Closing Bell - Closing Bell Overtime: Intel CEO on Earnings, Data Center Demand; L3Harris On Strong Quarter & Global Tensions 4/26/24

Episode Date: April 26, 2024

Intel shares slide in today's session after earnings; CEO Pat Gelsinger talks the company's progress and AI demand. L3Harris CEO Chris Kubasik on a strong quarter, defense spending and geopolitics. The Nasdaq has its best day of the year--how to play the next round of earnings with Apple and Amazon reporting next week. 

Strong results from Microsoft and Alphabet, sending the Nasdaq soaring today and helping push the Nasdaq and the S&P 500 to their best weeks of the year. Bet you didn't see that coming. And Alphabet just closed above $2 trillion in market cap for the first time ever. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. And coming up this hour, Intel sitting out this rally, adding to sharp losses for the year after giving weak guidance. We're going to hear from CEO Pat Gelsinger about the outlook for his business. And the CEO of $40 billion defense contractor L3 Harris joins us exclusively after the company raised its outlook with earnings and as geopolitical tensions flare around the world. CEO Chris Kubasik will break down those numbers for us in an exclusive interview that I just said, but was in the prompter.

I just had a Ron Burgundy moment. Well, no, it's all right. I mean, it's worth repeating that he's going to be right here with us. And we start with the market as we close out the best week since November for the NASDAQ and the S&P 500. Joining us now are Brooke May from Evans May Wealth and Jill Carey-Hall of Bank of America Global Research. Jill, we are back where we were two months ago on the S&P at 5,100 after briefly losing 5,000. Traders seemed spooked by the macro data, then heartened by earnings. What's the next catalyst?

Well, we're looking for $5,400 on the S&P for year end. I think this year will be about fundamentals and earnings coming through. Last year was a lot about multiple expansion for the market. And particularly this year, we think demand and, you know, sales growth coming back will be an important driver because so far that's been been lackluster. So I think the fact that we're seeing abroad, you know, manufacturing recovery inflection in a lot of our regime indicators, both U.S. and globally in terms of the cycle do bode well for for the earnings and profits recovery this year.

And technically, we just barely lost 5,100 at the end there for the S&P for the week. Brooke, you think we can get more than 10 percent higher from here on the S&P, but you say don't try to pick sectors and don't expect rate cuts. That means you think tech is going to remain strong, it sounds like. We do. We think that tech is where a lot of the earnings are, but it doesn't look like last year. Last year, two-thirds of the earnings came from the Magnificent Seven. And this year, only about a third of the earnings thus far.

So we think that there's more participation. At the end of the first quarter,8 s p 500 companies hit new highs so broader participation in addition to big tech continuing to be leadership we think will lead the way through your end so joe are our small caps a value trap here then especially if you have inflation that's going to be sticky and you have a market that is aggressively pricing fewer rate cuts this year and now later into the year? Right. So I think you want to be selective in small caps. I think you want to pick your spots. We had been positive on small caps going into the year. I think a lot of the positive macro story for small caps still stands in terms of the manufacturing recovery know GDP recovery the the profits recovery but when you think about

now potentially less fed fed rate cuts or a push out in in fed rate cuts our expectation of the of a is the federal start cutting until December I think a lot of investors that that I speak to have been looking to the Fed is the next catalyst for Russell 2000 to to really take another leg up from here in terms of leadership because the index is rate sensitive. It has a lot of refinancing risk. So I'm cautious near term on the index until we can get a little bit more confirmation that the inflation data is starting to decelerate and we're getting more confirmation that that late year Fed cut will be possible. But I think that segments of small caps that are tethered to better economic growth, the

profits recovery, higher commodity prices, and that have less refinancing risk could still be positioned to outperform in the near term. So I think sectors like energy and industrials materials, these are some of the ones that have less refinancing risk and are tethered to those themes. And then just being selective at the stock level, avoiding stocks that are lower quality, that have a lot of leverage or short-term or floating rate debt and that are more sensitive to rates. OK. Brooke, along those same lines, if you have an environment that continues to be a little more inflationary. You have a Fed that maybe doesn't cut as soon as had been originally anticipated. Is that a good thing for earnings this year or is that going to be a drag on earnings? And I ask that knowing that it's not always a clear cut answer here. Absolutely. It's going to be a drag on earnings. You know, a lot of companies utilize debt

and higher rates. Most companies, most large companies have fixed rates, but to Jill's point, a lot of smaller companies are rate sensitive. And earnings have proven that interest rates have been navigated differently by corporate management within the same sector. Some companies have done well and others have really disappointed. So you have to be very specific right now and use a bottoms up approach. It's not a clear cut answer. You know, I think that the earnings for the most part will be a drag, but only for those companies that are

more interest rate sensitive. All right. Brooke and Jill, thanks for joining us as we did get this Friday rally on mega cap tech. Amazon topping the Dow today as the whole tech space got a boost from Microsoft and Alphabet. Kate Rooney joins us now with more on that move and a look ahead to Amazon's earnings, which are coming up early next week. Kate, Amazon's the last of the mega cap tech players to not have a dividend now. Pressure's on. That's right, Morgan. The grand finale with Amazon on Tuesday. The bar is really high for Amazon after blowout results from Microsoft and Google. The big focus is on Amazon Web Services, AWS, which is still really the profit engine for Amazon. Streets expecting 14.7 percent growth when it comes to AWS, up from about 13 percent in the prior quarter.

Dan Ives of Wedbush is among those now saying that consensus growth rate does look a bit conservative in the wake of what Azure and Google Cloud reported. Did say there's now no excuses. Amazon can't come out on Tuesday and then say the dog ate my homework. They need to deliver on Tuesday. North American revenue, e-commerce there, margin expansion and then advertising are also other key areas to watch. Advertising is expected to get a boost from Prime Video. Google and Snap's results this week on the ad side could bode well for Amazon. And Amazon notably, as you mentioned, Morgan, it's the only big tech company other than Tesla not paying a dividend. Analysts that I'm talking to say, don't hold your breath. It's not widely expected that Amazon is going to change and all of a sudden offer a dividend. The street wants to see Amazon reinvesting

in AI. CapEx is going to be a balance, though. Amazon needs to prove that it's spending to compete there. But Meta was the cautionary tale this week on spending. The stock got punished for Zuckerberg's comments and that outlook. So a balance here, but a big one to watch next week, guys. Kate, we're in this weird spot with Amazon. One of the things that drives me crazy about the markets is people tend to look at stock prices and think that they actually mean something about long-term strategy. Oh, Google's behind in AI because its stock is down. Now the stock is up and people are like, oh, well, Google's not behind in AI. As if anything's changed just in a few weeks, right?

But sentiment is important. And what do you think matters more as you're looking at the analyst reports, talking to the company? What do you think matters more to sentiment right now? Is it the AWS stuff or is it more of the ads prime consumer e-commerce stuff? It's interesting, John, that's such a good point about sentiment and how quickly things can change when you're watching the public markets and stock prices. Amazon, in some eyes, has been seen as a laggard in AI. They would argue that they're very much not, that they've been investing billions. And so I think that's sort of too soon to tell on the winner takes all. It's also, yeah, I think we'll get a lot

from the earnings report on Tuesday when it comes to that narrative. In terms of what's most important, it does seem like AWS is the driver. That bar of 14.7 percent growth, that's really going to be what they're going to need to top and will likely have the biggest effect on the stock. I was talking to an analyst earlier who said that everything else, which is really still a massive part of Amazon's business, whether it's e-commerce, whether it's advertising, those are multi-billion dollar businesses, but they're sort of seen as the appetizer or the dessert for Amazon.

So I think that's a good analogy. They're important, but they're not the main meal. AWS is really still seen as the appetizer or the dessert for Amazon. So I think that's a good analogy. They're important, but they're not the main meal. AWS is really still seen as the driver. OK, Kate Rooney, thanks. With Amazon closing up almost three and a half percent today. After the break, a soft GDP print and more evidence of sticky inflation. The latest data points for voters to weigh in ahead of the November election. We're going to talk to Dan Clifton from Strategas

about how this week's numbers could change the political odds. And check out some of the big winners in the S&P 500 this week. Supermicro, look at that. 20%? My goodness. Hasbro, Tesla, Nvidia, and NXP Semi all seeing double-digit moves higher. Overtime's back in two. Welcome back to Overtime. This morning's PCE report showed no signs of inflation slowing down, rising 2.8 percent on a yearly basis. It was a bit hotter than expected. If inflation remains sticky this summer, could Biden's chances of winning reelection be in danger? Well, joining us now is Dan Clifton from Strategas. Dan, it's great to

have you on. And just in terms of that question, is this how voters are going to be voting this year with their pocketbooks based on inflation? Yeah, there's obviously extraneous variables this election cycle that you haven't seen in the past, like Trump's legal issues or Biden's age. But the economic issues still are the dominant factor for voters, particularly in the seven swing states that are going to decide this election. We try and keep it pretty simple, Strategas, by just looking at kind of what's worked historically. And the misery index, inflation plus unemployment, has predicted 15 of the past 16 presidential elections. It's very simple, Morgan. If misery is higher year over year by the election, the incumbent party is generally lost.

And if incumbent, if misery is lower by the by the election, the incumbent is generally won. And so we know what that number has got to be. It's got to be about 7.3 percent by election day for Biden to win. We're actually below that right now, which is good for the president. We're at about 7.05. But it shows you that he doesn't have much wiggle room. And the greatest threat to his presidency is a sustained surge in inflation this summer, one that is probably not expected by the consensus. But as long as inflation keeps surprising on the upside, it will pose a risk to his reelection. OK, so then how does PC that we saw today factor into that? How does the GDP reading yesterday that stock sold off on factor into that? And the word stagflation is now starting

to be tossed about. You know, I realize one report, a trend does not make at least not yet. But how real is this risk when you have a Fed that is saying it's data dependent and a market that is predicting it's not going to cut as soon as the summer anymore? Absolutely. Look, the data's changed. And I would say that January was a data point. February was a line connecting those data points. And the March data was a trend. So the trend has clearly moved. I think that's why it's more of a risk today. But the president also has tools, Morgan. If you start to see that gasoline prices go up, they could release oil out of strategic petroleum reserve and try and get those prices down. That's what they did in 2022 into the

midterm election. And some of the president's advisors were publicly talking about that last week. Right. So for every action, there will be a reaction. But clearly, the data has moved away from where the Fed wanted to be, and it's going to make it harder to cut rates. That does not mean that the Fed doesn't have other tools available to them. We expect that the Federal Reserve is going to start cutting the size of its quantitative tightening as early as next week at that meeting, where you'll see them reduce their balance sheet by half of what they've been doing to about $30 billion a month. So there are definitely tools they can play with. And from the president's perspective,

he's got tools. This is why he's talking about student loan cuts. He's got a lot of infrastructure money starting to come into effect that you'll see later this year. So it's not a static environment, but clearly the inflation numbers have moved in the wrong direction. Back to the election, the mechanics of that. Is the economy more of a motivator or a demotivator? So are independents going to come out and vote for change if things are bad, right? Or is it more the base either does or doesn't turn out based on what the economy is telling them? Yeah, so what we do is we use historical standards on the economy. So we got a new data point today, which is after tax, after inflation income.

It is a major, robust indicator of predicting the exact vote that the president gets in re-election. And so that number, when it came out today, because it continues to show that inflation is rising faster than total personal income income comes out to about 48 percent of the vote for the president. Right. So if you use that historical standard, use the inflation unemployment standard that we just talked about, you know, you're basically trending at close to a 50 50 race right now. And these races are being decided by very, very thin margins. You're talking about 50 to 75000 voters. And there's going to be a mix of issues there. The economy is going to be one of them. What, if anything, then, is the impact of this bifurcation between the working class and the very well-off?

Does that potentially cause some variance in what the numbers have historically told you, say, over the past 40 years? No doubt about it. And things are changing here. So what you see is that former President Trump is doing well in Nevada, a state he's never won. He's doing much better with low-income workers who are very much worried about inflation. But if you look at Trump's numbers in Pennsylvania primary this week, he's not doing so well with higher-income workers, or what I would say traditional establishment Republicans, who are less affected by inflation and more going to vote on his values itself. So this is a real game-changing environment

that we're in right now, where you're actually seeing voters switch allegiance through parties. And inflation is a big part of that. Growth's a big part of that. Taxes will eventually be a big part of it. But clearly, the divergence between lower and higher-income workers is having an effect on where voter preferences are going to be. All right, Dan. We didn't even talk about tariffs. So you have to come back and do that with us. All right.

I would love to. Anytime, Morgan. You just let me know. It's going to be a heck of a rest of the year. Thank you. Well, tech having a standout day. But Intel, as I mentioned, sitting out this rally, falling hard as investors key in on the company's soft forecast for the current quarter. Up next, CEO Pat Gelsinger makes his case for why the Wall Street should feel better

about the second half of the year when overtime returns. Welcome back to Overtime. Intel shares sliding today big, down 9% on a weaker Q2 guide. That stock, down after the earnings report yesterday, beat street expectations with a better-than-expected profit, but leaned heavily on improvement in the second half of this year. I spoke with CEO Pat Gelsinger in a First on CNBC interview just after the analyst call last night, and he told me he expects Data center to pick up as pricing improves. For data center overall, the market is indicating a little bit more strength

for the units. But what's really up in a big way for us is with a higher core count products is the ASPs are comfortably up as we go through the second half of the year. So all of that gives us great optimism in the data center business. And we're also starting to see many of the year. So all of that gives us great optimism in the data center business. And we're also starting to see many of the AI use cases for the data center where Xeon, where we're

now running 70 billion parameter models directly on Xeon and Xeon plus Gaudi and all of the security management benefits and use cases like retrieval augmented generation, all of this where it's, you know, Xeon plus Gaudi sees a lot of strength as we look to the future of unleashing the power of generative AI for enterprise customers. I also asked him about inventory in the second half and how demand should flow through better now that problems at Mobileye and Altera have worked through Intel's system? Overall, as we look to our customers and we work with them very closely on their inventory positions, we would just say client inventories, healthy. Server inventories, healthy. As we are working with those customers, we have had some unique inventory issues and like the Mobileye business for automotive, our networking and Altera business, but that also says second half is going to be better because we'll have worked through those inventory positions in the first half. So we have a very good handle on where we are with inventories.

We're seeing market improvements. We're getting that signal from all of our channel and OEM partners. So we feel quite comfortable that the inventory position is healthy as we look to a stronger second half of the year and into 25. Morgan, since the separation of the numbers, the foundry business and investors have had to digest just how significant these losses are until that business ramps up, the stock's been, you know, going through it. Stock's been going through it, but it does take me back to when you were interviewing him at Council on Foreign Relations just a couple of weeks ago, and he made those spicy comments about we're looking for investors who are in for the long term. And I realize that this is very much a long term story for Intel. Yes, we can talk about

second half of the year and what that means for margins, et cetera, but also something like the foundry business. It's going to take years for this vision, this strategy to be fully realized. I suppose if you are such an investor, here's a better entry point. All right. One to watch. It's time now for a CNBC News Update with Seema Modi. Hi, Seema. Morgan, hello.

Here's the News Update. Two more witnesses have taken the stand in Donald Trump's hushed money trial this afternoon, including Donald Trump's longtime executive assistant who testified he was a fair boss, as well as a former banker who allegedly helped former lawyer Michael Cohen set up a home equity line of credit to pay Stormy Daniels. The trial continues on Monday. Federal regulators say a critical safety gap in Tesla's autopilot design led to more than 450 crashes, with 13 fatalities and many other serious injuries.

The findings are from an analysis of nearly 1,000 crashes by the National Highway Safety Administration where the autopilot was thought to be in use. Tesla has not commented. And the head of the Federal Student Aid Office will step down. The Education Department made the announcement today. In a letter to staff, Richard Cordray said that he will stay on until June to help with the transition. It comes as the office had been criticized for delays that plagued this year's application process for the college financial aid form called FAFSA.

Morgan and John, back to you. All right, Seema Modi, thank you. Coming up next, the CEO of defense contractor L3 Harris on his company's beat and raise quarter and how Washington's foreign aid bills will impact the business. And check out the transports pulling back today. The only major average to finish lower led to the downside by Old Dominion Freight Line. That name reported results earlier this week, narrowly missing on revenues. That stock finished down 7 percent, a big move for Old Dominion, the trucking company.

Stay with us. Welcome back to Overtime. L3 Harris closing higher today after strong earnings that we brought you right here on Overtime yesterday. The defense contractor lifting the upper end of its profit target as global security concerns and defense spending are on the rise. Joining us now exclusively is L3Harris CEO Chris Kabasic. Onset in the flesh. It's great to have you here. Always good to be here, Morgan.

So you beat for the quarter. You raised your profit forecast. You're expanding your margins and you're growing your sales. You're basically, this is the second quarter in a row that you're basically delivering on what you've set out and promised to do. Walk me through how you're doing that, how much of that is tied to defense demand, cost cutting, and supply chain normalization. That's a big question, I realize. That is a great question. Well, let me start by thanking the men and women of L3 Harris. None of this is possible without their hard work. Very dedicated, engaged workforce. We have factories working two shifts, sometimes three shifts to meet the commitments for our customers. We laid out a plan back in December at Investor Day, and we're just

executing it upon it. The operational focus is significantly improved. We're having better bid rigor and discipline, and we're seeing the results come through. It's early on, but it was a great first quarter. It's very unusual to raise guidance this early in the year, but I have confidence in the performance, confidence in the team. And there's been some tailwinds, a lot of robust demand. And again, we're one of the few companies that's going to try to grow the top line while expanding our industry-leading margins simultaneously. So where are you seeing the most demand when you look across the portfolio, both domestically and internationally? And now that we're talking about a $95 billion

supplemental that's finally been passed through Congress this week, how does that add to the situation? Yeah, it's a huge, huge tailwind. And it's been a great five weeks for the defense industry because five weeks ago, we didn't even have a fiscal year 2024 budget. So we have the $844 billion budget. We have the $95 billion supplement. When you look at the addressable market, over $900 billion of defense spending, which wasn't there five weeks ago. So a huge tailwind and a huge opportunity for L3 Harris and the industry in total. Specifically, the supplemental is focused on Ukraine, Israel, and Taiwan. And just today, a $6 billion package was brought forward.

So we see good demand international. We see demand in space. We see demand in munitions and resilient communications. When we talk about something like Ukraine, I mean, we featured your show on this program just a couple of weeks ago, Tactical Radios. We talk about shorter cycle products. How quickly can you manufacture and get them out to battlefields? In the Ukraine situation, it could be within a week. We pre-order the supplies. We just need to get the contract. It could literally be within a week. And the beauty is a lot of our products are being tested daily in theater.

We're getting real-time feedback, and all of our radios are software-defined. So to the extent they're jammed or there's an issue, they're easily reprogrammable in the field and ready to get back into the battle. Supply chain, we're still seeing some challenges in some areas. I've spoken to a number of executives at defense contractors who say there's some hiccups, particularly in rocket motors still. Aerojet Rocketdyne, you acquired it last year. Production, how's it going? It's going great. We've owned it for nine months. We announced it on your show 16 months ago, and I'll say strategically, the demand is literally exploding. Whether it's tactical missiles, the nuclear triad, next-gen interceptor, a lot of demand for these products. Operationally,

we've cut 20% of the late deliveries. We're digitizing the factories. We're investing in the supply chain. The workforce shortage is abating. So we're feeling really good about it. And you see in our financial results. So I feel much better about the acquisition today than I did 16 months ago. And I felt pretty good 16 months ago. I mean, we know demand for defense products is just skyrocketing right now. We also know that U.S. stockpiles need to be replenished. How quickly can that production cycle ramp?

And I guess how meaningful are we spending enough to do it? Are we moving quickly enough to do it? Yeah, I think we're moving quick enough, but it's a great question because I think we're a couple years away. You have to go back maybe a decade or so when we had the Budget Control Act. There was literally an artificial cap put on defense spending, which allowed our adversaries to catch up or maybe in some cases pass us, right? The workforce is down probably 20%. And the supply chain, interestingly enough, is down 20%. 17,000 suppliers shut their doors due to the inconsistency in the funding and, of course, the demand signal. So that's where we are today. We need to rebuild. Each and every one of these companies

has been right-sizing, consolidating their footprint, closing factories based on the demand. So in my opinion, the whole ecosystem has to be on a wartime footing. Congress, the DOD, the industry, and the supply chain. And that would mean having a defense budget by October 1 for fiscal year 2025, which I know is a long shot. And as I say, I'm pretty sure Russia and China don't have continuing resolutions. We need to fix this. Chris, you've been really trying to drive efficiency in data center, your ERP systems, even facilities. What's the philosophy that you're using, particularly on the technology side,

to try to drive that through as quickly as possible? No, great question. We are trying to leapfrog the technology. The reality is we were probably lagging, and in an odd way, it's a benefit because we're actually going to leapfrog. We have a lot of software as a service cloud. We're using AI for internal efficiency. Maybe at some point it gets into our products as well.

But, no, we have some strategic partners we're working with. I have a new CIO, and we're moving at light speed. And we're really excited about it, and the employees love it. New tools, new processes, new systems. It's making a big difference for the company. Earlier this week, announcing 5% reduction in workforce. Walk me through that, how that contributes to the margin picture at a time where you are looking to make more because of more demand.

Yeah, absolutely. I mean, we took a fresh look at our processes. All these investments that I just mentioned, you know, result in inefficiencies. So it's never fun or easy to do, but it was the right thing to do for the business. You know, with the pandemic and the focus on the supply chain and just expediting things, we never really got through that process over the last few years. So we laid out the strategy. We've focused on layers and bands. And, you know, it was the right thing to do. And we laid out the strategy. We've focused on layers and bands and, you know,

it was the right thing to do. And we move forward. All right. Chris Kubasik, CEO of L3 Harris. Thanks for joining us. Thank you. On set, on the heels of earnings. Good to see you. Good to see you. Stock up three and a half percent today. Well, still ahead, regulating space. We're going to hear from the chairwoman of the FCC on the sky-high number of satellite applications and the outlook for space-based communications. Plus, feedback loops win. Up next, how companies like Qualtrics are using data to help customers build better products and get an edge on their competition. Be right back. Welcome back. Consumers are still spending, but in this data-driven era,

businesses need to understand their behavior more quickly than ever. Today, John takes time out with a CEO whose company is harnessing data about the customer experience to try and deliver an edge. Yeah, Morgan. Zig Serafin is CEO of Qualtrics. It's a Utah-based company that was bought by SAP for $8 billion days before a scheduled IPO in 2018, then went public during the pandemic in 2021, and then was taken private for $12.5 billion last year. Qualtrics software

helps companies understand the customer experience through surveys, service calls, and other interactions, and other interactions, and then hopefully fix problems before they balloon. Zig Serafin grew up in Southern California, one of four sons of Polish immigrants, and learned early the value of feedback. It's actually further accentuated by the fact that my dad passed away when I was 10 years old. And so about 11, 12 years old, one of my first jobs was actually walking down the street to one of our neighbors and saying hey i'll cut your weeds and uh i'll clean up your yard if you'll pay me hourly to do it and that was because i just wanted to earn some extra money on the side

uh and then the next job was um working at a construction company. I was actually installing powder-coated aluminum railings on buildings. And I learned, for me, working for the family that owned this business, what it meant to be a true owner in a business. Now, in the AI era, owners of companies are racing to get advantages from their data, but just having unique data isn't enough. They need to continuously learn from it., but just having unique data isn't enough. They need to continuously learn from it. And that's an insight Zig started zeroing in on when he was an executive at Microsoft, even before he joined Qualtrics. Recommendation models are only truly smart

if they're fast learners. The quality of the algorithm, the quality of the model, whether it was a language model, whether it was a speech recognition system, the recommendation model would be only as good as the power of the feedback loop that existed between the human being and understanding their intent, understanding the level of effort that it took them to be able to complete something, and how quickly the underlying model or the computer would learn from that interaction. And this had a defining effect on me because I felt like there was room for yet another type of platform that could be built in the new era

of where data-driven systems. So the timeout takeaway, feedback loops win. What Qualtrics is working to do and what Adobe and Salesforce are also pushing on is using data from the customer experience to inform software agents that automatically make smarter recommendations or fix glitches. Maybe the kind of insights that product companies have traditionally gotten from secret shoppers. If it works out, maybe we'll see Zig Zareffin and Qualtrics make another run

at the public markets before long. Morgan? All right, We'll be watching. Up next, the CEO of NerdWallet breaks down his company's latest earnings and his outlook for consumer spending as interest rates do creep higher. Plus, check out shares of ExxonMobil, one of the worst performers in the S&P 500 today after missing profit estimates due to lower refining margins and natural gas prices. You can see those shares finished down about two and a half percent. Stay with us. margins and natural gas prices. You can see those shares finished down about two and a half percent. Stay with us. Welcome back. NerdWallet pulling back today after reporting results last night. Revenue came in better than expected, but was down five percent year over year. The company citing a tight lending environment. For more on the report and what he's

hearing. Let's bring in NerdWallet founder and CEO Tim Chen. Tim, good to see you. So the demand for loans in this environment and really just the willingness of lenders to lend out to certain demographics continues to play out. How is it trending? Yeah, thanks for having me back, John. Yeah, definitely proud of the team for exceeding revenue and profitability guidance during the first quarter. But yeah, like you said, the lending environment is tight. I mean, we've got elevated interest rates. We've also got banks seeing higher delinquencies. They're elevated levels in areas like credit cards and auto loans. So some natural inclination to be a little more conservative there. And that's really putting a

headwind in terms of our lending business. We're really thinking about investing through the cycle, growing cycle to cycle, though. So definitely putting investment in a product as the headwinds remain pretty tough. And your business, a big part of it is putting consumers together with those who are offering financial services. One of the big stories of the year has just been these higher insurance premiums. What's happening in your insurance business and to what extent does it reflect that? I guess as consumers are probably looking to comparison shop on these rates. We've certainly seen a ton of interest. I mean, people are getting notices of insurance premiums

going up a ton. It's pretty widespread. I mean, just for some quick context here, you know, inflation, the cost of replacing a car, the cost of buying a new car, the cost of fixing your home has all gone up, and insurance companies haven't been able to keep up with those price increases. And so, yeah, the market's been pretty tough. We are starting to see a recovery. Insurers really started turning it around in terms of some of their core profitability metrics in Q4 and Q1, and that market is starting to open back up. So, we had a record order for insurance in Q1 up 5% year over year. We've been investing through the downturn and feel really well positioned to take advantage

as the market comes back. Tim, you're talking about tightening underwriting standards and the fact that banks and other lenders are pulling back on some of that. Is that sort of the sole reason that you're seeing some softness in that part of the business? Or are you seeing some signs that consumers themselves are pulling back or are belt tightening themselves? Yeah, I think it's more driven by the appetite from lenders. So it's a combination of both balance sheets being a little bit strained coming out of the regional banking crisis last March. You know, in some cases, we have lending partners who don't want any more customers, even though they're very profitable. And then in other cases, it's really more that just tightening around the underwriting box. So we think that's very normal, cyclical dynamics,

and that it'll play out over time. The leading indicators I would look to are things like consumer delinquencies. You had several credit card companies call out that those are starting to peak or have already peaked. And that could be a leading indicator that things will loosen throughout the year. How aggressive are you prepared to be in SMB products and business credit cards here? Yeah, SMB is a very important area. I mean, we have so many small business owners in America. Their financial decisions are just as, if not more confusing than consumers. Taking out a small business loan is a huge financial decision, probably the biggest one you'll make in your life, right?

So we help people figure out which loans to take out, what their options are, and we help them when they need to renew. But we've also expanded into areas like checking accounts, credit cards, picking software, even payroll providers, how you accept credit card payments. And that type of stuff, I think, is very important information for making informed financial decisions. All right. Putting buyers and sellers together. Tim Chen, thanks for joining us here on Overtime. Well, get ready for the busiest week of earnings season. No, it wasn't this week. It's next week. Key names and numbers to watch straight ahead.

Plus, the chairwoman of the FCC on the regulator's growing role in space and how she's trying to speed up the new space economy's growth. And if you love the show because you love the show and because you want even more overtime, we've got a QR code for you. Yeah, I know it's been a while. There it is. It's on your screen. You can scan that. Follow us on LinkedIn, where we do post exclusive content. Overtime will be right back. It was a strong finish to the week on Wall Street. The Nasdaq climbing more than 2% today, more than 4% for the week. It's best week since November of last year.

Alphabet helping to drive those gains, closing above $2 trillion in market cap for the very first time. The S&P 500 up 2.6% for the week, also its best week since November. 50,000. That is the number of satellite applications awaiting approval from the Federal Communications Commission. This is the agency tasked with overseeing satellite communications, including mega broadband constellations like SpaceX's Starlink and Amazon's Kuiper. The surge propelled the FCC's chairwoman, Jessica Rosenworcel, to establish a new division, the Space Bureau, which just marked its first year. We have so many more satellites, so many more applications pending before this agency,

and so many new technologies that incorporate space-based communications. But I decided to reorganize the agency and set up a Space Bureau to help accommodate all of that demand and also make sure that our processes are really built for this new space age. So during the last year, we have done loads to try to address that with a streamlined process for applications with new spectrum for commercial space launches and new policies to prevent things like orbital debris. The FCC now has its hand in regulating everything from space junk to emergency satellite cell service, think Apple iPhones, to in-space activities like space stations and on-orbit refueling for satellites. It even issues the licenses for lunar landers to

carry out their missions, including the recent one with intuitive machines. But Chairwoman Rosenworcel also notes that the role space is increasingly playing to help ensure more complete and fluid connectivity on Earth. Single network future is really important where we combine wire, wired facilities like from fiber on the ground with traditional terrestrial wireless, new unlicensed technologies like Wi-Fi and satellites in our skies. The goal is for it all to be seamless to the user, whether that user is a piece of industrial equipment with a sensor on it or URI with a handset. We want all of those networks combining to offer seamless connectivity. That, to me, strikes me as the goal for the future. But what is most striking about it

is that satellites might be in our skies, but they're an anchor tenant in making this single network future happen. And it all comes down to access to spectrum as well. The FCC is moving to develop a regulatory framework to enable more collaboration between these different technologies. My interview was before the FCC's big vote just earlier this week to reinstate net neutrality. But that move only increases the demand for this kind of a potentially single network strategy because of all the demands on data. My full conversation with Chairwoman Rosenworcel is available on my podcast, Manifest Space. Scan the QR code on your screen to check it out. John, it makes me think about T-Mobile CEO

Mike Sievert, who talked about this idea where fiber and wireless, and he's working with SpaceX and Starlink as well, this idea of bringing all these capabilities together to create more connectivity. Do you end up with satellite traffic jams? I mean, right now, Starlink has really, you know, I guess, owned the marketplace when it comes to the highest technology communication from space. It's been so much of the Ukraine story and so much of Elon Musk's power. But as the FCC lays this groundwork, are they still going to be able to maintain that lead? And I think that's the key reason, one of the key reasons why they have implemented this Space Bureau is because you have all these applications, you have all these satellites and other types of spacecraft on orbit now. And that is a very real risk, the idea of

satellite traffic jams. And we talked about that in the interview, too, and sort of what that means in terms of allocation of spectrum, what that means in terms of the FCC regulating how these different commercial companies are operating in space to avoid that. And also what it means for orbital debris, as she put it there in what we just played, because there are loopholes in the regulatory framework as it exists. They're moving to close them so that decommissioned satellites basically get out of the way more quickly and aren't just hanging out in space causing a real risk. And we got Dave Limp, formerly of Amazon, now working for Jeff Bezos and another job at Blue Origin, who I guess is going to deal with that as well. That's right. And I think it's going to be a big year. I suspect before the year is out, we're going to have a number of milestones from that company, including, by the way, its New Glenn orbital rocket poised to make its maiden flight. So one to watch as more Kuiper satellites are also expected to go to orbit this year.

Always fun to watch those launches. Well, the biggest week of earnings season is about to be upon us. About a third of the S&P 500 reports next week. About 20% of the Dow as well. The big headliners are Amazon and Apple, but we're also getting results from AMD, Starbucks, Qualcomm, Coinbase, and many more. Aside from earnings, investors are also going to closely watch the Fed decision on Wednesday. Many now expecting no cuts. Chair Powell's news conference and the April jobs report out on Friday. That's that's a lot to look ahead to. But I think particularly Amazon earnings giving the

setup that we had from Microsoft and Google this week. And then questions about you also get some consumer signal from that company. You get some consumer signal for that company. Something else that we haven't mentioned that has typically flown below the radar up until the last couple of quarters has been Treasury refunding announcement, too. But given the fact that we do have this FOMC announcement, we had some auctions with some mixed results this year, this week as well. We've seen this backup in yields more broadly, and we know that that's been pressuring stocks. I think that's going to be one to watch. Yeah. I mean, a sticky inflation environment. It does seem like the micro, right, the earnings that we've been getting in overtime largely has sort of taken the narrative

away from the macro, which had so many people wringing their hands up until this point. I mean, just like we were talking about at the beginning of the show, you look at the S&P's chart where we were late February, where we are today. It's been a it's been a ride. I mean, look at look at today. Right. It's mega cap tech is in the driver's seat for the market right now. The secular AI growth story is in the driver's seat for the market right now. But only and you can counter meta versus Alphabet and Microsoft yesterday or this week, only if companies are detailing in a way that investors embrace the way that they're monetizing that AI strategy and the way those investments are starting to trickle down to the bottom line or to certain metrics around cloud.

I'm going to channel Santoli a little bit here, though, because if you back out and you look at that meta chart, yeah, I mean, it had really spiked after last quarter's earnings. The bar was high for meta. But now it's back on maybe that same trajectory that it was on before. So, yeah, it was a big tumble, but it had really started outpacing some of those other names before. We haven't even talked about Apple. Apple's next week, too, and AMD. We don't talk about Apple. It's like Bruno.

It just happens. Apple saw a rally. Apple saw a little bit of a relief rally as well. That's going to be another key one to watch. That's going to do it for us here at Overtime. Fast Money starts now.