Closing Bell - Closing Bell Overtime: Keith Rabois on TikTok, AI; Roger Altman On IPO Window 3/15/24

Episode Date: March 15, 2024

Averages ended the week lower as the Nasdaq turned negative for March. Macquarie’s Thierry Wizman and Bank of America’s Ohsung Kwon break down the week that was and the next catalyst for the market. Keith Rabois talks his support for banning TikTok and where AI goes from here. Evercore founder Roger Altman on the capital markets picture for 2024. 776 Ventures Founding Partner, an early Reddit employee, talks the upcoming IPO plus investing in space. 

Well, a down day, stocks slumping to close out the week. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. The Dow is falling for a second straight day while the S&P and NASDAQ extend their losing streets to a third day. Tech, the biggest drag on the market because of weakness in software stocks after Adobe's disappointing guidance that you heard about first here in overtime yesterday. And coming up, an exclusive interview with Coastal Ventures managing director Keith Raboy. He promised to cut off funding for any Republican in Congress who votes against the bill to ban TikTok or force a sale.

Find out whether he has any interest in a deal to buy the social media company himself. Plus, we will get the outlook for M&A with Evercore founder Roger Altman, whose firm is reportedly closing the gap with Goldman Sachs on deal-making advisory revenues. But let's get to today's market action with our market panel. Joining us now is Terry Wiseman of Macquarie and Osung Kwan of Bank of America.

It's great to have you both here, especially on a day where stocks are taking a breather, not just here in this trading session, but also on the week. So, Osang, you're here with us on set. It's interesting, just a couple of days ago at Bank of America, you raised your targets for earnings this year. Highest top-down forecast now on the street. Why? Yeah, thanks for having me today. Great to be here.

So, yeah, we're bullish on earnings. We are forecasting $250 for 2024 and another 10% growth next year, so $275. And we believe that we are entering into this virtual cycle in earnings. So we believe that the earnings cycle is very different this time versus the macro cycle, that we believe that earnings cycle is inflecting higher. There were two reasons why we were in an earnings recession last year when GDP was still printing above trend growth. The first reason was because of higher costs, which was taken care of. We saw margins improving higher for the second straight quarter when demand was still pretty tepid. The second reason was the shift that we saw from goods to services.

Now, that matters because when it comes to earnings for the S&P, it's 50% goods. But when it comes to the economy, it's only 20% goods. So the shift that we saw from goods to services over the past couple of years, there was a tailwind to GDP, but it was actually a headwind to earnings. And now we're starting to see lots of signs that the manufacturing recession over the past 16 months, which was actually the third longest downturn in history, that's inflecting higher. So all those things really point to strong earnings momentum going forward for this year and next. So you're bullish. Bottom line, you're bullish. Terry, I wonder how you see this market here, especially since you're more focused on the fixed income side of things and the bond market, especially

with a 10-year Treasury yield ticking back up to 4.31 today. With the data we've gotten, the mixed bag of data we've gotten recently, what is it telling us? Well, it's telling us the U.S. economy is still growing robustly. But I think the problem the market has right now, it's not so much growth as it is the concern that we may see the disinflation trend start to ease and start to flatten out. And the implication of that, of course, is that the Fed may be obligated to wait even a little longer before it starts to cut rates. That has had an effect on fixed income yields across the curve. And I do think that as we move closer to the Fed meeting next week, we actually may see yields on

the 10-year rise a bit further. And I think that explains a lot of the pressure we've seen in stocks today and yesterday. As yields go up, multiples get compressed a little bit, especially for the high growth sectors like technology. OK, so, Osang, earnings is one thing. But what about revenues? What about the top line? You mentioned in your note that the hyperscalers are among the only ones that are really spending in a big way when it comes to CapEx investment. I was just talking to Rene Lacerpe from Bill earlier today. You know, the bigger, smaller businesses aren't spending as much either. So is that CapEx investment from the hyperscalers and some of the software investment in AI from the larger companies going to be enough to keep equities bolstered? Yeah, that's actually bullish, not just for, you know, tech semis and things like that that benefit from hyperscalers building data centers,

but it's also very bullish for the old economy as well. So we've been hearing that power is now the biggest constraint in building data centers. So we've been hearing that too. Yeah, so GPU data centers just need more power. And that means more demand for electrification, grid, HVAC, cooling system. And these are massive construction projects that are going on. So, you know,

construction equipment and things like that. So it's basically both for everything. And I see more top line growth happening this year. Okay. Finally, Terry, are we done with the dramatic yield swings, you think, until a cut? Or is there something that could throw a monkey wrench in that? Oh, Or is there something that could throw a monkey wrench in that? Oh, there's definitely something that can throw a monkey wrench in it. For example, if the Federal Reserve next week decides that its estimates for the long-term, so-called long-term equilibrium or neutral interest rate is too low, and if it raises it, if the dots go up on the long-term and the median goes up as a result, I think that can throw a wrench to things.

The market will start to reassess exactly how low interest rates can eventually go in the forthcoming easing cycle. And this may not be the this may be not the last time the Fed does this. It may be the first time the Fed does this. Keep in mind that that long term equilibrium interest rate estimate has has stayed near 2.5 percent for more than two years now. So it's due for an increase. And that is something that could shock the market a little bit. Take yields higher next week still. Remember, we haven't even gotten back on the 10-year yield back up to the highs that we saw in February, that was close to 4.35 percent, 4.36 percent. We could break above that. Okay, so we won't get too comfortable.

Terry, Osung, thank you. And we didn't even talk about what Bank of Japan decision early next week could do to the entire global treasury market bond market as well here. All right, we'll see. Nvidia shares, meanwhile, up 80% so far this year, although there has been some volatility recently. Lots at stake for the company as it gets set to host its annual developer conference, GTC, on Monday. Christina Partsenevelis has details. Christina? They're calling it what? The Woodstock of AI, the AI Palooza, the godfather of AI is going to take the stage. The first in-person NVIDIA GTC event

in five years. You got the keynote from CEO Jensen Wang. Over 16,000 attendees flying in for the event. Every hotel in the city is sold out for miles. I can attest to that. But you have NVIDIA shares up, what, 82% in the last three months alone. One has to wonder how much is already priced in and what more can the company and the CEO do to excite investors, especially when the stock has moved over 2%, 8 out of the last 10 trading sessions to your volatility point, John. But there are three key

factors to look out for. First, the product roadmap for their new Blackwell AI chip. You know, how good is the memory? Will it outperform AMD? When will it launch? And is it really going to be 30% higher in price point than their previous H100 chip? Secondly, how AI adoption is growing at the enterprise level. It's been slow for, you know, takeover with most of the demand folks around hyperscalers like Meta. You just talked about that, John and Morgan, with your previous guests. So is that going to spread out to all other smaller companies? NVIDIA's CEO has also pointed to enterprise being at the very early innings of demand. So we expect them to talk about also expansion within other

sectors, finance, healthcare, maybe some partnerships too. And lastly, inferencing, which helps spit out the answers to questions on trained large language models. And they expect that to drive future demand since it already accounts for 40% of its data center revenue. The stock tends to move about 6% post these events, but we haven't really seen that much of a run-up in this stock prior to the event. So that could change a little bit, but on average, it's a 6% run-up usually. Yeah. It's hard to compare this period to any other period though, because now NVIDIA has become a $2 trillion-plus market cap, right? Yeah, it was at $100 billion five years ago, now $2.3 trillion soared.

The big question is, how can it keep going? There are quite a few other names for those that are thinking, hey, $878, that's pretty expensive, hard for me to get in. AMD, we're expecting some movement, maybe not to the upside necessarily because of the specs from the B100, the latest Nvidia chip. Micron, Micron has their earnings out on Wednesday, but we're expecting some type of collaboration with Nvidia on the memory chip,

so we could see some positive reaction. Oracle has alluded to comments with Nvidia. There's TSMC that's making the chips as well, so we'll probably hear more about that relationship. So there are other names. Yes, the stocks have all run up, but there are other names to play if you think that this NVIDIA share price

is a little too much. All right. Well, we know you're going to be bringing us all those headlines next week, Christina, from the Woodstock of AI. And once again, I think this is the second time this week. I was going to say, we just have such great style, Morgan. And that's all.

That's all everybody needs to know. All right. Have a good weekend. It's time to bring in Senior Markets Commentator Mike Santoli for his dashboard. Hi, Mike. Hey, Morgan. Well, market closed just barely low on the S&P 500 for the week, for the second straight week. Really not a lot of damage done, even though we're down seven of the last ten sessions.

You see this incredibly consistent uptrend from October. This is a six-month chart. What's happened when you've gotten these very minor dips along the way is it's generally been saved by that uptrend. That's not exactly the proper trend line, but it's pretty close to it. And we're basically closed right on it again. So we just kind of keep testing it. It's only had these little one or two percent dips. It has worked so far, even though it's kind of flattened out and lost some momentum. So I don't think it would be surprising if the market did have just a little more chop to it, trying to cool off, among other

things, investor sentiment. So here's one composite gauge of investor sentiment and positioning. It's been around a long time. It's now known as the Lefkowitz index. Panic euphoria was what it used to be called in honor of Tobias Lefkowitz, the late strategist at Citi. And it includes real market indicators, that options activity, margin debt, things like that, as opposed to just surveys, which also happen to be in there. So this line up here is the border between normal enthusiasm and euphoria, according to this gauge. You see, we're right up against it there. Haven't really been above it since 2021 when we were way above it in the meme stock craze, all the rest of it. What this corresponds to is when you're above this line,

the forward expected returns in the next 12 months for the S&P tend to be worse than at other times. It's not universal. It doesn't work every time. But on average, that is the case. So still a little bit of room, I would say, at this point. And right now, based on the level it's at, it suggests that the next 12 months have about a 50 percent chance of being up. But other times you've been at this level, you have had an up 20 percent year. So, again, you don't trade just on this, but it tells you people are on the verge of getting a little too happy and excited about this market, Morgan. I mean, maybe it doesn't work every time, but when you look at when it has trended so dramatically higher, it does coincide with some of those bubbles we have seen in the market over the last couple of decades. Well, that's right. And it's also the answer to people who say,

right in the here and now, we have a bubble. Looking at NVIDIA versus Cisco 25 years ago, whatever it might be, well, no, that, those huge peaks were genuine, lasting bubbles. You know, if this is going to be a bubble, we got time to get there. You don't always get to it. And I would argue, too, the Nasdaq tripled in 18 months

into the 2000 peak. We're up like, I don't know, eight, 10 percent in two plus years in the Nasdaq. It's just not really on the same scale. John. All right. Bagpipes and S&P. I'm glad you enjoyed that. Yes. The Irish in me is happy. Of course. Yeah. Well, there's Irish in one of us. Up next, venture capitalist Keith Raboy, who has been urging Congress to pass a law banning TikTok in the U.S. or force a sale. He's going to talk about whether he's eyeing a deal to buy the social media giant. And speaking of social media, an early Reddit employee tells us what investors should expect ahead of that highly anticipated IPO next week. Overtime is back in two. Welcome back to Overtime. The future of TikTok in the U.S. is in question. A bill that would either force a sale of the social media app or ban it in the U.S. passed quickly in the House,

but the Senate has yet to take up a vote. Former Treasury Secretary Steve Mnuchin told Squawk Box yesterday he was interested in buying TikTok. It's a great business and I'm going to put together a group to buy TikTok. You're trying to buy TikTok? I am because this should be owned by U.S. businesses. There's no way that the Chinese would ever let a U.S. company own something like this in China. Tech executive and investor Keith Raboy has been tweeting his support for this bill, saying he will never fund any Republican candidates or leadership packs run by Republicans who vote against the TikTok legislation. And that's a quote. Joining us now is Keith Raboy from Coastal Ventures now. Keith, good to see you. So if it's for sale, do you want to buy TikTok?

I have no interest in buying TikTok. I'm an early stage venture capitalist, which means I fund the first institutional capital that's going into the future 5, 10, 15 years, the next Airbnb, the next YouTube, the next Stripe, the next Square. I'm really not interested in companies that are at scale right now. So tell us about your approach here when it comes to political donations, because it seems to me even if you get Republican senators to vote for this, Trump says he's against a TikTok ban. So doesn't that pose a problem for you if Trump wins the election? Well, there'll be plenty of time for President Biden to sign the legislation, and he's already promised to do so. So as soon as the Senate votes on this, there's more than 60 votes on the Senate floor to approve this.

Chuck Schumer just has to get out of the way. But the Biden administration wants to sign the legislation. If it gets delayed, Trump will change his mind again. Every single senior person who worked for Trump, from the secretary of state to the vice president to the U.N. ambassador to the secretary, to his chief of staff, supports banning TikTok. The treasury secretary. I don't think there's anybody who works in the Trump administration who believes that Trump is on the right side of history. So with that in mind, how do you expect this to actually play out? Because I think there's a very strong sense that bite dance and perhaps the Chinese government by extension is not going to allow this to happen easily, that there could be potentially court challenges if you do see this bill actually make it into law

and that it's certainly not going to sell and let those algorithms that proprietary Chinese based tech and data as it currently stands actually fall into the hands of American investors and American companies? Well, all you need to know is that the Chinese government is interfering with the sale. Almost every single person on the cap table of ByteDance would be thrilled to sell TikTok. They would sell it at fair market value and make a lot of money. The Chinese CCP has no interest in selling their spy tools for any price. That's literally proof of why we need to force the sale. I mean, there is the First Amendment argument that you're

hearing in terms of the counter. There's also this sense out there that if you see this legislation become a bill, that actually sets a precedent that could perhaps and maybe some of the other social media companies like the Metas of the world are actually concerned about this, that it sets a precedent and opens the door for other countries to draft legislation that is similar and has a similar impact on American social media companies like Meta, like others. How big of a concern or risk is that? There's no First Amendment argument. That's like ludicrous. I was a constitutional lawyer. I clerked at an appellate court.

I learned constitutional law from Kathleen Sullivan, Charles Freed, Larry Tribe. That's like ludicrous. First Amendment does not give the Chinese government the right to own any media property in the United States. We've banned foreign ownership of TV stations, radio stations, newspapers. This is nothing new and it's silly. We could ban this just on reciprocal trade grounds. And the First Amendment people are just like making this up because they basically make money from the CCP. It's interesting to me that the foreign adversary clause in here really focuses on four countries that are already in the category and makes the case for this bill around that. But, I mean, I wonder, should there be even more that we're doing around foreign adversaries besides just the social media thing that's narrowly tailored to apps that have a million monthly active users or more?

I agree. I mean, Iran, Russia, North Korea are already subject to significant legislation and significant basically bans on Americans doing business at all. So we should stop and apply maybe the same principles to China. China is an existential threat to the United States. China at some point has serious interest in Taiwan, which do threaten our national security directly. So I think we need to take the CCP threat posed by China and their use of technology and their use of technology much more seriously. We also need to do conventional things like build a navy that can compete with China. We've sort of been behind the eight ball navy and defense funding as well.

So there's a lot of issues. This is just one. You're right. It's a first step. But if we can't even take a step against the most obvious, blatant spy tool being abused and also interfering in our elections, then I don't know how we start taking the threat posed by China seriously anywhere else. I mean, it does speak to how important data is and how critical AI is in a world where data is going to matter more and more and the weaponization of that. I guess, how does this speak to this emerging AI arms race that we are seeing on the geopolitical stage? I agree. The arms race for AI is very real and very serious. Whichever country masters AI first will have an incredible economic and military advantage, and we cannot

lose that race. That is separate than some of the concerns associated with TikTok. But I think China has been using and leveraging technology for more than a decade, possibly for 20 years, and we're now finally starting to pay attention to it. Keith, I wonder how you assess the AI landscape now, because a couple of years ago, before the big open AI chat GPT explosion and looking at what NVIDIA has done, a popular line was, oh, hey, look, China's going to be ahead because they've got this surveillance apparatus. They've got more than a billion people and a government that's not restrained by civil liberties. But now the biggest technology, most fast-moving technology companies in the world seem to be U.S.-based. Has the conversation shifted as much as perhaps the reality has?

Well, we don't really know which one is capable of an AI. It's not published. It's not open. They steal our secrets. We don't really steal theirs very effectively. So I wouldn't say that we have crystallized views on exactly how far ahead or behind they are. But they do have some advantages. They actually manufacture a lot of data at times, lots of people. And the data is available to the government, whereas obviously there's lots of protections here in the United States. So I think there are some fundamental advantages. That said, obviously, open AI is on the cutting edge of many, many things,

and hopefully they continue. As you know, at Coastal Ventures, we were the first institutional ambassador in the company. So we're super excited about its potential, its potential as a business, its potential to change the world and transform society. But we don't really know what the risk is with China, and I'd be more on the side of prudence than on the side of optimism. So speaking of OpenAI, I mean, and especially as we do have this NVIDIA event that kicks off on Monday, we've been getting this steady drip of reports that OpenAI and Sam Altman is looking to establish a new AI chip venture, in part to build a supply chain that's not so reliant on NVIDIA. Your thoughts? Is this something you would fund?

I don't know. Supply chain, let's say chip development is extremely expensive and has a long time horizon. It takes a very specialized skill set and almost infinite money. So I'm not sure it'd be the best investment of my career. But from a national security perspective, I'd be very happy for other people to fund it. All right. Keith Raboy, always great to have you on. Thanks for sharing your insights. Thank you. Goldman Sachs CEO David Salomon says he sees a rebound in capital market activity. Up next, Evercore founder Roger Altman on whether he agrees and where he sees the biggest opportunities for investors.

Stay with us. Welcome back to Overtime. Goldman CEO David Solomon releasing a shareholder letter today saying he is optimistic about 2024, saying the firm stands to benefit as capital markets rebound. Meanwhile, the Financial Times this week saying there is another firm nipping at Goldman's heels when it comes to M&A, with the headline, quote, how M&A boutique Evercore became Goldman North. Well, joining us now is Evercore founder and senior chairman Roger Altman. Roger, it's great to have you back on the show. Hey, Morgan. How are you doing? Doing great. So I actually want to start right there with those Solomon comments,

because we have optimism over at Goldman. We have caution over at J.P. Morgan with the Diamond comments earlier this week. What do you think? Well, I agree with David Solomon's comment that capital markets, at least from the point of view of a firm like his or Evercore, are going to be more hospitable in 2024. The IPO market so far is better. The leveraged finance markets are somewhat better. Credibles market is better. So, so far, things are pointing in that direction. From a broader point of view, I think the economic outlook itself is quite good

and that the soft landing scenario remains fully intact. Inflation, I think, when we look at the PCE, which is the Fed's favorite measure we'll see shortly, will probably come in right below 3 percent, maybe 2.8 on a 12-month annualized basis. So improvement, albeit not all the way down to the Fed's obvious 2 percent target. I also think there's some evidence that tighter monetary policy is beginning to soften the economy at the edges, consumer spending a touch weaker, wage growth a touch slower, and the unemployment rate itself, which came in at 3.9 percent, higher than expected. And that's good from the point of view of inflation progress,

and that's good from the point of view of laying a foundation for the Fed to pivot, maybe in June, we'll see, towards ease. Okay. So I do want to go back to this FT article about Evercore, this feature piece basically calling you, quote unquote, Goldman North. Also, you know, it notes that the firm has made its way into nearly every mega deal in the U.S. so far this year. What are you seeing in terms of dealmaking and the M&A landscape? And we know there's been an uptick, but we also know that the drumbeat has been steadfast in terms of the scrutiny and pushback we've seen from regulators along the way. Both are true, Morgan. The backlogs are up, evidences of activity, engagement letters, conflict checks, things like that, that our forward indicators are up to, although it's too soon to call 2024 as a whole. And so activity's improved.

You're also right that it's the tightest regulatory environment in terms of antitrust in many decades. And that is definitely deterring some combinations that would otherwise go forward but are remaining on the sidelines. You don't see that because you only know about the ones you've been involved in. You don't know about the ones that other firms have been involved in. But I can see that the antitrust regulators, the FTC and the Justice Department, have succeeded in deterring quite a bit of activity. So, yes, that's a bit of a downward factor. But on balance, activity levels have improved. Roger, if we don't get a rate cut in June, what's the impact of higher for even longer on M&A, you think? Well, I think the outlook, John, for a turn in monetary policy toward ease in 2024 remains good. Whether the first cut is in June, I think just depends on the data we see

between now and then, especially, of course, on inflation itself. I don't think the key measures of inflation have to reach 2% for the Fed to turn, but I think they have to be showing continued improvement. So I'm not sure, and I think the market isn't sure whether it'll be June. The latest pricing, I think, is three cuts in 2024, down from five to six anticipated cuts maybe two months ago. But I do think we'll see a turn toward ease, and I think that is being built in to economic forecasts and to business confidence. Finally, I wonder, you know, is the Russell 2000 maybe a better indicator of the health of the market for IPOs and the S&P now since the mega caps have become such a weight there? That may be, John. I'm not sure of the answer to that. I'm not sure, but the IPO market is healthier than it's been. And, you know, you're seeing

more backlog there and you're seeing more success in terms of offerings themselves. All right. Roger Altman from Evercore. Always great to have you here on Overtime. My pleasure. We've got a news alert on Reddit. Leslie Picker has the details. Leslie. Hey, John. Yes, this comes from a newly amended filing for the S-1 here. Reddit saying that the FTC staff is conducting a quote, non-public inquiry focused on the company's sale, licensing, or sharing of user-generated content with third parties to train AI models. Reddit says it does not believe they have engaged in any unfair or deceptive trade practice. The letter indicates that the FTC staff was interested in meeting with the company to

learn about its plans and the FTC intended to request information and documents from the company as its inquiry continues. If you recall, guys, Reddit struck that $60 million annual deal with Google to use its content for training AI models. And it's currently on its roadshow for an IPO that's expected to price next Wednesday, start trading next Thursday. And in its roadshow video, Reddit is telling investors that its total addressable market for AI is $1 trillion by 2027. Reddit declined to comment beyond the filing, but certainly interesting timing, to say the least, midway through this roadshow en route to an IPO that has been in the works for the better part of two years, guys. Yeah, timing cannot be denied. And of course, kind of takes us back to the

comments from Altman about the regulatory environment in general right now. Leslie Picker, thank you. Time now for a CNBC News Update with Julia Borsten. Julia. Morgan, Mike Pence will not endorse Donald Trump for president. Trump's former vice president just made the announcement on Fox News saying he cannot endorse him because Trump's agenda is at odds with the conservative agenda they governed on while in office. Nathan Wade, the special prosecutor on the Georgia racketeering case against the former president, has resigned from his position. It comes after a judge ruled today that there was an appearance of a conflict of interest between DA Fannie Willis and Wade, which meant either Wade or Willis would have to go. And Target is setting a limit at its

self-checkout lanes to 10 items or fewer. The retail giant said that it will go into effect on Sunday at almost all of its stores and that some self-checkout lanes may also close entirely at times, depending on foot traffic. The move comes after the pandemic years when many customers favored a contactless option. Back over to you. Yeah, now they're going to need more employees to police that. Oh, that's breaking news in the Brennan Kachati house right there.

Up next, how one publicly traded education tech company is taking on the backlash, while privately traded, against the over-reliance on technology in schools. We'll be right back. Welcome back to Overtime. It's a challenging time for the business of education, with schools and districts struggling to make technology an enhancement to learning, not a distraction. Today, John takes time out with a CEO whose company is growing into the challenge. Yeah, Bellum Forza is the CEO of Savas Learning Company, formerly known as Pearson K-12. The company serves 13,000 school districts with more than 40 million students. Bellum grew up the oldest child of a mother who worked for the United

Nations, moved the family to several countries, and insisted that her children learn about the world. I really thought I was going to be a doctor, and then I realized I couldn't. There were certain things, like I couldn't look at blood, and so I just did not have the ability to do that. So immediately I had to pivot to something I would do. But my mother would say, if you ask my mother, she said, I thought you would be CEO. She told me when I became CEO, she said, I had no doubt in my mind. Now, Forza is pushing to redefine the way the market thinks about tech innovation in education. A year ago, Savas bought Who's Reading, an AI-driven technology to help teachers assess kids' reading comprehension. And last month, Savas bought Outlier.org, which lets high schools

dual enroll students in college-level courses. It's ultimately the ability for high school students to take college-level courses while they are in high school and be able to get credit for their high school requirement as well as college-level requirements. So today, the way dual enrollment and dual credit is offered in the marketplace is schools basically either will send students to the local community college or a four-year college, or they will bring in an adjunct professor to come and teach certain classes within the school district. While it's widely available, but the selection of courses are very limited. And you can imagine logistically and everything else, the challenges associated with this. And most students are not even aware of this.

So here comes the solution of outlier wire. I was very excited in terms of making this acquisition. And teachers can teach more advanced courses remotely with the high school teachers kind of acting as TAs in the classroom. So the time at takeaway here, ed tech retools. There's been a bit of a backlash in K-12 against the over-reliance on technology during the pandemic, kids on Chromebooks distracted or doing remote learning with their cameras off. But the real innovation in education technology is in tools that enhance teachers' ability to provide individualized instruction for kids who need help

and advanced work for those who are ready to sprint ahead. PowerSchool, which I mentioned here a couple weeks ago, is a public name also competing in this space, Morgan. I love how all of this is evolving, and you've got to think it's actually going to help push down college-related costs, too. Hope so. Students can actually come in with more credits that they can transfer. Great stuff. Well, the venture capital firm of Reddit founder Alexis Ohanian just making a big bet on the space economy. Seven seven six founding partner and early Reddit employee Caitlin Holloway joins us next to discuss that and what to expect from the social media company's upcoming IPO. Stay with us. Welcome back. A new space investment from Reddit founder

Alexis Ohanian's VC firm, 776. Interloon was founded by two alum of Jeff Bezos' Blue Origin, former President Rob Meyerson and former chief engineer Gary Lai, as well as Apollo 17 astronaut Jack Schmidt, one of the last humans to walk on the moon. The plan? Moon mining. Extract rare natural resources from the lunar surface, bring them back to Earth. There is billions of dollars being spent going back to the moon and onto Mars, and Interlune is going to be the company, the commercial company that's there harvesting resources from space to serve commercial purposes, serve commercial customers here on Earth and eventually customers in space. So Rob Meyerson says the focus is to start with helium-3. This is very rare on Earth, abundant on the moon.

It's in high demand for everything from national security to quantum computing, medical diagnostics. Well, joining us now, 776 founding partner Caitlin Holloway, who led the seed round and is joining Interloon's board of directors. She is also a former executive at Reddit. It's so great to have you on the show. Welcome. Well, thank you so much, Morgan. I'm glad to be here. This is a literal moonshot. And when I think about something like natural resources on the moon, we've been talking about it for a long time.

And even in the case of Interloon, this is going to take a number of years to really ramp up and realize revenue. So why make this investment and why do so now? You know, I love that you're using my favorite pun, moonshot, because it literally is one in this particular case. But when I tell you that I had been searching for this company for years, I'm not kidding. So once upon a time, I used to work at Pixar Animation Studios. And ever since I began work on the film WALL-E,

and this was back in, I think, 2006 or so, I have just been obsessed with how our species was going to responsibly manage the impact we were having on our planet and sustainably expand our exploration into space. I fundamentally believe that those two things can coexist. And so, flash forward 18 years later, having evolved my own career from film to early stage investing, I had a very real opportunity to fund the perfect space tech meet climate tech company in our loon. So we are very, very excited to partner with this team. Okay. I mean, we've seen, and this has been particularly

true, I think, among the growth stage companies, other than those that are involved in AI right now. I mean, funding has been a little bit tougher to come by these last couple of years. We've seen a lot of re-rating of valuations lower as well. But it's my understanding that seed stage companies right now are actually starting to see a pickup in terms of funding and activity and demand. Is that the case? Absolutely. You know, I think the growth stage has had a more challenging time, particularly over the last year, and to your point, excluding AI. But we are definitely seeing a ton of action out there. I think that a lot of early-stage venture firms are

really seeing an opportunity to capitalize and partner with some of the very best founders that are out to change the world for the long term and the long haul. And so I think it's a really exciting time to be in early stage. But particularly if you're early stage and you're looking at and interested in sectors and industries that I think maybe have maybe been out of style or maybe not within a hype cycle for some time or are brand new, like climate tech, space tech. You're seeing hardware, biotech, cybersecurity is on the rise again. So there are a lot of really interesting sectors that early stage investors have their eye on. Caitlin, I know one of the areas that you guys at 776 are looking at is the creator economy. One could argue at this point with what's happened and what continues to happen in media, that there is no creator economy unless you're a huge

platform already or you're Mr. Beast. What's the argument on the other side that there is? Well, I appreciate you giving space for the other side because I think it's pretty big. Nice to see you, John. I am a very, very firm believer that this world should have space and create platforms for people who are very good at what they do, who are passionate about what they do, to be able to share that with the world and supplement their income. You know, I started my career as a teacher in my early years. I was a public educator. And the idea that I could have potentially used a skill that I had otherwise to help make ends meet in those early years of, you know, being a young professional could have been very life changing. And so, you know, here in the 776 portfolio,

we have a lot of companies that are not just playing to the big influencers, creators that exist in the space, like intro, places where you can connect with experts. And actually, not only, it's a double-sided marketplace. So you have users coming that are looking for advice, excuse me, and expertise, and you have the experts who are supplementing their income. So I think it's very much alive and kicking. Okay, very quickly, I have to ask you, since you were an early executive of Reddit and you did help build the force there, the company is about to go public next week. Your thoughts? Oh, it's very exciting. This marks the great breaking of the seal, does it not?

I think, you know, all in all, Reddit folks aside, who I know are very excited about this journey. It's been an incredibly transformative several years for this organization. I myself feel very privileged and count myself lucky to have been a part of it, in part because I got to meet Alexis, who is now my business partner here at 776. But I think the signal is a great and very interesting opportunity for the entire tech market. And so we're really excited to see how it goes. We'll be playing along with everyone else. Caitlin Holloway, thanks for joining us. Thanks so much.

For more on Interloon and Lunar Natural Resources, check out my podcast, Manifest Space. It's available wherever you get your podcasts. And still ahead, the CEO of Cohesity, which has a partnership with NVIDIA, on what he's expecting from the AI Giants big conference on Monday when Overtime returns. Welcome back. We have a quick news alert on Hertz. The company just announcing its CEO, Stephen Scher, is stepping down, set to be replaced by Gil West, who was formerly the COO of Delta Airlines and GM's cruise unit. So you can see right there, shares of Hertz are down just shy of 2% on this news.

All right. And NVIDIA's highly anticipated annual developer conference set to kick off on Monday. Cohesity, a late-stage security and management company, is one of NVIDIA's platform partners. Also, CEO Sanjay Poonen joins us now. Sanjay, good to see you. So tell me, a lot of people might think, okay, cybersecurity, ransomware, backup, AI. What's the partnership here? Thanks, John and Morgan, for having me on your show. Listen, we're just a few hundred yards next to SAP Center where GTC is going to be next week.

Some of you guys called it the Woodstock of AI. I think Jensen is kind of the Steve Jobs of the modern AI era. And we identified AI as a very important area for us because when we back up a lot of that data, it turns out it's really hard to search. And generative AI turns out to be a major breakthrough to be able to search documents. And we decided to partner with Microsoft and NVIDIA. As you know, in this big transaction we've announced with Veritas, we raised over $3 billion of a combination of cash and equity. And we're very honored that among other financial investors, we have two strategic investors, NVIDIA and IBM. But part of what NVIDIA is doing in the enterprise

AR layer, just like Wintel did 20 years ago, they're building on top of their GPUs an enterprise AI software stack that makes it easier for companies like us to run on top of private servers like Dell, HPE, but also public clouds. And that's a breakthrough. We're excited to be partnering with that. And there'll be a lot that we announce at GTC next week. Interesting. So in this Veritas acquisition, you and I talked about on Fort Knox when it happened. Part of that is some people have been anticipating that you might come public as soon as 2024. Now it looks like 2025 at the earliest. How important is that public market move as so many investors right now are anticipating Reddit and

wondering when it gets more hospitable for startups to come public? Yeah, I think in some senses this year from our bankers who were involved in us actually doing this big transaction, which was, by the way, in our space, the Veritas move was the biggest deal probably ever, well since EMC bought Data Domain. This raising of money was like a little mini IPO for us. So we were able to test the market. I think it's going to be a tepid, maybe uncertain market. I wish Reddit well. Next year is going to be much better is what we believe. And from our perspective, if it's uncertain, why not bulk up, get bigger? But we were going to do this anyway, because this is a transformative move. Not just do we get to 96% of the Fortune 100

and 80% of the global 500, but there's hundreds of exabytes. And that's what got NVIDIA excited, when they can run their generative AI not just on a smaller Cohesity number eight in the market, but on hundreds of exabytes. We set ourselves a mission to protect the world's data. But now with the largest companies now running on Cohesity today, but also in the future, that's a huge opportunity for both cybersecurity and generative AI, John. Yeah, you just touched on it a little bit, but I was going to ask that very question, why NVIDIA would be investing, especially given the fact that the company has gotten very aggressive and very active in terms of some of its investments

recently anyway, how it speaks to the ecosystem that is building out essentially around NVIDIA and the picks and shovels that NVIDIA is offering into the world. Well, Morgan, I've known Jensen for many years. He was one of the first people who helped us at VMware put VDI on top of GPUs 20 years ago when the market cap was only, sorry, 10 years ago when the market cap was only 20 billion. You know, kind of like my approach and Steve Jobs today, we approached him and his team. And what he loved about this technology was the fact that retrieval augmented generation, the term called RAG, which AI scientists know about, we were the first, we applied for a patent in this that's pending, to be able to apply that on top of backup data. It's never been solved

before. And that, in the end of the day, is going to drive a lot of GPU hardware, but it's also going to drive potentially his software. And for us, it's a benefit because we can then do this in a neutral fashion on-premise on top of Dell or HP servers, but then also in the cloud, AWS, Google, Microsoft, and not have to write the code four times. We do it once on top of video. It's a good win-win for both sides. Sanjay, finally, how important is GTC now in the pantheon of developer conferences, given this AI moment? I'll tell you, John, I don't think there's anybody who can fill this place, all 18,000 seats, other than Taylor Swift. This is going to be the mega conference in the world. It's going to be as big as reInvent.

If people are running out of places to sleep, they can come to our place here. We'll have a conference room open. I think it's going to be the first show since a while, since they've done it live. It's going to be the hottest show, and we wouldn't miss it. So I'm going to be there myself. I know you guys are covering it. If you've called the Woodstock, whatever you want to call it, I think it's going to be the hottest shows for developers. And for AI, it's going to become that mecca event going forward. Sounds like maybe we ought to be calling it the Eris Tour of AI. Sanjay Poonen, Cohesity CEO, thank you. Thank you, John and Morgan. Morgan, this one is going to be important next week, not just for NVIDIA and not just for NVIDIA's AI ecosystem. But, you know, we had Lisa Su on overtime this week. There's questions about when Intel gets this CHIPS Act funding. It seems it might be imminent.

There's a lot at stake in this coming week around AI, not just NVIDIA. There's a lot at stake. And we also know, as goes NVIDIA and the semiconductor stocks in general right now, so goes the market. And as you did see, semi-stocks, including NVIDIA, including some of these other high-flying names, take a breather this week. So, too, did the major averages, particularly the NASDAQ, which all finished the week lower. So, to your point, it's going to be one to watch, not just for specific investors in AI, in tech, in NVIDIA, but also in a market where you do have words like exuberance and overvalued, stretched, technicals, time for a pullback, all of these types of comments coming across the airwaves or the TV waves, I guess I should say, on CNBC.

There's also what I'll call the cameo effect, right? Who shows up in the keynote besides Jensen Huang? We used to get this in Apple keynotes where, you know, Steve Jobs would bring somebody on stage, Zynga, or some other partner, and you'd see stocks move. We've seen a number of stocks moving in reaction to NVIDIA, not just Supermicro, but also software names. We expect to see a number of software names called out in this keynote. It is happening right here in overtime. So we're going to get all the action here and there could very well be some after hours moves. That's right. We've also got a flurry of central bank decisions,

including the FOMC next week. And we've got a defense story. I'm going to be getting up in a Blackhawk helicopter on Monday morning and interviewing the president of Lockheed Martin Sikorsky, Paul Lemo, as well. So that's going to do it for us here at Overtime. Fast Money starts now.