Closing Bell - Closing Bell: Overtime: Impact From UAW Strikes Begins; Databricks CEO On Latest Fundraising; David Sacks Talks His Latest Company 9/15/23

Episode Date: September 15, 2023

Major averages ended Friday lower as chip stocks slid on demand worries. Wilmington Trust’s Meghan Shue and Unlimited Funds’ Bob Elliott break down the market action. Our Phil LeBeau reports that Ford plans to lay off 600 workers as UAW strikes ramp up while GM warns of negative ripple effects. Databricks CEO Ali Ghodsi on his company’s latest fundraising and a potential IPO timeline. Needham’s Charles Shi on Arm’s first two days of trading and a Reuters report warning Taiwan Semi is worried about demand. Craft Ventures Co-Founder David Sacks talks his new company SaaSGrid and the state of tech.

Well, everything red to end the week. That's the scorecard on Wall Street. But winners stay late. Welcome to Closing Bell Overtime. I am John Ford. Morgan Brennan is off today. We've got a big show coming your way. We're going to talk with the CEO of Databricks, the mega unicorn

software company that just raised an additional half a billion dollars at a $43 billion valuation. We'll find out if an IPO might be in the cards. Plus, we'll talk to venture capitalist and all-in podcast host David Sachs about his read on the IPO market, investing in AI, and more. Also ahead, the United Auto Workers are slated to rally in Detroit as targeted strikes against the big three automakers get underway.

We will bring you there for the latest. Meanwhile, stocks pulling back hard to end the week, with the NASDAQ feeling the most pain, driven lower by chips and mega caps like Meta, Amazon and Microsoft. Let's bring in our panel. Joining us now is Wilmington Trust head of investment strategy, Megan Hsu and Unlimited Funds CEO Bob Elliott. Happy Friday, guys. Bob, you're long energy, short tech. So this week worked out according to plan for you. You also say to stay invested. So if you're an investor out there, retail investor, how do you manage to both take advantage of opportunities that you see and also stay invested? Well, I think the main question is, do you have the sort of diversification of your portfolio that's necessary to actually weather

these sort of dynamics? If you look at today, what do we have? We got stocks down, bonds down, gold up, and oil up. That's about the worst possible scenario for a traditional 60-40 investor. So those investors are going to have to look for other opportunities. Is it going into energy stocks? Is it buying the commodities directly, adding a little gold to the portfolio? You do that, and you're in a lot better situation. Which one? All of them? All of them, right? Build that diversification, find those other opportunities. It'll put you in a lot better position to navigate what is likely to be a pretty challenging time for the 60-40 portfolio coming up. Megan, you still like fixed income, relatively speaking, versus equities. Did this week play out as expected for you? And

how does inflation look as a factor for you? Yeah, I'll start with your second question first, I think inflation continues to be very important. And as we're looking at the outlook going forward, this week we got data that inflation might, the headline level be showing some signs of stickiness. And it's really that final sort of 10 yards, if you will, that we need to see if we can make. Core CPI, though, is approaching the Fed's target. That is very encouraging. And I think I'm actually much less pessimistic on the 60-40 portfolio because while I think we're probably in a bit of a churn period here. For equities I mean you've got the S. and P.

five hundred at nineteen times basically. And projecting about twelve percent earnings growth next year we think that's a little aggressive. Especially given our relatively optimistic outlook. For the economy but still seeing growth being much

more muted. Than it has been over the past couple of years. But fixed income, this is probably a really good entry point. And we've been talking a lot. We've been overweight to fixed income, talking about possibly, you know, leaning further into that, because as we see rates pick up and the outlook going forward, real rates have probably gone a little bit too far on too much optimism about the economy. We think we're probably more a 2% trend growth rather than the Atlanta Fed telegraphing 5.5% GDP growth is way too aggressive. Yeah. Okay. Well, I guess that's the flip side of bonds being down. Yields are up

if you're planning to hold them for a while. Bob, what about IPOs? We got ARM yesterday, huge pop, down about 4.5% today, getting Instacart pretty soon, probably next week, etc. Is that an important factor in this market? Can you still stay short tech if these IPOs continue to work out? Well, I think the IPOs just give you a sense as to how much desired issuance there is in the market. How many companies have, you know, the IPO market was frozen. They're looking to come into the market. They need to get that issuance to get, you know, out of the private market. All of that possible supply sits there at a time when, you know, the valuations are elevated, you know, relative to, you know, you're looking at, you know, 2x times on tech relative to energy in, the valuations are elevated, you know, relative to you're looking at, you know,

two X times on tech relative to energy in terms of valuation. So you got supply issues, you got valuation issues, and you got a long end that keeps creeping up, which, you know, we might have forgotten about the fact that tech stocks are sensitive to the bond moves. But, you know, every once in a while, that's going to come back, come back for those tech valuations. Megan, is the pop dangerous? If you look at how IPOs have performed, aside from Mobileye, which Intel spun out a bit ago, they don't seem to hold a lot of those pops for very long. So if you're thinking about, you know, getting into Instacart, other stuff that might be coming down the pike now, they just, you know, raised their target price. Now that ARM did well, would you do it? Well, I'd be not as active in the IPO market as some are today.

I think it is a good barometer of some improving sentiment. And we've really been whipsawed a little bit by investor sentiment, especially on the retail side. It was pretty euphoric early in the summer and it's really tanked off. And we started to see maybe some better longer term indicators because obviously too much optimism in the market's not a good thing. But I think, you know, we've had some quite a bit of quiet period for IPOs. So to see them coming back, I think we've had quite a bit of a quiet period for IPOs. So to see them coming back, I think, is a good thing. And to see a little bit of a pop, I think, is a signal that maybe investors are looking to get back into the market. I mean, you have more than $5.6 billion in money market assets today.

That is basically a lot of dry powder for the long-term investor who's looking out at return prospects 12 months ahead. Also see if we can get these pops without a tiny, tiny float at the same time. Megan, Bob, thanks you both. Have a good weekend. Thank you. We turn now to the labor story getting a lot of headlines today. The United Auto Workers beginning their targeted strikes of Ford, GM, and Stellantis all at the same time. Nearly 13,000 workers walking off the job, and the United Auto Workers is holding a rally this hour in Detroit. Phil LeBeau is there with the latest. Phil? John, we'll talk about that rally in just a little bit, but I first want to give people an update in terms of the strike, exactly where they are taking place, how many

employees are involved for Ford, GM, and Stellantis. Approximately 12,700, and the three plants in question are all final assembly plants. There is the Wayne, Michigan assembly plant, which is just west of here in Detroit. That's where they build the Ford Bronco. Wentzville, Missouri is where General Motors builds its midsize pickups and full-size vans. And then Stellantis has a Jeep plant that is on strike down in Toledo, Ohio. The models that are built at those facilities, some cases, there's not a lot of supply. So they're not going to be restocking at the dealership as long as the strike is going on. The Colorado and the Bronco, 35 and 37 days supply, that's really low relative to where you would like it to be in a normal time. You'd rather have it up around 65 days.

There you see Jeep Wrangler at 82 days. As you take a look at GM, Ford, and Stellantis shares, keep in mind that these talks, they're not really going today. They will resume tomorrow. There's still communication between the automakers and the United Auto Workers. Today, there is a charity preview at the Detroit Auto Show, which is back at the convention center back here. But in front of the convention center, see all these folks in red? Those are United Auto Workers. They are holding a rally.

It will begin about an hour from now. They're going to do a short march here in the city. And then after that, they will hear from their president, Sean Fain. So that's what's going on here in Detroit on day one of the targeted strikes. John, back to you. Bill, who's the bellwether automaker here? Is it Ford, the one that's most likely to get a deal done most quickly? And how closely should investors listen to the rhetoric here to see if the salary that they're asking for, for example, is just an opening offer or if they're really going to

push hard for that and this strike might last longer than some are hoping? Well, look, they're pushing hard for what they want, which is above 30 percent. Exactly how much remains to be seen. But the bottom line is this. You can't say that there is one specific automaker that is in a better position than another automaker. We heard reports that it was Ford earlier this week. And then you saw what came out from Ford yesterday, where they basically blasted the UAW saying, look, we don't think that the negotiations have been taking place in a fair fashion.

There was no genuine offer to our four offers. That's what Ford was saying. So, John, I've covered a number of these. And every time you say, well, there's one automaker that's probably in a better position than another, it's not always true. And right now, I would say all three automakers are trying to figure out exactly what it's going to take to get the UAW to lock into a four and a half year contract. OK, Philip. Oh, I guess that means investors should buckle up if they can find a seatbelt that's already been made.

Philip, oh, thank you. Let's turn to energy. Crude oil hitting its highest levels of the year, driving closer to one hundred dollars a barrel. Let's break down what that could mean for energy stocks with Senior Markets Commentator Michael Santoli. Mike? Yeah, John, it's obviously meant positive things for the energy sector for a while right now. It's been on a run. It's been a leadership sector. It's gotten a lot of adherence, I think, to this new upward trend. I think it's interesting if you look back on a three-year basis, it's right around absolute levels in terms of the XLE Energy Sector Fund, where it did peak a few other times. So remember, back in 2022, we did have oil prices above 100. So we're not quite at those highs right now. Could be, you know, building toward at least a short-term test of how much momentum there really is behind this. Now, part of this story,

a big part of this story as to why crude's doing what it's doing is supply demand dynamics seem like they're favorable for the bulls, meaning supplies are lower, inventories of oil and other products are down, especially with the Strategic Petroleum Reserve having been largely depleted last year. And, you know, demand has been very steady. So this is the official weekly day's worth of supply of U.S. oil inventories. And you see it's down a lot from where we were recently, but also just not that far off of normal levels if you go back on the long term. Now, this excludes the effect of the SPR, because essentially prior to last year when all that oil was released,

you had much higher days of supply. In fact, the average days of supply, including the FCP SPR long term is 65 days. And now we're down to 45 or so. So there's a 20 day shortfall relative to the average. I guess the question is, do we consider that relevant given the fact that for most of history, it isn't like the day to day oil supply has been, you know, really fed by the SPR. It's just been this background inventory. I would also point out North American production is just about back to peak levels as well. So we'll see if, in fact, things come a little more into balance. Everyone's focused, of course, on on Saudi Arabia withholding more from the from the market.

But see if that changes, John. Now, when we had Warren Pies on, and he was one of the early ones saying we could get toward $100 here on oil, I asked him, okay, when we get really close to that, if the growth conditions and the economy haven't changed, does that mean you have to go short? And he was like, no, if we get really close, we'll go neutral. What's he saying? What are others saying who expected this move? As it happens, I just did notice Warren Pies' firm went neutral. That's because their trading model on crude oil simply told them that to do so.

So neutral, not bearish. I think he's saying he still thinks 100 is doable, but that the model is more or less saying enough for now and we'll reassess as we go along. Look, the energy intensity of GDP has been going down forever, for decades. And, you know, the 380 a gallon national average price for gasoline right now, we were at those levels for a little while in late 2014 and before that in like 08. And the point is we had lower wages and a smaller economy at that point. So we can absorb it to a degree. It's just a matter of whether it kind of comes on top of other challenges to the to the growth of the economy that we're going to have

to sort out. All right. Mike Santoli, see you again real soon. And when we come back, will Instacart deliver for investors? Maybe be as strong as Arm. We'll break down expectations for the next hot IPO following this week's blowout. Plus, we'll talk to the CEO of another company that could have a public listing in its future. Don't know when, but Databricks just raised a half a billion dollars at a $43 billion valuation. Overtime is back in two. Welcome back. Arms strong IPO pop might be boosting interest in the next big listing, Instacart, which is expected to hit the market next week. Maybe Instacart doesn't want to leave money on the table. Leslie Ficker has that developing story

for us. Leslie. I feel like there should be a pun about leaving money on the table as a grocery delivery company, but we have a couple of days to figure that out, John. But to your point, Leslie? I feel like there should be a pun about leaving money on the table as a grocery delivery company, but we have a couple days to figure that out, John. But to your point, Arm's successful debut yesterday, that was important, but I had heard that the Instacart Roadshow was actually going well before then. So it wasn't too much of a surprise that that grocery delivery company opted to hike its price range by $2 a share earlier this morning. There's not that much stock to sell, though, in this deal. If you extract the $400 million that's already been claimed by its cornerstone investors, there's just $260 million worth of stock to market, or

less than 3% of the float. So on a fully diluted basis, Instacart is now looking at $9.9 billion for its valuation at the high end. And that's a far cry, of course, from the $39 billion Instacart garnered in a private fundraising round less than two years ago. So this will invariably be a down round when they go public. And down rounds, this is a lower valuation than a prior funding round. That's top of mind for many executives at other VC-backed IPO cycle and for the ability of the window to truly burst open when this kind of down round guinea pig, at least this cycle, really gets off to the races, John. All right, Leslie, thank you. Well, somebody who's not dealing with a down round this week, Databricks, one of the companies we're looking at for a potential IPO down the line, that company Deepin Cloud

and AI, recently announcing a half a billion dollars in new funding at a $43 billion valuation, capitalizing on the surge of momentum in AI. A notable new investor in this round, NVIDIA. CEO Ali Ghodsi joins us now in an exclusive interview. Ali, you were sort of, you know, swerving when others were going in a certain direction of saying, OK, well, let's stop spending. Let's focus just on profitability. You said, no, we're still growing. We're going to lean into growth in 2023. And investors responded how? Yeah, I mean, look, you can't deny the thing that's going on called AI. Everybody's interested in it. Every CEO I talk to, by the way, I didn't used to talk to CEOs a year or two ago, but now the CEOs want to talk to me and they want to know, what should I do? What should my

AI strategy be? What do you think about generative AI? You know, we want to double down on it. Please help me figure out that strategy. So there's a lot of interest in it. So I just think it would be foolish if we were forced to not spend and invest when this is going on and I think that's what the investors are saying in this round too so that's why we got an up round here aside from the money which is nice what do you get out of Nvidia being an investor here a super close partnership you know so this started in talks with Jensen Huang at the media and you know we are the complementary market.

We make software that lets you build these large language models, these generative AI models on top of their NVIDIA chips. So doing that really cost effectively and really fast, you know, that requires the software to be working really well with the hardware. So you want these two to be like a yin and yang. So it's how can we really partner together all the way from the hardware that they're building all the way to the software so that you can press the price of these things down? Because as you know, there's a huge demand for these chips and there's a shortage of these and everyone wants them. So anything we can do to make it more optimized and more efficient could unlock more supply for our customers. Speaking of huge demand and limited supply,

AI-related IPOs people are very interested in. How long are we going to have to wait for Databricks? We haven't shared a date. We will go public when the time is right. I'm a paranoid guy, so we're watching the markets, looking at ARM. Instacart is coming up. You guys have been talking about these.

But we also stare at the floats, and we're going to see how the markets react. And once things are right, we will go public. But, you know, right now it does look like, at least, you know, for where we are sitting, there's so much demand for data and AI that it does look like the markets are turning a corner. So we're cautiously optimistic. Should we expect to hear more about you doing some different things with spending? Because a lot of times companies like to get their balance sheets look in a certain kind of way before they show up at the IPO party. Is that going to be an early signal for you? No, as a founder CEO, I have a long term perspective, like a 10-year perspective. And the way I think about it is that in every industry, the leaders, every company that's going to be the leader is going to be a data and AI company

leveraging this kind of AI technology. So massive market, we got to invest in that now. You know, if that's not what the market's like, that's okay. This is going to be the future. So we're going to continue investing. So, you know, how does that change things? Definitely looking at ways in which we can train more generative AI models for our customers that are customized for their use cases, but also looking at M&A, other companies that, you know, if we inorganically grew through them, it would make us even more successful and we could grab more market share quicker. So, you know, everything is on the table for us and we're interested in doing all of those things. A lot of investors are going to look at Snowflake to try to understand the potential of Databricks.

And there's been a lot of attention on consumption and consumption models. What are you seeing in consumption rates right now throughout 2023? It seems like there's been a bit of a pickup toward the end of the year as companies sort of experiment with these models. There's also a lot of new software,

AI software coming online from the likes of Salesforce, ServiceNow, we expect. Is that increasing demand for what you're offering? Yeah, like, look, last year, GDP dropped in Q1, in Q2, and then, you know, interest rates went up. And definitely we saw people be concerned about TCO reduction.

And, you know, they wanted to optimize their spend. We saw some of that. But also the approach we took, the lake house, which helps them build AI, could actually reduce their costs. So we didn't really quite see the same consumption slowdown that some of our peers saw. And then this year, because of this AI, after ChatGPT came out November last year, there's been an absolute awareness revolution around AI. So there's been huge demand around AI. So yeah, we've had strong last few quarters and consumption patterns look great. I think consumption is interesting because we're the first to see if things are going down or if things are going up. And of course, we're biased because we're in

AI and AI is hot right now, but there's huge demand for buying more data and AI for every organization on the planet right now. So it's looking good for us. I guess that's how you got that valuation and that half a billion dollars in the latest round. Ali Ghotzi, CEO, co-founder of Databricks. Thanks for being with us on Overtime. We've got a news alert on Disney now. Julia Borsten has it. Julia.

John, Disney's chief information officer, Diane Jorgens, is leaving the company after three years in the role. This is the second departure of executives in Disney's C-suite in the past several months. Of course, we did have the departure of Christine McCarthy as CFO over the summer. That was because of a leave, because of a medical absence. So that perhaps a different situation there. But this departure comes as Diane Juergens had joined under CEO Bob Chapek back in 2020. So perhaps this is more of a changing of the guard that we did receive, that we did acquire a letter that she sent to her team in which she says that she's going on to pursue new adventures outside of Disney and saying that it's been a hard decision with the company as a special place and she's enjoyed everything over the past three years.

So she's working with her team on a transition and finding a permanent replacement and putting in someone in the interim. But notable to see. Disney sure is pretty much flat, but definitely a lot of change at the top in the wake of Bob Iger taking over for Bob Chapek. Back to you. Lots of Disney news lately, Julia. Thank you. And now we've got breaking news related to that United Auto Workers strike.

Let's head back to Phil LeBeau in Detroit. Phil. John Ford has just announced that it is laying off approximately 600 workers at its Michigan assembly plant. That is the plant where one of the UAW strikes is taking place. We should point out that that strike does not shut down the entire plant. There is still body construction and stamping work that is going on there. But because those employees need some of the parts that the

UAW works with and provides to the stamping operation, the body construction operation, and they cannot do that, Ford says it has no choice but to tell those workers they are now laid off. So this is the knock-on effect that we've talked about, John, that when you see these strikes begin, you will see layoffs potentially beginning either at facilities related to that plant where a strike is taking place or elsewhere within the automaker and their entire network of operations. So again, Ford laying off approximately 600 workers at its Michigan assembly plant just outside of Detroit. John, I'll send it back to you. Phil, should we think of this as a temporary layoff and as part of this negotiation of saying, hey, there's a real impact to these work stoppages or no? No, I would not consider this as a temporary situation.

I would consider, look, it's as long as the strike goes on. They cannot do their work. And if you are Ford, if you are GM, if you are Stellantis, if you have workers who cannot do their work because the strike is stopping the flow of parts or whatever might need to take place, you have no choice but to lay them off. We've seen this in past strikes. And so for the 600 workers who are laid off basically this goes as long as the strike goes okay that's what that's what i meant uh in a sense so yeah they're saying that we're not going to carry these additional costs should we expect to see some similar moves from the other two automakers potentially they're going to do it if there's a facility that

it cannot operate because of a strike. Do we usually see it this quickly? Yeah, yeah, you know, look, it all depends on when a strike takes place, where it is at, and how that facility is tied in with the rest of the automaker. Look, we're in a world of just-in-time manufacturing, John, so it's not like you can have workers sitting around. The flow of parts has been stopped at these three plants,

and the final assembly has been stopped at these three plants. These are some of the knock-on effects that you're going to see from that. All right. Real consequences. Fill the bowl. Thank you. After the break, has the world gone from a chip shortage to a chip glut? Well, at least in some places. We'll talk to an analyst about reports today that Taiwan's semiconductor is now warning on demand, sending the whole sector lower. And as we head to break, here's a look at the biggest losers in the NASDAQ 100 today. Chip names heavily represented. KLA, Lam Research, AMD. We'll be right back.

Jitters in the semiconductor market hitting wider tech today. The Nasdaq snapping a two-day win streak. Chip giant Taiwan Semiconductor. They make chips for just about a little bit of everybody. Falling after a Reuters report said the company is telling vendors to delay equipment deliveries. Taiwan Semi said it does not comment on market rumor. The stock finished down nearly two and a half percent. Suppliers, including ASML, also getting hit. Joining us now is Charles Shi, Needham & Company research analyst. Charles, how should investors really parse this? Because there's huge demand for ASML's equipment overall.

We know there's huge demand for AI chips, but stubborn inventory of some traditional server chips. So should we paint the whole semiconductor industry with a broad brush here? Well, the thing is, well, like you said, right, AI is strong, but the non-AI part of the semiconductor industry is still facing the pressure. We're still kind of living in the overhand phase from the chip shortage over the last couple of years. So I think in terms of the news today, I actually, I'm not so sure whether that's new news or not. Like we've told investors that there may be some downside risk to Taiwan's semi-capital expenditure. ASML actually raised a similar warning as early as

April. So we probably need to verify whether this is new news or old news. But it's fair to say, yes, AI is the only hotspot right now for semiconductors. The rest is still kind of weak, especially smartphone PCs. So what's the next signal that semiconductor investors should look for? Is it perhaps the sell-through of smartphones in Q4? That's one of the good indicators. But I think given how semiconductor cycles work, this is actually not exactly a hugely terrible cycle compared with, let's say, 2008. I would say one thing investors should probably pay attention to is Taiwan Semiconductor output level. They recovered to the prior peak during 2008 or 2009 only by four quarters.

We're already three quarters into this downturn. So upturn usually comes a lot faster than people expect, especially when it's at the bottom of the downside. I think we are at the bottom. OK. All right. So so don't try to time it. Stay in semis if you like them. Charles Shi from Needham. Thank you. Thank you. Now let's get a CNBC News update with Pippa Stevens. Pippa. Hey, John. The Pentagon announced today it is revisiting the investigation into the Kabul airport bombing two years ago. The officials will interview around 20 service members who were injured in the bombing. Those firsthand witnesses

were not originally consulted by investigators, but their public testimonies have raised questions about the Pentagon's stance that the attack was, quote, not preventable. The former head of Wells Fargo's retail bank avoided prison time today after pleading guilty to obstruction in the bank's fake accounts scandal. Carrie Tolstead was sentenced to three years of probation. She will also pay a $100,000 fine and serve 120 hours of community service. A Polish company picked a new high-tech CEO. Rum maker Dictador tapped an AI robot named Mika to head its operations. The company insists the move is not a stunt and says that Mika is needed to help the company with data-driven decisions.

The robot initially worked to find clients for its high-end rums, but the company says her tasks now include choosing artists to design custom bottles. John, not something you hear every day. And I don't think she can sample the rum and appreciate it either. Pippa, thank you. When we come back, venture capitalist David Sachs joins us to talk about his read on the IPO market ahead of Instacart's debut and what he makes of Walter Isaacson's new book on fellow PayPal Mafia member Elon Musk. We'll be right back. Welcome back to Overtime. In case you missed it, we've had breaking news this hour on Ford.

It says the United Auto Workers' targeted strikes will have knock-on effects. Approximately 600 employees at its michigan michigan assembly plant were told not to report to work they've been laid off as a consequence of the strike this as uaw members gather right now this hour for a rally in detroit joining us now is craft ventures co-founder and partner David Sachs. David, welcome. So a big issue in this strike is electric vehicles and how many auto workers are going to be required to make them. So what do you think is at stake here for the U.S. EV industry and the competitiveness and the next generation of auto suppliers

who are more likely to be U.S. software and chip companies? John, you're getting into a level of detail that, you know, unfortunately, I'm not that familiar with the auto industry. But, you know, my understanding of what UAW is seeking is that they want a 40 percent pay increase while reducing the number of work hours from five days to four days a week. And I think what the auto companies have said is that's just not realistic. So I do think that this would be an opportunity for presidential leadership to come in and maybe help resolve this, tell the unions that what they're demanding may not be economically feasible.

I think what I heard the CEO of Ford say is that his company couldn't turn a profit if the UAW got all their demands. So but that's not happening because, you know, frankly, Biden is very pro union. So this is why we're having the strike right now. There's an issue, though, I think, across the economy, not just in autos, also in software. Right. We've got these copilot capabilities now that AI is providing where you don't need as many programmers to get work done. And some workers are skittish about it. What is the right way for investors to think about that and for companies to proceed? I think these AI co-pilots are very interesting. I think it's a very exciting part of the AI,

you know, just sort of developing AI space. And I think it's one of the best opportunities for startups to go after are these new co-pilots. I think that eventually in every job category, doctors, lawyers, accountants, architects, I think you're going to have a co-pilot that helps them do their jobs better. I think in every sort of horizontal job function in enterprises, sales, marketing, customer support, you're going to have co-pilots that help knowledge workers do their jobs better. I think this is a very positive thing. I think it's a great opportunity for innovation. I'm much less concerned about co-pilots putting workers out of a job. I think that, as the name implies, the idea of a co-pilot is a piece of software,

a tool to help that worker do their job better and to be more productive, to be more creative. And so I think ultimately these co-pilots are going to be very positive. I think it's just too soon to be jumping to the conclusion that's going to put everyone out of work. And I know in Hollywood, they're very worried about that, but I'm much less worried about that. Let me ask you, not directly just about SAS Grid, which is, you know, this offering that you have where for free, you know, leaders of companies can plug in their metrics and see if they're performing at a level where, you know, you would want to invest and sort of get a dashboard, a benchmark. There seems to be perhaps a continuing disconnect between the way the public market is valuing companies and the way much longer term investors like venture capitalists are valuing companies.

We just had Ali Ghodsi from Databricks on. What was your reaction to the ARM IPO? What are your expectations for Instacart based on that? And are you telling your companies to perhaps look more closely at going public? Well, ultimately, going public is the goal for every venture-backed startup. I mean, that's the best-case scenario. I mean, there's only really three good outcomes. You're either IPO, you get acquired, or you go out of business. So there's really only two good outcomes.

Right. So in any event, everyone wants to IPO. I think in terms of valuations, I think you're right that the private markets got way off during this sort of asset bubble in 2020 and 2021. But ultimately, private markets take their cues from the public markets because the public markets are exit comps. So all of those revaluations are happening now. I think you see this with the Instacart IPO. I think it's going to price, there are reports it's pricing at the top of its range, which is about $10 billion. But its last private round was at $39 billion.

So you can see there that private markets got way ahead of themselves over the last few years, and now that's getting sorted out. But I do think that the reception for ARM and now Instacart is very positive for showing that the market still is interested in technology names. Well, this time, David, I didn't get to ask you about the Walter Isaacson book in which you make several appearances, but at least you didn't get the kind of description that Max Levchin did, where your friend and former PayPal mafia member, current, you never leave the PayPal mafia. You know, he would have preferred a better description, but I hope to talk to you again soon, David. Great to have you.

David Sack. Anytime. Thanks, John. Up next, Mike Santoli looks at what this year's trend of receding inflation could mean for the market and the Fed when overtime returns. Welcome back to Overtime, a big story of the week. Much of the year has been receding inflation, but how's that going to impact the Fed's decision next week, if at all? Let's bring back Michael Santoli with his take. Mike?

Yeah, John, CPI, PPI, even today's consumer inflation expectations number all came in relatively as expected, kind of benign, and I think in an orderly way too, close to forecast. That's been a big change. This is the city inflation surprise index. We often look at the economic surprise index to see how much economic growth numbers are coming in better or worse than forecasted. What this shows is just a massive, unexpected surge in inflation that was well ahead of what anybody had been able to model in their forecast has come down and is now very much at normal levels, 10-year normal levels. It's coming in relatively benign. And that, to me, last year's story was the fact that it was this completely unhinged kind of galloping inflation problem that the Fed had to chase after.

Now the Fed is more or less where it wants to be. Maybe it nudges around the edges with rates in the coming months, but it'll be small increments spaced out pretty widely. The market has been able to deal with that OK. And it's also enabled the bond market to become a lot less stressed. Volatility in the Treasury market, that's measured by the so-called move index, has also receded, not quite back to pre-COVID normal levels, but is really showing you that the fever has broken here as well. And essentially, we're at one-year lows, even more than one-year lows on this index. Even though yields are higher, they're doing it in a fairly measured way. So it might be small solace. But for now, I think we're at a spot where we think we have a handle

on the path of inflation. Obviously, we need to have it proven out. But I think it's also a comfort that the Fed's own current projections don't have them getting to the 2 percent target until the year after next. See if that changes next week when they do come out with a new set of outlooks. All right. Michael Santoli, thank you. In the meantime, more breaking news on the United Auto Workers strike, and we go back to Detroit and our own Phil LeBeau. Phil.

John Moore ripple effects. This time it's General Motors warning that it may, as early as next week, have to idle production at its Fairfax, Kansas plant. 2,000 workers would be laid off at that plant if that takes place. Why? GM says that some of the stampings that are provided by the Wentzville, Missouri facility, which is currently on strike, is not going to be flowing over to the Fairfax, Kansas plant. And so if you can't get the stampings from Wentzville to Fairfax, you can flowing over to the Fairfax, Kansas plant. And so if you can't get the stampings from Wentzville to Fairfax, you can't do production in Fairfax. And then you would have the end of production there. And that may happen as early as next week, according to General Motors.

And if that happens, John, you're looking at 2,000 employees approximately at that plant who would be facing the prospect of being laid off. John? Okay, Phil, you just spoke on our air with GM CEO Mary Barr not long ago, and she was emphasizing the broader economic impact of this strike. And now here's a micro impact as well, just within the automakers themselves. Is this typically what we see companies do? Do they typically come out as often and as aggressively as a strike is starting and say, hey, here's what the deal is? Or I guess we've never seen three struck at the same time in recent memory.

No, we haven't. No, and we also haven't seen negotiations conducted this publicly in the past. But that's the route that the UAW chose when Sean Fain said, you know what, we're looking for this, this, and this. And by the way, he held an update on Facebook and he said, and by the way, this is what we're being offered by GM, Ford, and Stellantis. That forced the hand of these automakers to say, okay, I guess we're negotiating in public now. At the same time, when you look at these layoffs that may happen at the Fairfax, Kansas plant, Mary Barra was very clear about that this morning. She didn't say this plant specifically, but she said, look, they don't operate in silos. A plant in Fairfax, Kansas is interconnected within the GM overall production system. And you can't just say, well, production production continues there but it stops over here

there is a ripple on effect and that's what we're seeing here you saw ford's announcement about 15 minutes ago i wouldn't be surprised if we see more announcements like this if these strikes continue or they grow over the next several days several weeks however long it takes john well phil i guess when you conduct public negotiations you end up getting public feedback. We'll see how that swings for the automakers and for the unions. Our Phil LeBeau, thank you. Lots more coming on that story. Meantime, big tech companies starting to roll out their latest consumer electronics offerings. Up next, the CEO of Bose on whether consumers are still spending big bucks on higher end devices. We'll be right back.

Some news earlier this hour on Disney. If you're just joining us, the company's chief information officer has departed the company. That's the second C-level exec to leave in three months. Disney stock remains near its lowest level since 2015. And we are in consumer electronics launch season with Apple unveiling the updated iPhone, AirPod and Apple Watch lines this week. And Amazon and Microsoft expected to announce their refreshed consumer lineups Wednesday and Thursday of next week. I caught up with Lila Snyder, the CEO of audio product company Bose, which launched its latest

QuietComfort earbud and headphones yesterday. She said her premium audio consumer is still strong with the newer high end earbud category growing and headphones bouncing back. We see a lot of consumers moving into the noise canceling realm for earbuds, which they maybe weren't in before. So we see fast growth in both. We still see a lot of popularity, particularly now as people are going back to work, commuting again, maybe getting on a plane again. We've really seen the over-ear headphones come back in popularity over the last couple of years. But, you know, it comes down to this preference and how you use them. Bose is private, majority owned by the Massachusetts Institute of Technology, MIT.

I will see what that bodes for Apple. Now, former President Donald Trump weighed in on the Federal Reserve and interest rates in an exclusive interview airing this Sunday on Meet the Press with Kristen Welker. Take a listen. The Federal Reserve is obviously independent, but I wonder, Mr. President, if you are reelected, would you direct your Federal Reserve chair to lower interest rates? Well, you know that I put a lot of pressure on him. It was outside pressure because nobody knows whether or not you can really do that. But I did because I thought his interest rates were too high and he ultimately dropped his interest rates. The same gentleman as you know. And but it was a lot of pressure.

I mean I was very active on that. Right now interest rates are very high. They're too high. People can't buy homes. They can't do anything. I mean they can't borrow money. The banks don't have the money. The banks aren't lending the money. The banks by the way Chase Manhattan Bank, Bank of America, they discriminate against conservatives. It's a disgrace and they shouldn't be allowed to. And I'm going to do something about that. But you take a look at banks throughout the country, and I think because of the regulators, but you take a look at Bank of America and Chase, they discriminate against conservatives and Republicans.

What's the evidence for that, Mr. President? We'll give you plenty of evidence. OK. All right. Well, let's stay on track with this question though so just to be very clear if you were reelected would you director fed chair to lower interest rates uh... depends depends demands were inflation is but i would get inflation down because really must mister president are you gonna point a new fed chair if you

reelected well i i guess he would have two years left or something like that so we'll see but i all All right. You know, the word jawboning. I did a lot of jawboning against him and he ultimately lowered interest rates. Be sure to watch more of this exclusive interview with former President Trump on Meet the Press with Kristen Welker this Sunday on NBC. We should note the same invitation to sit down with Kristen has been extended to President Biden, who so far has not accepted. Joining us now is Nathan Sheets, chief global economist at Citi. Nathan, welcome. So the Fed's independent, right? So the president is not technically supposed to direct the Fed to do anything. What do you make of this?

Because the biggest criticism that the Fed has faced over the last couple of years is not, is keeping rates low for too long. This is a very important question. And I have to say, as someone who worked at the Federal Reserve for almost two decades, it's one that's very near and dear to my heart. I think there's a vast array of evidence suggesting that, quote, unquote, independent central banks deliver better outcomes in terms of inflation, growth, and unemployment as well. Now, in the United States, we have a tradition of the president not commenting on monetary policy, not directing verbally or jawboning the Federal Reserve chair. But the key thing is that the Fed be left alone to make its decisions.

And do you think the public understands? Do you think the public understands that, though? Because we've had this historic moment where interest rates have gone up so quickly, right, over the past year plus a little bit, and people are feeling that pain. Now, it appears that in this election season, interest rates and the Fed itself are about to be politicized. What should people know about that and what that means for the economy? I think the bottom line, and again, I say this as somebody who's spent many years at the Fed and attended FOMC meetings, is that the DNA of the Federal Reserve is first and foremost to look at what's going on in the economy. And if we have high inflation, that means tighter monetary policy than if we don't.

But to look at the economy and base policy on that. But by the same token, is the Fed chair, is the FC, aware of the political context. And next year, are they going to be aware that we are in the midst of an election? Absolutely. And I think holding all else equal, I think the Fed would like to be in a place where it's not hiking rates, especially in the second half of next year. And if they're in a place where there are cutting rates during that period of time, you know, I think from a institutional standpoint, maybe all the better. Do you expect for these rates to stay pretty high for a while based on where inflation and real rates are now?

So our expectation is that one way or another, we're going to start seeing some cuts in the Fed funds rate, probably gentle starting in the middle of next year and then coming down gradually through the second half. Now, how aggressive that is will depend a lot on where the economy is. If we're in the midst of a recession at that point, then I think that will open the door to more aggressive rate cuts during the second half of 2024. On the other hand, you have some of these data that have been encouraging, suggesting soft landing, you know, being a better predictor of where we'll be. I think those rate

cuts are likely to be much more gentle. So the pace of rate cuts will depend critically, of course, on inflation, but also on whether we have recession. All right. Nathan Sheets, thank you. Well, I'll be watching that. Now, next week, Tuesday, I will be in San Jose, California, for Intel Innovation, speaking with CEO Pat Gelsinger in a first on CNBC interview. That's Tuesday, 4 p.m. And now that's going to do it for overtime. Fast Money starts now.