Closing Bell - Closing Bell: Overtime: Intel CEO Pat Gelsinger on AI and chips, Early Instacart investor on IPO, How high will oil climb? 9/19/23

Episode Date: September 19, 2023

Stocks closed lower but off the worst levels of the day as investors await Wednesday’s Fed decision. Adam Crisafulli from Vital Knowledge and Nancy Davis from Quadratic Capital discuss the market set-up and the pop in yields. Early Instacart investor and Y Combinator CEO Garry Tan talks about the company’s first day of trading and what other names are in the pipeline. Intel CEO Pat Gelsinger talks about the company’s latest AI efforts from the sidelines of the Intel Innovation summit. Dan Pickering from Pickering Energy Partners discusses oil’s steady rise. Plus the latest on Amazon, Alphabet, and Rocket Lab’s failed launch.

A down day for stocks. Every major average lower as the FOMC meets. That is the scorecard on Wall Street. But the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. And I'm John Fort joining you today from Intel's Innovation event in San Jose. Just a few moments we'll speak with Intel CEO Pat Gelsinger in an exclusive about the company's AI plans, turnaround efforts as that stock falls hard more than 4% today, Morgan. We're looking forward to that. Also ahead this hour, Y Combinator CEO and early Instacart investor Gary Tan joins us to talk about the company's IPO and the stock's big pop. And we are expecting more breaking IPO news this hour as we await pricing from marketing automation company Klaviyo.

But we start with our market panel. Stocks under pressure ahead of tomorrow's Fed decision, but closing well off the lows. Joining us now is Vital Knowledge founder Adam Crisafulli and Quadratic Capital Management CIO Nancy Davis. Great to have you both here. Adam, I'll start with you. Almost stocks under pressure today. Almost every sector in the S&P finishing lower with the exception of health care and communication services, basically flat. A lot of focus on higher energy prices in recent days,

higher yields in recent days and a stronger dollar. Your thoughts? Yeah, definitely. I think that, you know, there's a lot of anxiety around the inflation dynamic with oil prices causing a real acceleration in inflation. You know, the real catalyst for the sell off this morning came at 830. You had a very hot Canadian CPI report. You know, normally U.S. stocks aren't very responsive to Canadian economic data, but I think just helped reinforce or underscore the existing anxieties about what's happening with energy prices and the effects this will have on global inflation.

You know, like you mentioned, very impressive rebound off the lows, even though Treasuries ended near their lows of the day. So the stocks bounced, but Treasury prices were under a lot of pressure into the bell as we look into tomorrow with the Fed. You know, I think there are a couple of reasons why the Fed tomorrow on an absolute basis is going to be hawkish. But there are reasons why I think it's going to actually look dovish relative to expectations. OK, I want to get into that. But first, Nancy, your thoughts, particularly what the bond market is telling us right now ahead of that Fed meeting and the results, the comments from Powell tomorrow. I think most people are expecting no hike tomorrow, but Powell to be

very hawkish with his commentary, kind of a repeat from Jackson Hole in 2022. And he sounded like Ric Flair, right? He was like, we're going to hike. Things are going to get tough because although they're not going to hike lately tomorrow, inflation data has not cooled. And, you know, we are seeing a lot of pressure given the rise in oil and gas prices. Yeah. Ric Flair. I like the little shout out there. I remember him. I remember him and his his daughter, Charlotte Flair, is my daughter's a big fan. So so I appreciate the metaphor there. Adam, I do want to get your thoughts on what you expect from Powell tomorrow. It's priced in that we're not going to get a hike. But this idea of, you know, higher for longer,

what the dot plot tells us. And to Nancy's point, just continued hawkish rhetoric here. Yeah, so I think it's going to be a very nuanced report with a lot of different moving pieces. So we know we're not getting a rate hike. Powell will not close the door fully to future rate hikes. But I think it's pretty clear, and I think this will be the message tomorrow, that the funds rate ceiling has been reached already. And he will emphasize how the Fed is going to keep rates elevated for an extended period. But the market's repriced pretty aggressively already. So the market-based year-end 24 funds rate rose above 4.6 percent today. That's above the current dot. I think most people assume you're going to get an increase in the 2024 dot tomorrow. But the market's pricing a lot of that in. And again, I think there are reasons why it can look dovish versus expectations,

one of which is the distinction between headline and core inflation. Headline inflation is reaccelerating. It's probably going to reaccelerate further going forward. But core prices are still on a downward trajectory. And there are depressants that can weigh even further with housing and shelter prices in the months and quarters ahead. You know, the labor market continues to normalize. You've seen a lot of progress on this front, in particular, the jolt readings. I think that's something Powell emphasizes as well. And there are a number of growth headwinds on the horizon. So in recent commentary, the Fed has talked about risks, meaning the risk of growth on the downside versus the risk of inflation on the upside are turning more balanced. And I think he's going to acknowledge some of the headwinds lurking on the horizon, whether it's student loans, whether it's the exhaustion of excess savings,

the various different labor strikes, government shutdown potential, et cetera. Yeah. And we've got headwinds on the horizon for the economy, Nancy. And yet we've had two now strong IPOs out of the gate, whether it was ARM last week or Instacart today. We've got another one pricing here imminently. What does that tell us? Well, I think corporate America is ripping, you know, trying to sell, right? They're trying to get out. I think if you even look at the New York Fed's indicator of a recession, they're using the yield curve.

The yield curve is now more inverted today than it was even in the late 80s. So I think all these IPOs coming to market is showing that it's a lot more expensive to raise debt with higher rates. And it's time that a lot of corporates are trying to cash in. And I think that could be a really counter indicator for people and for their investing portfolio. When everybody else is trying to sell, isn't it Warren Buffett who said you have to get greedy when others are fearful and greedy when

others are fearful? So right now, the market is trying to raise cash, trying to raise capital. And I think the Fed's balance sheet is really an important key, too, to watch tomorrow to see if Powell gives any indication. You know, the Fed has put into these $95 billion of caps per month. They're not actually meeting these roll-offs because prepayments are down. So they're not able to reduce their balance sheet at the speed that they've said they are. And then also with Silicon Valley Bank in March, they had another bank liquidity event and more balance sheet expansion with the bank funding program. So I think the question to watch tomorrow is if there's any change with the caps and if the Fed addresses that they're not meeting this monthly roll up of $95 billion. Yeah. One more thing to watch

tomorrow. Adam, do you want to get your thoughts on the IPO we saw today and whether we've turned a corner for that market? Is this a good thing or do you see it similarly to Nancy? Yeah, I kind of agree with Nancy. I think in the near term, it does reflect healthy appetite risk sentiment. But there actually is kind of a supply demand issue, you know, coming into the market with stocks where you have an uptick in supply. So IPOs and secondaries and then the volume of corporate buybacks is actually shrinking a lot. And this kind of ties back to what you saw at Disney today, where they announced this enormous capital investment program for their parks division. You're seeing companies invest more in their business or for whatever, for a variety of reasons, including more investing in the business, they're curbing buyback activity. So there's this supply demand imbalance that can be a headwind if this continues for the next

several weeks. Quickly, is that why Disney had such a weak day today and it downed 4%? Yeah, I think there's just some anxiety that, you know, they're going to double the amount of capex going forward over the next 10 years. You know, there is some anxiety that, you know, they're going to double the amount of cutbacks going forward over the next 10 years. You know, there is some anxiety that they're doing so potentially at a peak or a near-term peak in travel. There are definitely some indications that travel is peaking after several very robust years. You know, one can argue that their balance sheet is already under a little bit of stress right now as they pay for the streaming transition. So I definitely think that was a big factor behind the sell-off in that stock. Yeah. Disney, one of the worst performers in the Dow. The only one that was worse was Intel.

We're going to be hearing more about that company when John Fort brings us the CEO, Pat Gelsinger, a little bit later this hour. In the meantime, guys, thanks for kicking off the top of the show with me, Adam and Nancy. S&P finishing the day at about 44.43. Let's check in on investors' appetite for risk with Senior Markets Commentator Michael Santoli. Hey, Mike. Yeah, Morgan, more on the interplay between greed and fear, between risk tolerance and defensiveness. Take a look at the ratio of the high beta stocks in the stock market, the more aggressive, faster moving ones, and cyclical ones relative to low volatility,

defensive ones. You see it's had this downturn and I've seen some people get a little bit concerned about that dynamic right there where you see like the succession of peaks low high low again and maybe is potentially a concern and a sign that the market is turning a little bit more defensive and a little bit less generous toward riskier enterprises. I don't think we're quite in that point of feeling as if it's changed the complexion altogether. These were the real risk-off periods. Obviously, that was last year's downturn in the economy and the markets and the Fed tightening so much.

And then here was the regional bank crisis. So at this point, we're kind of holding in the upper-to-middle zone of risk appetite. It seems okay. And then when we turn to a similar measure in the credit markets, a measure of a willingness to take on a higher risk in corporate debt, this is the HYGH. Now, this is basically an ETF of junk bonds that hedges out yield risk through Treasury. So, in other words, it's a way to isolate the spread activity in corporate bonds.

And so you see the prices of these corporate bonds relative to Treasuries going nicely higher and holding near the highs. So it seems as if if there's going to be some nasty surprises out there, the credit market is not really anticipating them, Morgan. Yeah. I mean, what would it even take? And I realize a surprise is a surprise, but we've had a lot of data that perhaps would have moved this over the past month or at least over the past year, and it hasn't. So what are some of the examples of things that would actually maybe shake this up a little bit? I mean, number one would be some kind of an air pocket in economic growth. If anything happened, if we did get, you know, an oil spike, if you all of a sudden started to see a big jump in layoffs and things that really said, OK, the economy is going to have a harder stretch here, that's immediately going to be registered in these in these measures. But, you know, it's one of those things where it's an if,

not a when. We simply don't know if that's the direction we're headed in anytime soon. All right, Mike, great stuff. We we're headed in anytime soon. All right. Mike, great stuff. We'll see you later this hour. Thank you. After the break, Insta gratification. We'll talk to early Instacart investor and Y Combinator CEO Gary Tan about today's listing as the stock closes well off its best levels of the session. Plus, we're still awaiting pricing for the next company waiting in the wings to go

public. Klaviyo will bring you that as soon as we have it. And later, don't miss John's exclusive interview with Intel CEO Pat Gelsinger from the sidelines of Intel's Innovation Summit. We have got a huge show ahead. Stay with us. Overtime, we'll be right back. Instacart finally making its public debut today, finishing the day up 12 percent after pricing at $30 per share. And the company's CEO laid out plans to continue growth earlier on CNBC. Take a listen. As for how we accelerate growth going forward, you know, we are going to continue to do the things that served us well to get to this point, which are having absolutely unmatched selection,

having great affordability options for all kinds of customers, having the absolute best quality so that you get the order to your door that you need, and having the best convenience. And that's what has made us market leaders. That's what is going to continue to carry our growth. So joining us now is Y Combinator CEO Gary Tan, Y Combinator invested in Instacart more than 10 years ago, back in 2012. Gary, it's so great to

have you on the show. Thanks for being here. Thanks for having me back, Morgan. So a strong debut for Instacart after the IPO price, the pricing process was raised and finished the day at about 3370 here. I want to get your thoughts on this debut of Instacart, especially since, yes, a strong first day as a public company, but still just a fraction of the valuation, the $39 billion valuation we saw for this company a mere two years ago? I think the big thing that all founders out there are actually learning about, sort of the hard way, is to what degree interest rates are really affecting valuations and how they should think about their business. And the thing is, everyone's talking about 2023 as back to basics. That's true for venture. That's true for high growth startups. And the great thing about it is when you get back to basics the way Instacart has, you

have a long and profitable future ahead of you. And I think that this is the new normal, but that's a good thing. These companies are so much more profitable. They're driving cash flow. And I think that that is good for investors, good for our capitalist economy. Yeah. So what are public investors now who might be circling Instacart and the stock? What do they need to keep in mind in terms of future growth levers for this company and how they should be viewing it?

My favorite thing about Instacart was obviously that it was able to grow incredibly efficiently, especially during COVID. But the wild thing about it was that as people started to use it for the first time, they stuck with it and they keep using it over time. And so in the end, for especially consumer products of all sorts, I always look at that key retention number. It's something that at Y Combinator, we talk about with early stage founders all the time. If you don't have retention,

then there's no long-term cashflow. There's no business. You can't value it at all. But if you have something that really changes behavior and people stick with for the long haul, that is a longstanding brand that will last and stand the test of time. And I think that that's what we've got with Instacart.

Yeah, which of course brings me to this story, going back to 2012. The founder, Apoorva Mehta, wouldn't take no for an answer. It's a great entrepreneur not quitting story. Was really looking for Y Combinator to make an investment and went as far as using Instacart

to deliver beer to you personally. Walk me through how all of this happened. Absolutely. Y Combinator funds, at this point, we funded more than 4,000 companies. And the key innovation is funding people in batches, kind of like a university. But the tricky thing is we would back then especially look at things only during the application period. But Apoorva would not take no for an answer. He emailed everyone. I was the one who replied and said, well, it'd be almost impossible to get you in now. And so a true founder takes that and says, so you're saying there's a chance. And so he tracked me down at the Mountain View Y Combinator office and actually he had already hired two people working off of Craigslist to do

deliveries. And so, a lot of people at the time were trying to do exactly this idea, but they were trying to do it with a pitch deck. They were out there raising on Sand Hill, trying to show, here's the idea, give me money and I'm going to go do it. But here was Apoorva saying, you know what, I'm not going to wait for that. I can actually build it myself. I'm going to get the inventory info. I'm going to get the images. I'm going to get the payments. Both the driver and the consumer app were entirely built.

And so that was my favorite thing about it. And I'm so glad he did it because he also made my career as an investor 11 years ago, right at the beginning of this 11-year overnight success. It's such a good story. So I have to ask, we saw Arm last week, Instacart today. We're waiting on pricing for Klaviyo. Has the door kicked open now for more of these late-stage private companies to actually come public? I absolutely think so. When companies have strong cash flows, when they have durable businesses, it's time to go public. And I'm really excited to see that level of health sort of ripple across all of startupdom. You know, it's time, guys. It's time, founders. Let's go. Yeah. Real

quickly, Stripe, you're invested. Class of 2009 for Y Combinator. Are we going to see that anytime soon? I don't have any special information, but I do think that that's a really enduring company too. Yeah. Gary Tan, great to have you on. Thanks for joining me. Thanks for having me. Don't miss an exclusive interview with Instacart's founder.

Speaking of, tomorrow at 7.30 a.m. Eastern on Squawk Box. And as we talk about IPOs, we're still awaiting pricing for marketing automation firm Klaviyo. We'll bring that to you as soon as we have it. After the break, though, John Fortz joins us from Intel's innovation event with a very special guest. John. Yeah, Morgan, I've got Pat Gelsinger sitting across from me right now, ready to go as usual. The stock was down today, but not necessarily because of what was announced here. We'll be right back with that full conversation when Overtime comes right back. Welcome back to Overtime.

Intel, the worst performer in the Dow today, but about the best performer over the last month. The company making a flurry of announcements here at its Intel Innovation Conference. The overarching question for the stock, though, can Intel design artificial intelligence chips to chase down NVIDIA and fix its manufacturing problems in time to make them? Joining me now to answer that question is Intel CEO Pat Gelsinger. Pat, thanks for having me back in my second home in San Jose. Hey, always a pleasure, John, and really appreciate being on the show with you as always. So let's get straight to it. Gaudi, you announced for Gaudi 2, that's your existing chip, a pretty big customer instability

AI, so that's heartening, but Gaudi 3 is the one that's really supposed to close the gap with NVIDIA. Is it on schedule? How soon in calendar 24 can we expect it? Yeah, so I say overall, you know, Gaudi 2, Gaudi 3 next year. We also disclosed Falcon Shores here. We have a robust roadmap for 23, 24, and 25.

And Gaudi 2 is super important because it's sort of that on-ramp to Gaudi 3 and then to Falcon Shores, so that whole momentum of the roadmap. Obviously, the stability announcement today is a big GAUTI 2 announcement. We also announced Dell as a partner on delivering GAUTI 2 based systems.

But as you say, it's the warmup for GAUTI 3 next year. We have a first silicon out of fab. It's now in packaging, looking very healthy so far. So we'd say the roadmap is on track. And the MLPerf scores, the key machine learning benchmark today, is showing us we are very competitive with the market leader, NVIDIA. And in many cases, finding the best that they have is about as good as Gaudi 2. So we're very competitive today.

And obviously, Gaudi 3 will be a big step up from there. And I disclosed the first details on that today. But we're gaining momentum right now and the market's starting to realize there's another opportunity here for AI leadership in the industry. As I mentioned, the stock has been up considerably, outpacing the overall semiconductor ETFs over the past several weeks. But now I've got to ask about manufacturing, right? Because these five nodes in four years, for those who aren't fab geeks, that's moving at about twice the pace that Intel used to move.

The longer we go with you saying that you're on pace in manufacturing, that's a good sign. So are you on pace? Yeah, in the five nodes, we first, Intel 7, done, that's Sapphire, Rapids, Alder Lake, Raptor Lake, the PC products that are now in volume. Intel 4, our Meteor Lake product, or today we announced the brand for that

called Intel Core Ultra, right, with the new AI capabilities, so that's now ramping in volume. So we'll say two are done. And we've showed the server products for next year, what we call our Granite Rapids and Sierra Forest, and they're on our head of schedule. You know, so we'd say the next two are on track. And then we showed the first Intel 20A. And this is super important because this is the new transistor, the new backside power. You know, these are the breakthroughs. And as I sat on stage today, this new transistor,

it is a Picasso. It is a work of art. And for somebody like myself, who's been in the industry for 40 years, right, it is spectacular. But the culmination is 18A. And what we said today is, hey, we'll soon be releasing the final design rules for that in the very near future so that the industry can start. And I'll be sending my first products in the early part of next year for manufacturing. So it's on track. So two done, three on track. We're feeling really good about getting back to process leadership and doing that from a manufacturing base in the U.S. and Europe. This is spectacular.

Now, I've been hearing questions about gross margins, right, which have taken a big hit as you guys have, you know, both gone into investing in capital to build out fabs and lost some market share over the past couple of years. And I think some people wanted to hear today about gross margins in 2024. But correct me if I'm wrong here. We don't know what inventories are going to look like heading out of Q4, which is right in front of us. It's a big question, a big issue that affects margins because of factory loads. And then as you're spinning up these new process technologies, that's what tends

to hit margins too, as you're getting a new process started. So is that why perhaps you're not saying too much about margins in 24? Well, you know, we're in the quiet period, you know, a couple of weeks left in the quarter. We just weren't going to give any more updates on the financials. And, you know, so far this quarter, you know, we said, hey, we got our first major prepay for 18A, our next process technology. So, you know, boy, that's better than a customer name. You know, put money on my balance sheet to accelerate my manufacturing build-out. You know, we also announced that we were, you know, above the midpoint of our guide. You know, I'd also say, hey, we were beat and raised the last couple of quarters.

And, you know, we'll be updating on our October earnings call. So I'll say, overall, we've shown great financial discipline on cost savings we've been beaten raise as we've gone through the year and clearly as we come up on our next earnings call we're feeling the momentum in the marketplace the product machine is working the manufacturing machine is doing well but obviously hey the market has worked through a lot of inventory issues those we believe are largely behind us on the client side. We said we still have a little bit more work

on the networking and on the data center side for that. But of course, this is an expensive journey, right? We're investing a lot, but we lowered the margins and we've been consistently bringing them back on our head of what we've committed to the streets. So I'm feeling good about every aspect of the execution and our financial performance. Back to AI, but not necessarily in the data center this time. You talked today about the AI PC, and you and I have talked about how your expectation is

we're going to move from accelerators, from generative AI into more inferencing. And with those workloads, there's going to be more need for AI on the client, on the PC, on the phone, places like that, places where Intel has more strength, let's say, than right now in the data center. Is this AI PC a preparation step in that direction? What are we going to get with that?

Yeah, and we see this idea of the AIPC, and I've described this sort of like a Centrino moment. You know, when we first brought Wi-Fi into the platform, and now, you know, it cut the wires and changed everybody's life. And we see the AIPC that begins now with our next generation ultra processor launch, you know, is ushering in volume AI deployment.

Hey, a little bit of Gen AI in the cloud, hey, that's fun, but can I make it part of your everyday experience? Where, you know, we showed off today, one of my favorite demos of today was rewind.ai. We're literally on the PC locally. I'm not sending my data to the cloud, no privacy concerns, but I'm able to record everything that I do on my PC and then be able to ask questions.

When was the last time I talked to John Ford? And it will tell me when I spoke to him. Yeah, it will tell me what we- I did see that demo. Right, this is impressive, right? Capabilities that are in place. And I don't lose any privacy concerns, all generated locally.

It's too expensive. And you need developers though, to take advantage of that. Absolutely. And write for the client in order for that to really work. Yeah, and I really see this as a next phase of development. Right, and this is why it's a developer conference that we're here at with innovation.

Developers one and all, and as I say, the killer apps are underway. That one to me was pretty compelling. Also the hearing aid demo I did, right, where literally it's now, my PC is now interacting with my hearing aids real time you know transcription language translation you know focus management being able to suppress or enhance you know external effects for my zoom or teams call or whatever might be on it's going

to be next generation creators uh as well where literally you're seeing, you know, Gen AI and being able to see image, you know, with GIMP in real time and song creation, we're all going to become creators, but with spoken language asking what to be done. So I think this is just, you know, going to be the killer app is the AI PC and our product line is strong. And I believe that it will become a driver

of an expanded PC marketplace. Well, we'll talk more about that, and I know you got earnings coming up, where I'd love to talk to you. So Pat Gelsinger, thanks once again for having me here. As always, John. At Intel Innovation. Hey Morgan, you know, the stock did what it did today, but perhaps bottom line,

Pat's saying they're still on track with that turnaround strategy, with design design with manufacturing yeah that got my attention too john i mean great interview and yes i realize the company's in a quiet period but he does sound pretty upbeat i mean just you know sort of pointing to the fact that they've already guided above the midpoint uh above the midpoint of the previous of their guide and have beaten raised over the last few quarters i'm also very curious about the hearing aid demo and your thoughts on some of these demos, which it sounds like you did yourself. That I did not do. I thought I hadn't seen the Rewind demo, but in fact,

I had. The ways that AI can be used, we're in one of those periods where we're getting a lot of software-based AI announcement, and it's going to take that software to really drive demand for the chips and for the infrastructure. So, you know, this is when things are getting started, you know, but it's unclear how quickly they will get started. Intel trying to show, hey, before you assume you know who's winning this race, we're in. So let's take a look at how this unfolds in the next couple quarters. All right. Great stuff, John, from our own resident fab geek. We'll see him a little bit later this hour. It's time now for a CNBC News update with Bertha Coombs.

Bertha. Hey, Morgan. The Biden administration is no longer sending a team to Detroit this week to help resolve the UAW strikes. Today's announcement comes after President Biden announced last week that he would dispatch officials to negotiate in person. But the United Auto Workers Union and the White House have agreed to meet virtually instead. It's still possible a senior advisor and the acting Labor secretary could travel to Michigan next week. Five players from Spain's World Cup winning women's soccer team returned to practice today after their plans to boycott the team drew sanction threats. The players said they did not feel safe under current leadership at the Spanish Football Federation and would not play to protest sexism at that federation. And Amazon is hiring 250,000 workers to help manage the holiday season rush. This is a jump from the 150,000 employees added during last year's holiday season. The company said it will also increase the average

hourly pay for warehouse and delivery workers to $20.50 an hour. New hires will include full-time, part-time, and seasonal workers. Morgan? It's an amazing number. It really speaks to how much they've built out their own transportation and logistics network. Bertha Coombs, thank you. The NASDAQ pulling back today, but one mega cap name has been a big outperformer of late. Mike Santoli breaks down the charts

on that mystery stock next. And later, oil hitting its highest level of the year before settling lower. We're going to talk about crude's push towards 100 bucks a barrel when we're joined by Pickering Energy Partners CIO Dan Pickering. And as we head to break, check out Disney posing near the bottom of the Dow today, down almost 4%, revealing plans to increase its theme park investments to $60 billion over the next decade. We'll be right back.

Welcome back to Overtime. Check out shares of Rocket Lab tumbling today, finishing down about 7.5% after the space company suffered its first launch failure in more than two years. The 41st Electron rocket failed about two and a half minutes after lifting off from New Zealand after the first stage booster separated. Seems to have been an issue with the second stage. The We Will Never Desert You mission was carrying an Earth imaging satellite for startup Capella Space. Rocket Lab founder and CEO Peter Beck tweeting, quote, tough day. My deepest apologies to our mission partners, Capella Space team is already working on root cause. We'll find it, fix it and be back on the pad quickly.

Rocket Labs also already working with the FAA on an investigation. The company's next mission will now be postponed and revenue guidance is now expected to be revised in the coming days. So it is one to watch. Meantime, Alphabet ending the day in the red as well. But it's been an outperformer this year as investors show confidence in its AI ambitions and earnings forecast. Mike Santoli is back with a look at the charts. Mike. Yes. In fact, Alphabet's within 1% of its 52 week high. It's been a case of people leaving it in the AI rush and then coming back to it. Take a look at Alphabet shares relative to Meta. It's a five year chart and you can see really in lockstep right up to this point,

kind of in the second part of 2021 as the overall market was getting prepared to peak. And then you see these companies sort of successively had these little crises of confidence among investors. This was obviously when Meta detailed its name change and its huge investment plans into the Metaverse. And people didn't want it. They wanted, you know, cost cuts and they want a margin expansion. That's what they got right here. And Meta started to catch up. This area right here, as the overall market was doing OK, was really when people were worried about Alphabet and how it would fare after ChatGPT was introduced and Microsoft seemed to have the advantage. So now they're both participating pretty well to the upside. I don't want to suggest it's a zero sum game between them,

but in terms of the preferred ad supported online media company, it seems like Alphabet is back in front. Take a look at the valuation that would also support that conclusion. This is the forward price earnings multiple for each one of them. And, you know, over a five year span, you see they all pretty much move together for the most part. And earnings estimates also rising for Alphabet pretty nicely this year. And there's just no is barely ahead getting that premium both to the market and to and to meta right now. So it seems as if if we're looking at, you know, which fangs are in and out of favor, the G, the old Google is back in favor, Morgan. Yeah, it's really interesting. And of course, you know, to your point where you sort of started this conversation, Alphabet is one of those names that investors pile into because of AI. But Meta has its own AI ambitions, too,

with Lama 2 and some of the other applications that it's working on as well. Are investors paying enough attention to that name from that standpoint? It's a good question. I don't think that there's a tremendous amount of the valuation that's necessarily attributable to those kind of longer term potential growth prospects at Meta, because right now it seems to me every time they just sort of increase their estimates for margins because they were cutting costs and allowing more money to fall to the bottom line, that has moved the stock higher. So obviously, as I mentioned, not a zero sum game. You could have multiple winners here. I guess the question is, is it fair right now to be paying, you know, 20 times earnings for these companies?

All right. Mike Santoli, thank you. Oil hitting its highest levels of the year today. Up next, a top energy asset manager on whether crude prices will keep on climbing. Stay with us. Welcome back to Overtime. Oil touching highs not seen since last November. This helping power the broader energy sector lately. It's the top performer so far in September in the S&P. Natural gas also having a good day. It's up nearly 4%. Joining us now is Dan Pickering,

Chief Investment Officer at Pickering Energy Partners. Dan, what to make of this? The elevated energy prices, the fact that crude is moving back towards 100 bucks a barrel. Are we going to be facing higher energy costs for a while here? Morgan, I think we're likely to see higher prices than we have

recently. You know, crude's trying to make a run for 100. I'd argue that's not necessarily a great price for sustainability of demand. We worry about demand if price gets too high. So the good news here is, if you want to call it good news, is that OPEC has three plus million barrels a day off the market. They can bring it back if price moves too high and demand's at risk. So I think we think about oil in the 80s, natural gas in the $3 to $4 range as the most likely outcome for 2024, 2025. So we're pretty bullish on the commodities. And yet OPEC hasn't brought it back. You have the rig count has been declining here in the U.S. for the last couple of months. And oh, by the way, the SPR has been depleted to levels we haven't seen in decades. So I guess

when does the supply demand balance even out? What is it going to actually take? Yeah. So I think what we know isn't going to happen is I don't think we're going to see U.S. oil and gas producers really start to spend aggressively. Why? Because Wall Street's told them they shouldn't. The second dynamic is if they start spending, the likelihood that OPEC brings that spare capacity back onto the market and smacks them with it is pretty high. And so I think that that price probably stabilizes at a pretty decent level. If it tries to go higher, Saudi and OPEC bring it back. If it tries to go lower, you know, I'd say we'll see demand increase then. So, you know, I think I think we don't expect a lot of incremental volume. And that's why price has gotten to where it's at.

Last point, you know, the the speculators or the financial players have really started to to come into the market. They've been underinvested. Now they're chasing. And so that sort of throws fuel on the fire. And of course, we're having all this conversation in in this broader macro context of how it's funneling back into the inflation outlook as the Fed meets this week and makes a rate decision. But you mentioned nat gas, three to four bucks. That's higher than where we're at now. And yes, oil prices funnel into gas prices and other types of fuel prices, but nat gas funnels into utilities as well. Why do you think that's going to be elevated from the pricing we see right now? Yeah, so we've had a lot of drilling and essentially no incremental export capacity for natural gas out of the U.S. during 2023. As we move into 2024 and into 2025, we're going to see more LNG exports, so that's more demand. And we don't necessarily have a lot of incremental

supply in the 24, 25 time period. So price should improve. The futures market expects that at this point. If you look out to 2024 prices in the threes, if you look to 2025, it's almost four bucks in MCF. So the export capacity to the global LNG market is really sort of the incremental catalyst here. And it'll show up in utility bills as we move through 24. Okay. Dan Pickering, great to have you on. Thank you. Up next, Amazon's hardware chief on the state of consumer spending and the outlook for AI devices in your home. And take a look at shares of NIO turning in their worst day of the year on news of

a $1 billion convertible debt offering. Shares fell 17%. We'll be right back. Welcome back to Overtime. Amazon's unveiling its holiday device lineup tomorrow outside Washington, D.C. at HQ2. The event typically features updates on products including its Fire TVs and tablets, Ring Home Security line, and Echo Assistants. So I spoke with SVP of Devices and Services, Dave Limp, today ahead of that event and asked him about the health of the consumer compared to what he expected under the economic storm clouds at the beginning of 2023? I would have been pleasantly surprised, you know, that the consumer's ability and willingness to spend on things that they value seems to be better than we would have predicted. That being said,

you know, customers are really looking for deals. You know, we saw it during Prime Day. It was a record Prime Day. And so price does matter a lot. And offering oversized value, I think it's going to happen. We just yesterday announced our Prime big deal days in early October. And I think that'll happen again. So I think we're really, certainly in the devices and services team, we're doubling down on kind of value. And can we give oversized value to customers? Because that appears to be what's working in what is still a turbulent economy.

Limp didn't tell me what's coming tomorrow, but we did talk about Amazon's philosophy behind the products it's brought to market over the past 15 years or so. We've really focused and concentrated not only with the devices we've invented, but some of the acquisitions that we've done over the years on trying to take the innovation that you see happening in phones and bring them into your home. And now, once you bring them into your home, you have a different dynamic. It's not a one-to-one user interface like you would have with your personal computer or with your phone. It's a one-to-many experience. And so you might have a device or two devices in a kitchen or a living room, and you want multiple people to be able to talk to them. And that's kind of how we've evolved this idea of

ambient intelligence, which is a sort of more, I'd say, a more passive user experience. And it's not meant to replace the phone or the personal computer. They're here to stay. But there's now so many homes that have this. You know, we have hundreds of millions of endpoints of people using Alexa and this ambient intelligence. It's definitely going to be sticking around. Finally, Dave Limp is leaving Amazon after more than 13 years there. And there have been headlines this week that Microsoft Chief Product Officer Panos Panay will be replacing Dave Limp at Amazon. I asked Dave if he could comment on that. He said not today, but he did tell me why

he's leaving Amazon. I kind of came to the epiphany earlier this year that I had been doing some version of this job. We've known each other for a long time, for 30 years. When I started as a wet behind the ear product manager, I went to Apple in 1987. And so I've done a lot of Christmases, a lot of holiday seasons, shipped a lot of products. And I kind of decided that if I was going to do something next, that I just didn't want to be in the consumer electronics space. If I wanted to stay in the consumer electronic space, I would stay in this chair. This is the best job in the world. I've said that publicly for many, many years. And so now I'm just going to think about doing something that's a little different. Morgan, a lot more upbeat than just a few months ago when Amazon was cutting in the devices and services business,

cutting back on Alexa. And now we got this announcement from Amazon coming up tomorrow, then Microsoft after that. So after just having Apple a few days ago, there's a lot going on. There's a lot going on. I did think his tone was very interesting because it juxtaposes the report that's out from Reuters today, basically saying that Amazon devices unit morale has waned amid these cost cuts, job cuts, and weak development pipeline. But that's not the tone that he struck in his conversation with you. Well, you know, he's on TV. He's talking to me. He's not going to sound down any unit that's hit with those

kind of cutbacks. And having been in journalism as long as I have, you know, we have been in that position. You're not going to, you know, it takes a while to perk back up, certainly. But things have changed in the overall economy throughout the course of the year, as he did mention. And Morgan, I got to mention, getting out of consumer and back into enterprise for a moment. Don't miss another big interview on Overtime tomorrow when we speak exclusively with ServiceNow chairman and CEO Bill McDermott. AI, once again, he said they've got a big launch coming up and we're going to see it tomorrow on Overtime. We've got a lot. We've got a lot going on tomorrow, John, so hurry home for all of it. All right. See you soon.

See you soon. The Fed is expected to leave interest rates unchanged tomorrow when it wraps up this week's meeting. What that could mean for the market and your money when overtime returns. Welcome back to Overtime. Some key market events we'll be watching tomorrow. The Fed rate decision, widely expected to hold rates steady at the current level. That announcement coming at 2 p.m. Eastern, followed by Chair Powell's news conference. We're also watching earnings.

We'll hear from General Mills, KB Home, and the other Fed tomorrow, FedEx. On FedEx, analysts will be watching how the shipping giant has handled some turbulence with rivals UPS and the now bankrupt yellow, whether they've been able to take market share from both of those situations. CNBC senior market commentator Mike Santoli is back with us. Mike, I got to start with the Fed here because you got labor strikes with the UAW. You got student loan payment resumption. At the end of this month, you have higher energy prices. And oh, by the way, the possibility of a government shutdown. How does the Fed navigate this?

Well, for one thing, I think it helps that they were probably guiding everybody to expect no change in rates this month. And I don't think they're going to be eager to explicitly put on the forward calendar a potential rate hike in November. They want to keep their options open so that they can basically survey the impact of all those things on the economy. Broadly speaking, the Fed feels as if it's in the zone of where it has to be on rates. The question is the outlook into next year. They will be revising, you know, those projections of where rates are going to end up, where inflation and growth is going to be next year. And right now there's like a full percentage point of rate cuts potentially out there in 2024. Probably they might want to take some of that back. How the market absorbs that might be the question.

Yeah. And of course, we do have the 10-year Treasury yields, you know, hitting a fresh high today, too. It sort of speaks to all the issuance that's out there as well and kind of this cross-current of fiscal and monetary policy right now and what it's doing to the markets. For sure. I mean, the higher for longer message that Fed officials have been conveying is definitely making its way to the long end of the curve, as well, as you say, you know, this sort of idea of heavy supply for as far as the eye can see in terms of Treasury issuance. All right. Well, Mike Santoli, we'll see you tomorrow and viewers, we'll see you tomorrow as well. All the major averages finished the day lower. That's going to do it for us here at Overtime. Fast money begins right now.