that's the way we're headed, tilted higher. I did want to also point out, though, an area of the market that has been a standout even

during this choppy period. Of course, that's energy. This is energy relative to WTI crude oil going all the way back. This is a three-year chart. So it shows you they were tracking really well up through the spike we got after the invasion of Ukraine, now decoupled to some degree. And I think part of that is simply the energy companies still have pretty healthy cash flows with crude at these levels. And over the years, it's kind of waxed and

waned in terms of which one did lead. But right now, getting a lot of credit, people thinking that maybe it's an area, a beneficiary of some of the rotation. Cyclical sectors in general have done well, although, you know, still have a little bit of proving to do here because energy as a group, this is equal weighted energy, has not quite made a new high for the cycle. Yeah. Three words, free cash flow. That's been the name of the game, especially for some of these big oil majors and energy majors, because you're seeing even with energy prices, oil prices elevated right now, you're seeing the rig count come down. It's all about that cash preservation. For sure. So production levels are up, but it's not as if there's a ton of binge of spending on CapEx.

Almost every big company very focused on free cash. And part of the reason is nobody's making big bets that the commodity itself is going to shoot to the moon. So range bound commodity prices enforcing some kind of discipline. It's working for now anyway and enabling energy stocks to maintain or hold on to the big gains from last year. Shoot to the moon. That's a that's a good space reference. There you go. As we try next, even unconsciously, I try. All right. Mike Santoli. Yeah. A lot happening in space. Former Qualcomm CEO and chairman Paul Jacobs just named the new chief at satellite communications company Global Star,

which supports emergency calls on Apple's iPhone 14. He discusses his outlook for the company, the future of the satellite industry, when Overtime returns. Welcome back. Disclaimer here. We don't often talk about companies trading near a dollar a share because they can be especially volatile. And if our company trades below a dollar a share for an extended period, its listing status can be at risk. An exception here for a number of reasons. Shares of satellite communications company GlobalStar surging more than 20 percent today after naming Paul Jacobs as its new CEO. Its market cap is above $2 billion, has some major customers.

Paul Jacobs himself is the founder of XCOM, former CEO and executive chairman of Qualcomm, and he joins us here on set. Paul, Qualcomm had a role in the formation of the original iteration of Global Star. Your dad, Erwin, a Qualcomm founder, placed the first call on the system 25 years ago. Why are you becoming CEO of this company? Well, it's super exciting because it's not just about the satellite component of it, but they also have a terrestrial allocation of spectrum that's associated with the satellite as well. And at XCOM, we built technology that makes spectrum actually work harder. So this is a group of people that have

worked with for over 30 years at Qualcomm. We were building all the different generations of wireless technology. We came up with a new idea that gives you 5 to 10x improvement in what you can get through a chunk of spectrum. So now we see, okay, GlobalStar's got not just the satellite part, which is super interesting, but we can take this chunk of spectrum and we can use it for private networks. So we have customers that are interested in things like warehouse automation or training or various applications where there's something that an enterprise wants to do with that and we can provide a mission-critical capability

for them, meaning that they can't have their communications go down. So there's a spectrum out there that the government's made available for these private networks, but this spectrum doesn't get taken away, whereas the other can. So this is particularly very important because capital is expensive right now and launching satellites is very expensive right now if using XCOM technology Global Star is able to get more out of the infrastructure it already has that's potentially big so how soon might that be able to happen well we're actually in with customers right now so this is this the technology I was talking about from XCOM is for the

terrestrial side. Because people have talked about Global Star in terms of what's the satellite business worth, what's the terrestrial spectrum worth, and it's kind of gone back and forth over time, right? Now people have been very focused on the satellite side because of the relationships that they have and the wholesale partner that they're working with.

But now what we want to say is, hey, there's value in that terrestrial network. There's enterprise opportunities. People are interested and we have technology that can actually make that work harder. Technology is important here, but so is capital. And GlobalStar has struggled in the past to really make money off of its spectrum position. Getting satellites and launching them is expensive. What changes, if anything, with the capital position and the debt under your leadership? So what's really interesting is they, you know, this is a tough business. You launch satellites, you got to make sure that you're going to get the

return off of them. What they were able to do with the wholesale partner is actually get that Constellation paid for. So those old satellites were up there. In fact, they were using some of the old equipment from the early Qualcomm days. And now they've been able to upgrade and we're looking forward to continuing to provide better and better services as time goes on. You keep referring to the wholesale partner, Apple, which is a major, it was a major moment, a major milestone for GlobalStar to be working with Apple because this has been the market everybody's talked about, but hadn't really been fully realized or tapped into, this direct satellite to mobile connection. How big does, I guess, how far does that partnership with that wholesale partner go? And even beyond that, how big is this market potentially? Look, the market

can be big because it's not just to devices, it's also to internet of things. And so, you know, everybody talks about how many devices there can be in the internet of things. And that's an area that we've been very focused on as a company and we will be even more focused on going forward. I think, you know, the opportunity with GlobalStars Partners, we're here because we've done good partnerships in the past and we think there's opportunity to do good partnerships in the future and this is a group of people that have built great technology before and we want to keep doing that speaking of of partners uh elon musk would like to be able to do some of what global star is doing uh over at spacex and i know spacex has been

a partner one sense helping you get satellites in the air But they're also trying to get into your spectrum position any possibilities of working better with him and with space SpaceX Yeah, I mean, you know what Elon's done is pretty amazing in space. And so I think certainly from launch capacity standpoint, that's always interesting and but I think the fact that global star has its spectrum the license spectrum is important and it's global whereas if you're trying to cobble together spectrum that's not global when you have to go country by country especially for these things like IOT you know it's very hard if you have to do it every single country if you can

come in you say you have spectrum everywhere you have connectivity everywhere that's just a huge advantage so I think that's a big thing that Global Star has going for it. What do you make of the competitive landscape overall? I mean, you have Dish re-merging with Echo Star, which kind of speaks to this landscape as well. You do have Starlink at SpaceX, including their partnership with T-Mobile. You have AST Space Mobile that's working with AT&T right now. Qualcomm is actually working with Iridium. Is there room for everyone? And how does GlobalStar fit into that longer term?

Well, I mean, it's exciting already because GlobalStar has been out there for a while. They've shown that they know how to run the system and make it work well. And these things are not easy. Having been through a number of these things, I was also involved with OneWeb as well. So I think, you know, there's a lot of excitement right now, as in any industry, and we'll see who is actually able to make it through. But GlobalStar is already there, and they already have a great partnership on this, and they're already delivering services that are saving people's lives.

So this is, you know, I think we're in a very strong position. Are you going to need more capital, and do you have a path to get it if so? Yeah, I mean, the way that the relationship works is that the partner is actually there to pick up a lot of the expense in terms of launching. And, of course, we understand satellite networks are expensive. But if you want to deliver that service, which is clearly a valuable service, then people are going to put up the money to make it happen. I know 85 percent of capacity is committed to that partner and the partner's got a few dollars on the side from what I hear, what gets reported. Paul Jacobs, thank you. CEO of Globalstar. Well, the earnings calls from Vox and HP are just minutes away. We're going to run through all the earnings movers that need to be on your radar.

Plus, we will break down the court ruling that sent Bitcoin and crypto assets sharply higher today when Overtime comes right back. Welcome back to Overtime. Let's get you caught up on today's big after hours earnings movers. It's right across the board. HP Inc. turning in a mixed quarter, matching on the bottom line, missing on revenues. Meantime, HP Enterprise beating on both lines, citing strength in its AI segment. Box topping EPS estimates, matching on revenue. But third quarter revenue guidance was light. Ambarella beating on the top

and bottom lines as well. But Q3 revenue guidance was soft, soft enough to send that stock down almost 14 percent at the moment after hours. Morgan, who said the last week of August is slow? Look at that. A lot of moves on the screen. Here's another one. Bitcoin and crypto related stocks booming today on new hopes for Bitcoin ETFs. I got those details on the other side of this break. Welcome back to Overtime. Bitcoin and Bitcoin-related stocks rallying after a big court win by crypto investment firm Grayscale. Kate Rooney has the details. Hi, Kate. Hey there, Morgan. So a court of appeals today sided with Grayscale in its lawsuit against the SEC. Grayscale had applied multiple times to convert its $20 billion Grayscale Bitcoin ETF, or excuse me, Bitcoin Trust, into an ETF. The agency had denied all those applications, but the judge today saying that the SEC's initial decision was what they called capricious and arbitrary,

and that the commission failed to adequately explain why it approved the listing of two Bitcoin futures products, but not Grayscale's proposed Bitcoin ETF. It is seen as the final integration for crypto into mainstream finance. If these are approved, it would get some of the world's largest asset managers on board as well. You've got BlackRock and Fidelity among those in line for Bitcoin ETF. And it's seen as it would really broaden the crypto investor base by unlocking exposure to Bitcoin in brokerage accounts. Spot ETF is also considered more efficient than a futures ETF in terms of tracking underlying prices. Back to you guys. Yeah. And of course, when you see Coinbase surging double digits today, it's because it's listed as the custodian partner

for multiple spot Bitcoin ETF applications. Kate, when I spoke to Mike Novogratz out in the Hamptons about a week and a half ago, one of the things that he said is that an ETF or the approval of an ETF, the realization of one is the single biggest thing that will help adoption. Is that sort of the sense here from the community overall?

That is definitely consensus that this is really what the market has been waiting for in terms of driving retail adoption. It makes it just easier to allocate to Bitcoin. If you want to say as a portfolio manager, we're just going to put one percent into Bitcoin. It is much easier to do in a brokerage account, even though it's available on Coinbase, for example. You can open up a Coinbase account, but this also just makes it a lot easier. It's also just a way to get it more into the mainstream. So it's more symbolic in some ways than anything. You see this often in crypto that you see these sort of by the rumor events where the hype kind of gets ahead of some of this news. You may be seeing that right now. It's often the fact that when one of these court cases happens or you get these rulings, prices surge. And when

the actual event happens, it's not as exciting when it comes to prices. So it may be a bit of an overreaction here. We'll see. All right. Kate Rooney, thank you. I'm not sure the issue with Bitcoin is that it's been too hard to buy. Like, I know people talking about Bitcoin all the time. You can buy it on this app, SoFi, that app, Coinbase, et cetera. Yeah, I think there's sort of the sense that it opens the door to more widespread adoption. You have spot ETFs that are tied to actual Bitcoin

instead of derivatives. That's gonna do it for us here at Overtime. Fast Money starts now.