Closing Bell - Closing Bell Overtime: iPod Inventor On Where Apple Stands Now And What’s Next; Getting Ready for Big Tech Earnings 10/25/24

Episode Date: October 25, 2024

Tony Faddell, inventor of the iPod and co-inventor of the iPhone, joins to discuss the recent spate of bearish Apple headlines—and makes his case for why Apple has a strategic advantage in AI not just right now but for years to come. Plus, the fallout from WSJ’s bombshell report on Elon Musk and Russia and T. Rowe Price’s Tony Wang on how to position ahead of Big Tech earnings next week.

Well that bell marks the end of regulation for the week. Forbes ringing the closing bell at the New York Stock Exchange. Sky Quarry doing the honors at the Nasdaq and tech in the driver's seat today with the Nasdaq hitting an intraday record high for the first time since July led by a pop for the chips but the Dow finished lower by 260 points and that is the scorecard on Wall Street but winners as always stay late welcome to closing bell overtime I'm John Ford Morgan Brennan is off today coming up up this hour, we're going to zero in on the Nasdaq's record and get you set up for a major week of MAG7 earnings coming up, including Alphabet, Microsoft, Amazon,

Apple, and Meta. Plus, former Apple executive Tony Fidel joins us to talk about the latest signals on the stock, including a rare downgrade from KeyBank and new data on Chinese demand. But first, let's bring in our market panel, Unlimited CEO Bob Elliott and Wilmington Trust CIO Tony Roth. Happy Friday, guys. Bob, if I look at this week and today, the 10-year yield has to be a big part of the story. Now stands at around, what, 4.24 percent. It surged above 4.1 to start the week. The surge today maps with the air coming out of stock gains. How do you see its impact? Well, I think it continues to show the dynamics of over-easy monetary policy signaled by the Federal Reserve. That long-end rise, you know, we're up 50 basis points, basically, from the time that the Fed introduced their 50 basis point cut.

And as a result, that monetary policy looked too easy given the strength of underlying economic conditions. And even today, we get more stats, durable goods better than people expected, consumer confidence a bit better than people expected. All of that combined with strong labor market data all combines for the fact that maybe the Fed was a little too aggressive in easing right away and that we need to back out a lot of that easing that was priced in that aggressive easing. And that's basically what we're seeing. Bond yields rise and it's flowing through to the rest of the market. OK, so, Tony, you say the yield surge shouldn't be a problem if inflation stays under control. So how much pressure does that put on the last jobs report before the election out, I think, a week from today? Yeah. Hey, John. Good afternoon. Happy

Friday. I think it puts a lot of pressure on the jobs report. I think that when we think about why the market struggled so much this week with the higher rate environment, we did have the record of the NASDAQ today, but it was it was barely. And so what's happening in the market right now is that the market is really looking for a catalyst to the upside. The election may give us that. And the at the same time, there's a lot of concern and apprehension that the Fed rate cut cycle is going to stall. And so if we get a big labor market report next week, let's say above 250,000 new private payrolls, that could really provide the impetus for the Fed to not move in November. And I think that would really undercut the premise, the short-term premise, at least, for the big rally that we have seen in equities. Bob, let's say that happens. What do you do? Well, I think right now, if you look at the next 10 days, it's going to be a pretty wild next 10 days. We've got mag seven earnings. We've got a QRA. We got the election

and we've got a Fed meeting. And I think in the time being, there's a lot that we'll get a little more clarity on in terms of the direction, both of the economy and on policy. So right now, probably time to ease back a little bit, take a little bit of risk off the table. I think in part, that's what we're seeing this week across stocks as people are positioning with a little less risk ahead of all this information. Really, for me, I'm focused on whether or not the Fed in 10 days is changing the reaction function. You know, they looked about six weeks ago that they were comfortable easing into a relatively strong economy. The question's going to be whether those,

you know, pretty good job reports and some inflation pressures that are coming back into gear are the sorts of things that are going to have them pause their easing cycle, or is it carry on forward? And if it is, all the momentum that we've seen from the over-easy monetary policy trade over the last six weeks will push forward. And if it is, all the momentum that we've seen from the over easy monetary policy

trade of the last six weeks will push forward. But I guess maybe if not, then it won't, Tony. What what what positions would you have in place in case we get a very strong jobs report? Well, first of all, I want to make sure that we remember that we've got a PCE report coming up, too, which is going to have a big impact on how the Fed reacts in early November. If, in fact, we get stronger inflation and PCE report and we get a stronger jobs report, then I think that we want to be a little bit more defensive and we want to be a little bit more focused on quality across the board. But most investors are not going to be that tactical, if you will, at least not the ones that we work with in their portfolios. And I think that the other catalyst that is obviously on the table right now is this election coming up. And what I would just say real quickly, John, about the election is that unless we have, they're not possible outcomes when we think about the two houses of Congress and the White House, and unless we get a blue sweep,

because the market's clearly not pricing in higher taxes right now, in almost any of those other scenarios, we see a catalyst to the upside, whether it's a continuation of the status quo with a resolution of the election in the case of Harris winning with divided government, or whether we have Trump

with an improved regulatory environment and an improved tax environment, we end up with a lot of reason to be hopeful for stronger economic growth. Even if it does mean slightly higher rates, nonetheless, it means better earnings and a continued economic expansion. Okay. Widening the exposure, Bob, what do you do with Asia here? We had that big surge in a lot of China related stuff related to stimulus over there. India was up as well. Some of that's backed off. So is the story over or was that just sort of a preview to value there to come? Well, I think the Chinese authorities are struggling with a depressionary environment. And what I mean by that is, you know, debts are too high across the Chinese economy and a deleveraging

is happening. And the trouble that they're facing is that monetary easing is not enough to overcome the challenges of the Chinese economy. And we continue to see pretty weak stats coming out of China, despite the efforts of policymakers. The challenge right now is while they've focused their stimulus on the asset markets and have gotten a pop in the stock market, that has very little impact on the rest of the economy as a whole. And as a result, until they engage in a much more substantial fiscal expansionary policy and restructuring of their bad debt problems, particularly in the housing market, we're probably not going to see the recovery that has been so often hoped for in the housing market, we're probably not going to see the recovery that

has been so often hoped for in the West, in China, anytime soon. And along those lines, finally, Tony, you still favor the U.S. over non-U.S., despite some of the concerns about the Fed being potentially out of position. Yeah, I think the Fed has actually done a really remarkably good job here trying to stick the soft landing. We are coming into an environment where while you have low velocity in the labor market and you're seeing very anemic growth really across both developed and relative to recent history in the emerging markets. You're seeing very anemic growth. So the U.S. continues to be the place to be. And that's why we're overweight, both U.S. large and small cap in this environment. All right. We've got a lot more data coming both at the company level and at the macro level. Tony, Bob, thanks to you both.

Well, the financial sector finishing near the bottom of the S&P 500 today as a number of regional banks pulled back, including New York Community Bank. Leslie Picker has more on what's behind that drop. What is it, Leslie? Hey, John, yeah, a fresh reminder that some banks are not quite out of the woods when it comes to commercial real estate pain. New York Community Bank reporting third quarter earnings this morning showing much deeper losses, lower margins and higher provisions and charge offs than the street had expected. A surprising quarter to the downside that you saw that chart there sending the stock plummeting more than 8 percent today.

Shares of NYCB have yet to recover from their slide amid fourth quarter earnings 2023. Those took place in late January. The stock's down about 66% over the past year. And at the same time, at that time, the firm slashed its dividend and took a much higher reserve for loan losses, spooking the market and leading to a cash infusion by an investor group led by former treasury secretary Stephen Mnuchin. Now in today's numbers the company lowered near-term guidance as well thanks to that continued weakening in credit quality. On the call executives were asked about whether guidance was impacted by changes in the forward rate curve to which they replied that

they're still liability sensitive meaning that the firm will benefit eventually from deposit rates going lower, but there will still be, quote, pressure on the balance sheet liquidity aspect of the portfolio in the meantime, John. Leslie, at the same time, the KRE, the regional bank index, has held up pretty well. It's still near around 58. And so that indicates to me, just kind of looking from afar, that there isn't a concern that this is perhaps a wider issue throughout multiple banks. Is that relative comfort that the market seems to be displaying misplaced? Are we going to hear from some more names that might change the narrative? I think so. I mean, we're about, I would say, midway through regional bank

reports at this point in time. And credit quality has held up really well. I mean, you mentioned how the KRE has done. That's largely reflective of any credit quality concerns being attenuated by some of these reports throughout the last few quarters or so. The soft landing narrative certainly helps. And then this idea that the rate posture is changing, which may have some tailwinds, may have some headwinds for the regional banking system. But by and large, if they're able to kind of skirt through some of the credit quality concerns that were held a year and a half ago or so, then it bodes pretty well for the industry as a whole. NYCB is kind of that reminder that there are still potentially issues out there

that have yet to be fully resolved, and it could be a few quarters before we really kind of see the end of these. Okay, well, I know you're keeping an eye on it, Leslie Picker. Thanks. We've got a news alert on Hawaiian Electric. Pippa Stevens has the details. Pippa? Hey, John.

Well, shares of Hawaiian Electric are jumping after a filing showed that Ken Griffin's Citadel took a 5.4% passive stake in the utility. That is as of August 18th. It, of course, comes as the embattled utility continues to deal with the fallout from the wildfire in Maui last year, most recently agreeing in August to pay nearly $2 billion as part of a $4 billion settlement. The stock jumping nearly 6% here as Citadel takes a stake. John? Wow, Pippa. All right. Thank you. And now to the consumer and more signs of strength today.

Consumer sentiment in October hitting a six-month high, topping estimates. Let's get to Mike Santoli, who's drilling down on consumer credit trends. Mike? Yeah, John, as Leslie was just saying, in general, credit conditions among consumers and smaller businesses have remained OK. There's been an uptick in delinquencies, but the big picture backdrop remains pretty healthy. So this charts the percentage of overall credit card limits that are now being utilized. In other words, outstanding balances relative to how much consumers could borrow on their cards. That dotted line is the average over the last 20 or so years.

So you've seen that usage has gone up, but it's still a little bit below this 20-year average level and certainly well below where we were, you know, back here several years ago, of course, around the financial crisis, preceding the financial crisis. That's when folks got in trouble.

It's a similar story. I don't have a picture, but with home equity lines of credit, the outstanding balances are even farther below the longer term average utilization, which means that there's a little bit of a leverage cushion if folks have to resort to it and they're not necessarily in aggregate overextended. So take a look at the consumer lending stocks, the card issuers, and how they've done over the last year, obviously pretty strong. That's Capital One. This is Synchrony Financial, a lot of private label credit cards. And that's Ally Financial, been somewhat weaker because of its exposure probably to auto lending, but still all outperforming the S&P 500 on a one-year basis,

John. Mike, how much of that not maxing out the credit cards, how much of it's explained, you think, by the relatively strong job market? A ton of it. I mean, I do think the strong job market, wage gains have been relatively strong. Some people would argue that with rates going up so much and the actual interest rate on credit card lending being so high that maybe people have to be careful about making sure that their monthly payments don't get out of hand, even with lower balances. But in general, I think the story of, you know, four percentage unemployment rate, four percentage annual wage growth is one that's relatively comfortable, keeps people mostly out of excessive leverage trouble. Yeah, it keeps them from getting

swamped, even though it is painful having that balance higher and higher. Mike Santoli, thanks. See you again in just a bit. Well, Apple moving higher today, sitting just off record levels with the stock catching a rare downgrade at KeyBank and new data is raising questions again about iPhone demand in China. Up next, the man known as the godfather of the iPod, Tony Fidel, gives us his take ahead of next week's results. And later, the latest on the bombshell reporting about Elon Musk's alleged secret conversations with Vladimir Putin. Overtime's back in two. Welcome back to Overtime. A bevy of Apple headlines out in recent days ahead of next week's fourth quarter earnings. Today, the stock getting a downgrade from KeyBank based on iPhone super cycle concerns. Meantime, new data from the International Data Corporation shows Apple sales in China

slipping half a percent year over year, but regaining the number two slot in market share. Joining us now is Tony Fidel, a former executive at Apple, inventor, co-inventor of the iPod and iPhone. He's now principal at Build Collective, an investment and advisory firm. Tony, great to have you back. Thanks, John. These numbers are funny, right? They swing one way or the other. Of course.

We find out over time. But I want to get some perspective with you, right? Six years ago, Apple crossed a trillion-dollar market cap, and a popular thing to say was, well, if they're going to get another trillion, they'll have to come out with another hit like the iPhone. Instead, loyalty ecosystem have propelled it three and a half X from there. So how does Apple remain different from your perspective, having been inside the culture years ago and observed it since? I think Apple is continuing to be different because it's providing the customer exactly what they want. They hear about all these buzzwords. They hear about AI and everything else. But if you look at their real competition, their competition

is in OpenAI and other AI companies. Their competition is Samsung and these types of companies. If you look at the AI applications that are coming out from Apple, they meet or beat what's from Samsung or any of the other providers. So, look, they're continuing to drive interest by their loyal consumers. They continue to hold on to that market with services. You see the services growing and the profitability of those services over time. So, they're just doing what they've always done. Obviously, everybody wants to see

some huge spike, but I don't see anything coming anytime soon that's going to change that. But those customers not running anywhere else because Apple provides them what they want for a great value. So about the nationalist sort of concerns, particularly in the China market, Huawei, we were worried about Xiaomi, I suppose, a few years back. Foldable phones now more popular. Is that your sense, just more of a fashionable flash in the pan? Or is this an area like larger screens, larger phones, where Apple eventually is going to have to assess and decide to respond? Look, the foldables, they are a segment for sure, but they're actually higher price than anything that Apple sells today. So if you want to go higher, you can go higher with

those foldables. Apple may or may not do that over time. But we're talking about a real different segment of the market than where the volume is today. And if we look at China, remember, China actually has restrictions for government workers to not use iPhones at all inside of government work. So Apple is doing pretty well when you consider all the government workers in China today can't use them. It's doing well. It's holding on to market share. It's slightly down from the growth, but it's holding on to its market share. So Tony, just to take it broader and into the future for a moment here, I want your assessment of the power of Apple's vertical integration and chip design now that we're in the AI era,

because we're talking about companies like NVIDIA, et cetera, having their chips and the power to extend the strength of those through software. Apple seems to me uniquely positioned in the consumer market with a similar combination of strengths. Absolutely. When you have AI actually move down onto the device, if you look at all the other products out there, the other smartphones, they don't really have that same AI offering on the device that Apple does to take advantage of. And yes, this week, they released the software and the APIs to allow third parties to get

access to that AI on the device itself. And so what's great about this is when you talk about NVIDIA, NVIDIA is all in the cloud. It's not on device. And so Apple doesn't have to go and buy huge server farms or work with huge server farms to get AI to work. They have it on every single device. So that's a strategic advantage, just not this year, but years to come. And so you're just seeing the initial kind of benefits of that with the latest release, but you're going to see a lot more

not just from Apple, but from third parties to take advantage of it. Typically, when you look at Samsung and these other ones, they have different AI processors. They can't use apps on top of them. Well, fly in the ointment right there. Qualcomm, with its Orion processors, announcements at the beginning of this week, but also this legal issue that they've got with ARM, I think is interesting, where Qualcomm is saying ARM is being anti-competitive and not letting it use the architectural license from this Nuvia acquisition without a lot of headache. How much threat does that pose within the ARM ecosystem and those who want to compete with Apple?

I think that, you know, when you look at ARM, and truth be told, I'm part of ARM, so I have to be full disclosure there. So as far as ARM goes, you're going to see much more of unification of AI through the ARM ecosystem. So what Qualcomm is doing is trying to get ahead and they're trying to gain certain kinds of market dynamics ahead of their other competition. But with Qualcomm and ARM, it's really just about pricing. It's about someone who doesn't want to pay for an ARM licensing cost versus and pay the going rate that everyone else does. So this is really just a battle of wits and a battle of egos about what is really ARM's rightful ability to charge licensing fees for those processors. Well, the way you frame that, it reminds me of a certain legal disagreement between Qualcomm and Apple,

but shoes on different feet here. Tony Fadell, always great to chat with you. Great, thanks, John. Well, Apple's not the only magnificent seven-name reporting earnings next week. We'll also get results from Alphabet, Microsoft, Amazon, and Meta. Coming up, T. Rose, tech portfolio manager,

lays out how to position ahead of those numbers. And up next, The Wall Street Journal reporting today that the world's richest man, again, Elon Musk, had regular secret contacts with Vladimir Putin. We've got the latest updates on this developing story next. Welcome back to Overtime. The Wall Street Journal out with a bombshell story today, alleging Elon Musk has had regular conversations with Vladimir Putin spanning geopolitics, business and personal matters. CNBC's Eamon Javers joins us with the latest. Eamon. Hey there, John. NASA head Bill Nelson said today that the possibility of conversations between Elon Musk and Vladimir Putin, quote, should be investigated, although he said he

didn't know the truth of the underlying allegations. Speaking at a conference organized by the publication Semaphore, Nelson said if the story is true, that would be concerning. And no comment yet from Elon Musk himself, but the Kremlin is denying the Wall Street Journal report this morning, calling the story fake. The Wall Street Journal, citing several current and former U.S., European and Russian officials in its reporting today. CNBC has not been able to independently verify the details, but the journal says Musk has been in regular contact with Putin since late 2022. They reportedly discussed personal topics, as you say, including business and geopolitical tensions. And the journal says Putin asked Musk not to activate Starlink over Taiwan as a favor to Chinese leader Xi Jinping. I've been talking to several high-ranking former US intelligence sources about this and

they make a couple of points here. One is it's unclear from the reporting and from what we know of whether Musk disclosed these Putin contacts to the US government. That would be required from him as a holder of a top-secret U.S. security clearance. It's at least possible, also, that U.S. intelligence knows more about the contents of these conversations. If they are technically able to obtain Putin's communications, the NSA would, I'm told, be allowed to record conversations involving Musk, even though Musk is a U.S. person, so long as the intended target of that surveillance, John, is Vladimir Putin himself and not Elon Musk. That's

what they call incidental collection. Right. It is possible that Musk has informed the right people, who I imagine wouldn't be a whole lot of people, and they've known about this for a while. Yeah, absolutely possible. He disclosed all this in real time. I'm told it is relatively common for U.S. intelligence to debrief American CEOs who meet with foreign heads of state or significant people overseas just to get a temperature check. What do they say? Who's around them? What do you know? What's the insight? That may have happened here. We just don't know. Musk hasn't said anything about this today. We have not gotten any comment from the U.S. government

about it either. We've asked the White House for comment earlier today. Nobody really seems to want to talk about this today, John. All right. Well, Eamon Jabbers, I'm glad you do. Well, it's time for our CNBC News update with Kate Rogers. Kate. Hi, John. Chinese hackers may have accessed phones used by former President Donald Trump and his running mate, Senator J.D. Vance. Sources tell the New York Times the campaign was alerted earlier this week that Trump and Vance were among those targeted by infiltrating Verizon phone systems, though it's unclear what data, if any, was taken. NASA said a member of the SpaceX Crew-8 mission remains, quote, under observation at a Florida hospital as a precaution.

NASA did not share any more details about the crew member. The four-person crew landed in the Gulf of Mexico overnight after spending nearly eight months at the International Space Station. And founding member of the Grateful Dead, Phil Lesch, has died. The bassist was credited for the band's early albums with Jerry Garcia and continued to tour with ex-members after the group disbanded following Garcia's death in 1995. Lesch died peacefully with his family by his side this morning, according to a statement on his Instagram account.

He was 84 years old. John, back over to you. Kate, thanks. Well, after the break, a MAG7 reset, a group of mega cap tech stocks has collectively made a shift ahead of earnings. Mike Santoli looks at what the charts could signal about their next move. And check out the action today for Rubbermaid parent Newell Brands, jumping after the company raised its full year earnings outlook and reported its highest gross margins since 2020. Be right back.

Welcome back to Overtime. Let's take another look at shares of Hawaiian Electric moving higher by about 4.5% after news this hour that investor Ken Griffin has taken a 5.4% passive stake in the company as of October 18th. That's according to an SEC filing. Well, mega cap earnings coming in fast and furious next week, including Alphabet, Microsoft, Apple and Meta. Mike Santoli is back to break down how those stocks are faring heading into those results. Mike. Yeah, John, they've really spent the last few months kind of cooling off, at least on a relative basis. This is the Nasdaq 100, which is really thoroughly dominated by those magnificent seven stocks relative to the equal weighted S&P 500. So the average large cap stock

really stark to see the just the degree of outperformance we saw going into about the middle of this year by those stocks. As everybody complained, the market was too concentrated. It was basically a seven stock market really came off of that hard. The market has broadened out. But if you look subtly here, it's still this relative uptrend where we're not really giving back all those gains. And that's probably a healthier pace of outperformance. It's not really a kind of an all or nothing game. And also within the mag seven, a lot of divergence among those stocks, also probably a healthy thing. So things are following the fundamentals as opposed to just, you know, buying acute kind of catchphrase for a category of stocks. Now, take a look here at the valuation of the Nasdaq 100, both on an absolute basis and then compared to the equal weighted S&P. And again, it's off the highs, but it's still about 26 times

forward earning. So certainly not inexpensive. And you haven't seen many times in history when it was quite that high this century. But on a relative basis, again, to the average stock, it's off the boil. And, you know, you actually were down here about three years ago in terms of Nasdaq 100 PE versus the equal weighted S&P, or at least a couple of years ago. And it didn't stop those stocks from from doing OK. So obviously it's a cliche and it's maybe obvious, but the path of earnings is probably going to be enough. We have to be enough to carry things from here, John. Right. So putting these two charts together and thinking back a couple of months, some of this on the mega caps versus the Nasdaq 100 is that the rest of the Nasdaq 100, a number of stocks there, are doing a lot better over the last couple months than they had been versus the mega caps doing worse.

Some of it is exactly that. And it's not just about, you know, kind of flipping the switch in terms of Mag 7 going down. I mean, I'm struck by the fact that you do have things like, you know, meta over the last three months up, I don't know, 15 percent or something like that. And, you know, Alphabet down 10 or 11 or something like so. You basically do have a lot of divergence within it. You have also the likes of Costco, which had been a super hot stock into the middle of the year. That's one of the biggest NASDAQ 100 names, too. So I guess you have to be careful not just assuming that it's all about tech stocks.

For sure. Mike Santoli, thank you. Well, much more on the MAG7 is coming after the break when we're joined by T. Rowe Price Portfolio Manager Tony Wong with a breakdown of how he's positioning ahead of next week's results. And it's not just mega cap tech reporting next week. We'll also get numbers from some key restaurant stocks. After a busy stretch of news in the sector, not all of it good. We are serving up a full preview of what to expect when overtime returns. Welcome back to overtime. Well, the busiest week of earnings season is coming with five of the magnificent seven companies set to report results, including Alphabet, Microsoft, Meta, Amazon and Apple. Let's bring in T. Rowe Price, Portfolio Manager, Tony Wong. Tony, great to have you.

I especially am curious, your take. We got three of the hyperscalers talking from a cloud and AI perspective. Google, Microsoft, Amazon through AWS reporting next week. Given what we just heard this week, say from ServiceNow and IBM, IBM software business up 10 percent. ServiceNow hit record highs after its earnings. What, if anything, does that signal about AI demand, software demand, what we might expect from the hyperscalers? Yeah, well, I think that that is the primary topic that the market's going to be looking for, AI and how it's being utilized to drive all these businesses. For example,

Microsoft Azure, how is it increasing their cloud demand and accelerating growth along with GCP? And then you also had digital advertising. And so looking at how Meta and Google are applying AI to, you know, comp these difficult comps and really grow at these tremendous base of revenues. And so that's kind of what I'm looking for, is that how AI is driving idiosyncratic growth across a large base of customers among these big tech companies. Is the AI commentary that these companies can give potentially strong enough to outweigh any concerns over the billions of dollars that they're spending in capital to build out those data center capabilities? Well, I think the commentary has been pretty strong over the last few years, and I think we need the numbers to really show through, and we've got to see the growth to justify the type of spend. And so I think if they beat numbers and continue to grow really strongly above where consensus expects, I think they're going to have more reign to spend more CapEx because it does increase their

terminal value. So I think it's got to be growth accompanied with this large amount of investment and good commentary in terms of more uptake in the effectiveness and ROI of AI. Do you expect this Apple report will put iPhone 16 demand questions to bed or are we going to have to wait another three months? I don't think it's going to be solved here. I mean, I think the AI features are still being rolled out. I know the checks have shown some sluggish demand, but I think that the results will kind of put the rest, you know, the near-term results. But as you know, like the features are still not out yet. And I think we're going to see a gradual cadence of upgrade. And, you know, from a stock perspective, I think if

it doesn't happen this cycle, you know, the bulls can always look to the next cycle. And, you know, that should probably maintain the multiple in some ways. So I think it's too early to judge whether AI is, you know, not going to work for Apple. I think they still have more time to figure out the features. How's the setup for Meta? We know that they've spent a lot on AI and data center stuff that's actually helped them in reels and being able to figure out how to match the right kind of content to viewers. But as we're heading into the holiday season, I think there are probably some questions with the slowdown in the consumer, though the consumer is still going. Will advertisers lean in to try to

capture that incremental person? And will that benefit the likes of Meta through Facebook, Instagram, et cetera? Or does the slowdown hurt them overall? Yeah, I think that's a great question. I do think that what is happening at Meta is pretty idiosyncratic. You look at their efficacy of targeting and advertising, it is pretty unique. And from an advertisement perspective, it's all about, like, what is your ROI on placing this ad? And as Meta increases that with AI, i do think that they continue to take you know significant share and this is a massive business growing you know in the mid-teens um and so you know to me i think that they continue to do well i expect that you know they they can continue to

have um strong results as a result of like how much they're spending in AI and their ability to go from like kind of a mid funnel improvement of advertising as you apply AI to it, I think it does help them disproportionately. Are you keeping an eye on this Qualcomm ARM legal dust up and the way it flared up this week? Is that a concern that's unique to just those couple of companies or does it have broader implications?

Yeah, definitely a very dramatic week for the core case there. You know, I kind of view this as part of a negotiation tactic. I think both companies are really important to the ecosystem. They're clearly having a battle right now. But to me, I think this is a matter of negotiation and it all gets sorted out eventually. So I think it's too early to tell. And I think that both companies

do kind of need each other to some regard. Okay. Tony Wong from T-Row, great to have you. Well, coming up, will AI demand drive a new wave of IPOs? Up next, we're taking some time out with the CEO of a unicorn cloud data security company that's going up against public rivals like Commvault and Rubrik. And because you love Overtime and you want even more of it, well, we've got a QR code that you can scan on your screen. Follow us on LinkedIn. There we post exclusive content you're going to want to see.

Overtime will be right back. As a child, I struggled in school and was told I was stupid and because it was really difficult for me to learn how to read and do other things. So being able to kind of share that story that there is a special talent that comes with these children. Dr. Halliwell, who wrote ADHD 2.0, said the boardrooms and the prisons are full of kids with ADHD. So there's two paths you can go and you can be really successful or you can have a really tough life. Earnings season has brought some early signs of growing demand for AI equipment and software. So can that reinvigorate the IPO pipeline? This week, I take time out with a startup CEO who is watching that closely. Jaspreet Singh is co-founder and CEO of Druva. It's a cloud data security company last valued at around $2 billion.

Druva targets smaller companies and plays in a similar space as Commvault and Rubrik, which are already public. Singh grew up in India. His father was in the Air Force there. And while observing his father's military operations work along the country's northern border during a break from school, he learned as a kid about the complexity of managing data from different sources to make sure a system doesn't break down. It wasn't about computers, though. It was about houses of worship. SINGH SINGH, they were running a particular unit, which had a temple, which is a Hindu temple. And somehow they had to man it. So, and to actually observe it and to, you know, make sure it goes forward. And there was also a church, a Catholic

church, the same vicinity. The military sort of moves with the, and in this case, it so happened, being a bordering state, the Sikh gentleman had to understand Catholic prayers and the Indian prayers to sort of make sure he can run both the places simultaneously open for public. Now at Druva, Singh is using generative AI to help make sense of vulnerabilities and attacks. The new Druva Investigate product aims to disrupt tools from the likes of Cisco's Splunk using natural language to explain suspicious activity and how deep it might go. Who logged on to my system? You know, how many did John Ford log on within the U.S. or outside the U.S.? And what did John Ford do to my system? Show me all the changes he did. Show me everything that doesn't look like him. Then show me all the changes he did, show me everything that doesn't look like him, then show me all the data which may map some other entities because John Ford, you know, tampered one system, but he did

have access to 10 other systems. What happened to those systems? Cyber data is super hard, executing, growing, you know, tons and tons of customer traction. And now we have to understand the public markets. You know, before COVID, only 20 SaaS companies used to go public every year. And that number went to 57 and then came down to three. So hopefully it settles down at a good number and we can make a way out. So the timeout takeaway, data mechanics. It's not only the IPO pipeline, but a broad swath of smaller public software companies have really been relatively out of favor in the market over the last three years.

Beneath the surface, though, companies like Druva are preparing for an AI-driven redesign of the way enterprise applications work in security and beyond. So it'll have echoes through the whole industry. And I promise I did not tamper with his system. Well, coming up, new details about the McDonald's E. coli outbreak and a look ahead to the restaurant names reporting next week. And don't forget, you can catch us on the go by following the Closing Belt Overtime podcast on your favorite podcast app. Be right back. Welcome back to Overtime. We have got a busy week ahead for restaurant results, and it comes after headlines this week from Starbucks

and McDonald's that left investors on edge. Let's bring in Kate Rogers with a look at what's at stake next week. Kate. Hi again, John. So when it comes to earnings, McDonald's, Starbucks and others will all be subject to the value equation with consumers. McDonald's, as we know, currently facing an E. coli outbreak in 13 states tied to its slivered onions used in the quarter pounder, had already signaled that the back half of the year would be potentially challenging given consumer discernment around value. We also, as an update, just heard from Taylor Farms, the distributor, for the first time this afternoon via NBC News saying, quote, we've preemptively recalled yellow onions from our Taylor Farms Colorado facility that were sent to select food service customers, adding, quote, all Taylor Farms products in the market today

are safe to consume. Now, McDonald's extended its five dollar offer through the end of the year remains to be seen if this outbreak will lead to a broader image issue and consumer pullback. Onto Starbucks pulling its 2025 guidance, giving preliminary numbers for the quarter earlier this week. The company is also undergoing a revamp with its new CEO. It's steering away from previous discounts and focusing on the premium experience Starbucks has long been known for. But the question is, will consumers pay up?

It's definitely a tall order for Brian Nicol. And finally, value has been less of a factor for some of the sector's best performers of the year. Chipotle, for example, has seen consumers willing to pay premium prices for its burritos and bowls, even in the face of stubborn inflation. Kava and Sweetgreen, which are two of the pricier for the consumer names, as I call them, are also the top two stock performers on the year. They're up over 200 percent year to date. John, back over to you. Kate, I wonder if Starbucks is in a better position

sentiment-wise, just given how challenging things are out there, even given for McDonald's. I seem to remember the stock getting hit a few days ago. I forget on what. And it's come back since then. It certainly has. It got hit on those preliminary results in pulling or suspending guidance for the next year. I do think that both investors and potentially consumers recognize that under new leadership, this turnaround plan will take a little bit longer. Right. This is not a quick fix. And so we'll see how long the street's willing to give the company to kind of get things rolling again. But Brian Nichols says that he really wants to get back to what makes Starbucks Starbucks. And we'll see how that plays out. But you can already see the marketing has shifted. And again, moving away from those discounts, which was never really Starbucks' game to begin with, right?

It's always been a more premium experience. And so giving consumers a good experience, one that's worth that price, will be the challenge. Looking forward to your reporting there next week. Kate, thanks. Thank you. Now let's get back with Mike Santoli as we get ready for a major week of Catalyst for Investors. Mike, always good to get your perspective. We got the hyperscalers, all of them from a cloud and AI perspective. Next week, we got Apple and then we got a jobs report.

Yeah, I mean, obviously plenty. And that's just the anticipated stuff. I think the market's also in this mode of almost expecting the so-called tape bomb headlines because we've gotten a very eventful little pre-election period here. But in terms of the fundamentals, if this market were felt it was free to just focus on the macro fundamentals, the earnings path, I think it'd probably be a lot more comfortable. The real GDP tracker for the third quarter is above 3 percent. You obviously have the credit markets very generous. Earnings coming in at a beat rate pretty much in advance of or ahead of where it usually does on a given point in this quarter.

So it seems as if things are lining up. Question is, you know, we didn't have the standard seasonal weakness really in September or October to this point. So have we got a little bit of pent up jitters in the market that maybe are becoming evident if you look at things like the volatility index nosing above 20 when you have the S&P near a record high? That usually says that people are at least on alert for some

kind of flutters in the in the tape. Yeah, if we can pull up and there we have an S&P 500 chart, but make it six months. I mean, I was told to expect some real volatility in 100 days before a big election like this one. And I mean, we did get that beginning of August, beginning of September, beginning of October dip. But that's a pretty steady march upward since August. Yes. Diminishing pullbacks over the last three months to the point where the October one was very barely noticeable. And I guess what you have is that whole pre-election cycle interacting with a sturdy economy that's outperforming expectations and a Fed that has begun an easing process into it. So all that works. You had the biggest earners in the market have a little bit of a breather for a few months. So we'll see next week whether, you know, again, the faith in the big tech guys is validated

and what people think of their CapEx plans and all that other fun stuff that everybody fixates on when it comes to the big guys of the NASDAQ. And then after jobs, we've got PCE and I guess concerns perhaps about whether there might be a pause on race. Whether we have to start being on inflation alert again. Yeah, exactly. OK, we'll watch all of those things at the same time in a very busy week for all of us. Mike, I will see you then. That does it for overtime.