Closing Bell - Closing Bell Overtime: Late Day Market Reversal, Tech and Retail Earnings Bonanza, Snowflake & C3.AI CEOs on the Record 3/2/23

Episode Date: March 2, 2023

Stocks reversed midday losses after comments from Atlanta Fed President Raphael Bostic. BD8 Capital Partners’ Barbara Doran breaks down the market action while Miller Tabak’s Matt Maley breaks down what Silvergate’s tumble means. C3.AI CEO responds to a short seller’s report while Snowflake’s CEO talks customer cloud spending trends. Plus, a puzzling earnings move in Zscaler and results from Marvell, Broadcom, Nordstrom’s and Costco.

Thank you, Scott. Stocks ending higher on FedSpeak today. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. We've got more big name earnings that are coming your way this hour, including Nordstrom, Marvell, Broadcom, Costco, and many more. Plus, we're going to talk to the CEO of C3AI. His numbers are coming out this morning. He's going to join us before his call. And we're going to talk to Snowflake CEO Frank Slootman, his stock getting hit hard today after guidance missed what the street was looking for. We mentioned FedSpeak sending stocks higher on the day, but we get more of it this hour with breaking news out of the Fed. Steve Leisman has that for us. Hi, Steve. Hey, yeah, and a hawkish Fed Governor

Chris Waller ending the day by saying if the data continue to be too hot, the policy target rate will have to be raised above his range of 5.1 to 5.4 percent. That is higher than 5.4 percent. The title of his speech was about the February hot data, and he said the Fed cannot risk a revival of inflation. If the data moderates, however, in March, he does support a range in the 5.1 to 5.4 percent terminal rate, which is where the committee is right now. But he said the data from February showed inflation is not coming down as fast as he had expected or thought. The fight to bring down inflation will now be slower and longer than many expected just a month or two ago. Inflation data indicate that they haven't made as much progress as had been thought, and that's because of the revisions that we got

in December, for the December and November data. Consumer spending isn't slowing, he says. The labor market is unsustainably hot. Recent data show, he says, instead of loosening, the labor market was in fact tightening, and that is in reference to the 500,000 jobs created in January. No concern, he says, that there's a risk of raising rates, that the risk of raising rates is two-sided, he said. It's only one-sided, and that is the risk that they won't do enough to fight inflation. Recent data show progress on reducing demand may have stalled, and that's in reference to the retail sales numbers. He does say there are reasons to be optimistic about continuing to prove an inflation,

but no change is his plan and maybe even going higher, Morgan, if in fact the inflation data does not cooperate. We've been hearing it a lot in recent days from Fed officials, this focus on data dependence, which perhaps is not anything new. But how would you compare this versus the comments we got from Bostick, which basically led to an afternoon rally where he essentially said, you know, data dependent, he's looking at 25 basis points. Yeah, I mean, I don't always hear what the market here is morgan i didn't hear bostick be all that dovish um uh and and i i get i get that the market was cute to his uh his that the market turnaround was cute to his comments but i i listened to his call and i asked one of the questions and

i i didn't hear him be particularly uh dovish maybe not as hawkish as Waller was right here, because certainly Waller is already flagging you that this number, this target range, which is kind of capped at 5.4 percent in the dot plot, could be higher. And he's also talking here, Morgan, about how dramatically the January and February data has changed his view about what he thought had happened and what was going to happen. So it was two-sided for him. All right. Steve Leisman, always giving us a little more Fed context. Thank you. As we do wait for earnings, let's bring in our first guest, Barbara Duran from BD8 Capital Partners. Barbara, I want to stick with this theme. I hear Waller talking about an unsustainably hot labor market. We get ISM services tomorrow. It's going to be a big focus on prices paid.

What do you think of the commentary we're getting from the Fed, which we know is signaling higher for longer? Yeah, well, I think it's very consistent with what they've been telling us, higher for longer. And I think the market is now knows, has known it's true. And when you saw the inflation data stalling out, you saw that hot jobs number, you know, last month. I think the market is already and that's what we saw this sell-off after a really strong January and February. You know, but the interesting thing to me is that the market, the S&P is still up three, almost three and a half percent. It was up 7%. And the NASDAQ is still up around 9%, having been up 14%. So I think the market is discounting a lot. And I think the market is looking at three potential 25 BIP increases, March, May and June.

So the market continues. Investors continue to look through that. You know, but obviously there's a lot of uncertainty in a wide range of outcomes. And investors are now as data dependent as the Fed. We're hanging on every inflation number to see where it might lead and what it might mean. OK, let's talk more about the data. Let's turn now to CNBC Senior Markets Commentator Mike Santoli with today's market dashboard. Mike. Yeah, John, this sort of walk down the stairs, tied at the ankles with stocks and bonds has been going on for a while,

and not just in this country. As a reminder, this has been a global phenomenon. Overnight, we got another hot inflation reading out of Europe. Global yields are rising. That means global bond prices have been falling and global equity index is kind of following along with them. So you have international bonds, government bonds in this ETF over the last 14 months or so. And you see it's been a pretty tight relationship. But as with the U.S., you've seen a bit of outperformance here in the last couple of months by equities. That's the All Country World Index stock index relative to what

bonds have done. So this is leading to a lot of the either consternation or criticism of the stock market kind of not getting it and maybe underpricing where yields have gotten to or where they might go. I guess I would argue that if you go over a longer span, this is not necessarily always one for one. And as we get to the point where the yield move perhaps seems pretty mature and maybe it's not going to be as open ended as it was last year when the Fed went from, you know, virtually zero to almost five percent in short term yields, that stocks are trying to make their peace with it in the context of a recovering economy in both Europe, China and, of course,

the U.S. being a little better than expected. So you've got to be on alert that maybe you have more shocks to come from bond weakness. But so far, it seems as if the stock market is attempting to put some distance between it and what debt is saying right now. Interesting. I do want to note that Marvell's numbers have crossed. We're going to go through those and make sure we got them straight before we bring them to you. The stock did take kind of a knee-jerk move, lower, higher again, and then lower again. So working that out. Mike Santoli, so how should investors think about the yield move and what that tells them about the right time if they're looking to pick up some bonds, the right time to do that in this kind of environment.

Yeah, I find it fascinating, this sort of relatively newfound excitement over bonds, of the idea of just sort of riding the yields and capturing that income, which makes all kinds of sense. It's a normalization. This is the way the world was supposed to be, where you get some safe yield, and then against it you can take some risk in stocks. What's funny to me is nobody really takes a look at the entry point a month ago, let's say, into bonds and says, well, that was really badly timed because bond prices are down three and a half percent since then, because you assume it's a buy to maturity, kind of just take the income and don't worry about the mark to market and trading it. Whereas

with stocks, if you bought three percent higher than it is right now in four weeks, it feels like a bad move. So I think that's the way to think about bonds is just to own them and own them in whatever target allocation, as opposed to trying to time where we are in terms of the Fed cycle or anything else. The short-term yields may not stay here for long.

At least the market thinks we might be getting some Fed rate cuts in the next couple of years. So it's much more a matter of be happy with what you have right now and the role they can play in the portfolio. All right. Mike Santoli, thank you. Marvell, technology earnings are out. Christina Parts-Navalis has those for us. Hi, Christina.

At least 6% right now. Q1 earnings for EPS, one cent miss at 46 cents adjusted on $1.42 billion. That came in a slightly higher, but it's guidance for Q1 that is alarming some investors. Why is that? There's a huge miss for Q1 EPS guidance at 29 cents. The street was anticipating 41 cents adjusted. Revenue for Q1, they're anticipating $1.3 billion, which is slightly lower. And the reason for this, the reason that we're seeing this decrease, sorry, the press release just fell from my screen right here, has to do with weakness in the data

center. Give me one second. If you guys want to just come back to me, I'll just pull right back up just so I can pull the reason why we're seeing that weakness in Q1. I apologize for that. Indeed, will do. No problem, Christina. Oh, I have it here. I have it here. So the reason is inventory corrections and resulting changes in products. Product mix are impacting our guidance for fiscal first quarter revenue and gross margins. We expect these headwinds. So these are the headwinds affecting Q1 to subside later in 2024 as inventory levels normalize and Marbelle specific growth drivers accelerate. So, again, inventory corrections and changes in their product mix that are affecting their Q1 guidance. Hence, the reason why you're seeing the stock sell off right now.

All right. About 5%. Live TV, breaking news. I know, it's always exciting. You should see my laptop. I can't, everything just shut down. This is the action. Okay, this is it. Barb, for more on this action, this isn't entirely a surprise, the data center issues, because we heard about this from Microsoft and from Amazon. And Marvell has a pretty big percentage of their business that's with the hyperscalers. How much should we trust that this will indeed work itself out later in the year, given that there's so much uncertainty about what the Fed's going to do and how much the Fed's going to slow things down and how the rest of not only the domestic but global economy is going to react? Yeah, John, that is the question. Nobody really knows, you know, what the impact for any business is going to be. I mean, I have to say this number is surprising because they had pre-announced and guided lower. And so this number is really much lower. And we at this point, you know, we knew about the cloud. We had, you know, Alphabet, Microsoft, Amazon reporting. But this is interesting because the inventory buildup is

obviously in the network, you know, enterprise area. And we want to know a lot more because that must be a big demand issue. So it is actually a bit surprising. You know, and Marvel, by the way, I think, you know, when the macro smoke clears, this name has a lot more upside. But the question is, you know, and that's where I want to see a deeper dive in this. If this is really a time to buy, is it if it sells off on weakness? Because it is a great name and they are in key areas like 5G, auto and, of course, cloud, which a lot of companies are projecting will recover in the second half this year. But unknown in the economic uncertainties.

And we've had we've had a pretty strong start to the year for semiconductors in general, Barb. And I realize you own Marvell specifically, and maybe a few other names too. With all the companies talking about macroeconomic uncertainty and given how cyclical the sector is to begin with, I mean, how real is that risk that it falls off a cliff? I guess my point being, if it's an economic, an early economic indicator, is that factored into these names even before we get earnings like we did this afternoon? Yeah, well, it's a good question because the question then is what are trough earnings? You know, what is the trough PE? And Marvel, for instance, has a nice mixture of cyclical businesses, which I think is where the problem is, and other things that are growing

strong. And that's why I want to see what they say about their auto and 5G and everything else that's going on there, because that is the question, where is the bottom and where is the trough earnings? And so I think this report and digging a little deeper is going to tell a lot, and not just about Marvel, you know, but we saw NVIDIA's numbers, they blew that away. And then we're going to have that little bit, Broadcom's numbers, which, and by the way, all three players are for long-term beneficiaries of whatever happens in AI. But that's sort of a free option at this moment. Yeah, of course, we're awaiting Broadcom. We're awaiting a number of other companies reporting results. I will mention C3 AI's results have crossed. I'm looking through those. The stock is moving and we've got Tom Siebel, the CEO, coming up in just a few minutes.

All right. In the meantime, Barb, just want to do get your thoughts on the broader market right now. The fact that we saw stocks rise on these headlines from Bostick, but we did also see Treasuries increasing as well. And we saw the yield curve steepening a little bit, too. The fact that we've been seeing some of these moves more in tandem, which feels very contrarian to times past your thoughts. It sure is. I mean, we've been we've had an inverted yield curve now for quite a while. And the market is really looking through that and saying at some point there is the lagged effect that everybody's waiting to see what happens over the next three to four months, when things are going to kick in, as they will. But meanwhile, you know, it should impact labor, jobs. We should start to see some softness there. Who knows when, because it just seems to be strengthening.

You know, and meanwhile, when that starts to kick in, you know, we still there's still sufficient savings, leftover stimulus. And I mentioned this last time I was on about a trillion. And that could last through year end. So there is there is good buffer, you know, for consumer spending for the Fed to keep fighting inflation. But, you know, we'll see. It's, you know, month by month, report by report. So much of that stimulus that you just touched on is going to manifest in things like infrastructure projects. I mean, how does an investor, I guess, position themselves for that money that hasn't yet hit the economy? Well, the infrastructure plays, that is something that is much longer term, because that takes a lot of time for the government to sort out who gets the money,

when they get it. You know, the savings we're talking about is really consumer. And you've had any number of bank executives on talking about they can they have insight into millions and millions of accounts. And even the lower income consumer has more money saved than they did pre-pandemic. And so that's really what we're talking about. In an economy that's two-thirds service, you're going to continue to have support in that regard. Now, the interesting thing, too, that people keep saying, well, the market's not cheap. It's now after this last reset. I call it a reset this last few weeks.

It's under an 18 PE. However, as Tom Lee, who you all have frequently on, pointed out, if you take out those top five or six mega cap names out of the S&P 500, which make up 25 plus percent, the PE on the rest of those 495 names goes down to under 15. So, you know, it's really it's stock picking. It's really looking at most stocks. So, you know, I think this I think stocks are discounting a lot, which doesn't mean, you know, we're going to continue to have this volatility. There's going to be just. Barb, hold that thought. Nordstrom earnings are out. The retail parade continues. Melissa Repco has those numbers. Melissa. Hey, John. So, yes, the numbers are freshly out from Nordstrom and

it beat on earnings with 74 cents compared to 66 cents that were expected. Its revenue was roughly in line with expectations, a slight miss there. 4.32 billion reported versus the 4.34 billion that was expected. And then there's some interesting highlights here. One of the notable things that Nordstrom announces that it's going to be winding down its operations in Canada. So that's a decision it's making, presumably to cut some costs here. And it's also noting that its off-price banner, Nordstrom Rack, is still lagging behind the rest of its business. So for the fourth quarter, again, that was the holiday quarter,

the Nordstrom banner net sales decreased 2.4%. But for Nordstrom Rack, which again is that off-price player, it decreased 8.1%. And that's interesting because we've been hearing from off-price players that they've been taking advantage of consumers being more in that value mindset. For the Outlook, they are predicting a revenue decline, including retail sales and credit card revenues of four to six percent. Back to you, John. All right. That doesn't sound great, but the reaction, not so harsh. Melissa Revco, of course, will continue to watch that, Morgan. All right. And we will give our thanks to Barbara Duran as well. Thank you. Good to see you all. And now we've got a lot more action, a lot coming your way, including the company with the ticker AI that has doubled this year as excitement grows around artificial intelligence. You can see it moving there after hours on that report.

It's up nearly 10 percent at the moment, but a lot can happen. C3 AI CEO Tom Siebel is going to join us to talk about the quarter when overtime comes right back. Welcome back to Closing Bell Overtime. Broadcom earnings out. Christina Partsenevelis has the numbers. And we are seeing a beat for earnings per share at $10.33, adjusted higher than the street anticipated at 10.10.33 adjusted, higher than the street anticipated at $10.10. On revenue for Q1, this is Broadcom, $8.9.2 billion, which is roughly pretty much, we can say, in line. Maybe slightly higher than what the street was anticipating. For guidance in Q2, revenue coming in higher at $8.7 billion, so that's seen as a positive.

There's not a lot of meat in this press release right now. We're anticipating more from the call. But the CEO did say that Broadcom's first quarter strength did come from infrastructure demand, which is something we're looking for. Hopefully, he'll provide more details on the call in regards to cloud and infrastructure demand, which is what we want to see for chips to turn around. Yeah, we want more details on the cloud always, too. Christina, thank you.

And as we mentioned, C3 AI numbers are out. The stock is jumping. It's up nearly 15 percent. Joining us now in an overtime exclusive interview, C3 AI CEO Tom Siebel. Looks to me like it's a beat on the top and bottom. Talk about the guide, Tom, and particularly in the context of consumption. It's a model you switched to a couple quarters ago, and we just heard from Snowflake last night that customers want to take smaller bites. How are you seeing that show up in demand for what you do? Well, I would say, first of all, John, we had a great quarter in every respect. We switched to a consumption-based pricing model just basically a quarter ago.

I think today we're tracking over 290 enterprise opportunities that want to jump on the consumption bandwagon. Our customers, we do it a little bit differently than Snowflake. They tend to start small and just kind of grow into it. And so it's a little bit different model. So we're not seeing that headwind. You'll recall that I reported in June, July and August of last year that we were just seeing bracing headwinds out there in terms of companies kind of bearing down for a recession, slashing expenses, stopping all procurement, sales cycles moving sideways. And I would say that has really changed in the sense

that companies are, I'd say they're really quite optimistic. And I think whether there's a recession or not, they're fine with it. They're planning for growth. AI has all of a sudden become king. They want to use AI to save money. And so all of a sudden we seem to be the name of the game. And I was talking to you just a couple of weeks ago about how you're planning to integrate open AI tools into the interface and what you do. You were talking to me from the UK, I believe. I see you got a deal done over there involving EY recently. I believe you said that that's going live this month. Any impact that you expect on customer adoption, deal flow, customer interest? Because Frank Sloopman was just saying last night on on his call it's unclear to him exactly what the business models are around this gender that they are stuff so he doesn't want to get in over his

keys well generally is a general about the general a i in a very unusual way so basically bar architecture enables this to take immediate advantage of all the innovation that's going on open and i, Microsoft, Google, and others, AWS and others. So whoever is the most advanced on that day, we just plug that into architecture. user interface with natural language processing, generative AI, reinforcement learning, and kind of normal supervised, unsupervised, and deep learning techniques to fundamentally change the nature of the human-computer interaction model for these enterprise applications. And so rather than have these complex applications that kind of look like a Bloomberg terminal

with all kinds of funny keystrokes and menus, the interface for all of our applications going forward is just the Google search bar. And you just ask it whatever question you want. And it uses generative AI as part of the solution to deliver the answer, be it about military readiness, supply chain, customer churn, ESG footprint, whatever it may be. So we will be demonstrating this to about, I think, 400 of our customers next week in Boca Raton. As it relates to EY, the vice chairman of EY will be with us in Boca Raton, demonstrating their ESG application in front of all of our customers.

So there's a lot going on at C3. Yeah. Tom, I wanted to ask you about a report that was released a couple of weeks ago, Spruce Point Capital Management. A release report said strong sell research opinion. Alex Springer actually came on CNBC and commented on C3 AI. Have a listen. This is a company that frequently pivots its business model to what the best and hottest technology trend is. So if you use the Wayback Machine, first it was C3 Energy during cap and trade. Then it was C3 IoT during Internet of Things. Then C3 AI when the AI buzz was hot during COVID. And are they going to change the ticker to company C3GPT? I mean, one can only

speculate, but again, this is a company that has a history of promising things that just don't pan out. All right, that was Ben Axler. I just want to get your response to that. Well, C3 has a history of exceeding its revenue guidance in each of eight quarters that that has been a public company uh c3ai has a long history of satisfied customers i think we're in a very good business i do read it's broadly reported in the media that that person who just had the tv and his company are under investigation by the scc for stock manipulation where they go short of stock and then go on TV and say things like that. And so we'll see how that investigation works out for them. All right, Tom, I know you got to get ready for the call. So we'll let you go. Thanks for joining us first on Overtime. Thank you, John.

Well, excuse me, Costco earnings are out now as well. And Melissa Repko has those for us. Hey, Morgan. So shares are down a little bit for Costco, but it actually beat on earnings per share. It reported $3.30 per share compared to the $3.21 that were expected. It had a slight miss on revenue, though, $55.27 billion versus $55.54 billion expected. That does represent an increase year over year of 6.5 percent. It's very minimal detail in the press release here, so we're going to have to wait for more details on the call. But it is notable e-commerce sales decreased by nearly 10 percent year over year for Costco, which is interesting. And that may just be a reflection of people shopping more again in stores. Back to you. All right, Melissa Repko, thank you. Shares down 2 percent. Still ahead,

a closer look at the massive pullback today in shares of Silvergate Capital. Look at that, down 58%. If the stocks collapses, a warning sign for the rest of the market. We're going to dig into that. And up next, another stock taking a leg lower today, Snowflake. We're going to talk to CEO Frank Slootman about the post-earnings plunge and the read-through for enterprise cloud spending. We'll be right back. Welcome back to Overtime. Time now for a CNBC News update with Bertha Coombs. Hi, Bertha. Hi, Morgan. Here's what's happening.

Alex Murdaugh's fate is now in the hands of the jury in his murder trial. They went to this room, you'll see in a minute, about an hour ago, to begin deliberations on whether the disbarred South Carolina attorney fatally shot his wife and son in order to divert attention from his financial crimes. The House Ethics Committee says it is starting an investigation into whether New York Republican Representative George Santos engaged in unlawful activity in his 2022 congressional campaign. Revelations that he lied about aspects of his employment and educational history have led to questions about his campaign's finances. And a big winter storm has closed Yosemite National Park in California.

It got up to 15 feet of snow in some places. Crews are working to dig out, but officials don't know yet when the park can reopen once again to welcome tourists. Morgan, I cannot imagine driving up those windy roads to even get there. It's March. We're getting snowstorms. We're going out with a bang here. The groundhog may have been correct. I hope he was not. Bertha Coombs, thank you. HPE and Dell earnings are out as well now. And Steve Kovac has all of the numbers for us. Hey there, Morgan. Yeah, and shares are up on both of those names. Let's start with HPE up about 5% after beating on the top and bottom lines. EPS coming in at 63 cents adjusted versus the 54 cents Street was looking for. And on the revenue side, $7.81 billion versus a $7.43 billion estimated. Guidance also really strong. Gross

and gross margin is up slightly, 34%. And then let's move over to Dell, where C-share is up about 6%, I believe. EPS coming in at $1.80 versus $1.63 adjusted the street was looking for. Revenue, $25.04 billion versus a $23.39 billion drop there due to lack in PC demand last quarter. Also, just one headline here, Dell CFO Tom Sweet is retiring and will be replaced by Yvonne McGill pretty soon here. Morgan. All right, I'll take it, Steve. Thanks. Interesting moves higher. And we're just talking about that 15 feet in Yosemite. That's not the only snowfall. Rough day for a snowflake stock. It fell 12 percent on current quarter product revenue guidance, a little lighter than some on the street had hoped.

But there's a wrinkle here. Investors need to understand that though Snowflake is an enterprise cloud company, it doesn't charge customers using a subscription model like many do. It uses what's called a consumption model. We were just talking about with Tom Siebel, where you pay as you go. Think about it like candy bars, because it's afternoon and I'm kind of hungry. Okay, so subscription, you got a box of these snowflake bars coming on a regular basis, right?

You might go to Costco, get a big box of them when you need to for consumption, though. In these tough times, though, fewer customers even want the big box. They're buying the bars one at a time. Snowflake saying that doesn't mean customers are consuming fewer bars. They're just not buying them in bulk as much. So let's figure out what that means for the current

quarter and the road ahead. Snowflake CEO Frank Slootman joins us now. Frank, so talking about the current quarter and the product revenue, what are you seeing from customers, particularly internationally, that convinces you that even though they might be taking smaller bites and newer customers might be ramping more slowly, that's not a bad sign for the business overall? Yeah, first of all, John, you characterized it really well. But there's always a tale of two cities with Snowflake. There's a bookings dynamic and there's a consumption dynamic. And in some quarters, they don't align and they don't line up and they converge. And it's always hard to know exactly which way it's headed. But on the consumption front, we were well over the high end, over our guidance.

And it's very durable. It's been holding up very good. We saw more sort of headwind behavior, if you will, sentiment changes on the booking side. And this is really, you know, when you go to the gas station, am I going to fill up my tank or am I going to go to the gas station three times a week and put in 20 bucks each time? So people are doing shorter duration. They're doing deals, but they're buying enough to enable the growth for a quarter or two quarters. And then they come back and they re-up and they re-up until they get to the end of the contract. So there's definitely a posture of wait and see. And by the way, they give up some economics in the process, but they like to

have the shorter duration posture towards contractual relationships. But as you said, we started mostly international SMB and so on, not at the high end of our business. Yeah, I thought about using cell phone minutes, you know, do you do the monthly subscription or but I'm hungry. So I went with candy bars. So if we go deeper, though, into the industries that you serve, financial services, a big customer group for you, so is media and telecom. Do we need to be concerned about the macro impact on those businesses and how that might affect their rate of consumption?

Not yet, because the consumption is holding up. I mean, we obviously took our guidance down, but that was really a reflection of the newer cohorts having a different ramp or incline in terms of consumption. And the reason that is happening is we're seeing much more large mainstream enterprises coming into the business. I mean, just remember, Snowflake, the early adopters were all digital natives, very aggressive adopters, plus the economy was on fire at the time. So you saw a much more aggressive ramp in the early days. Now we have mainstream enterprises coming into the cohort mix and also in a time where people are having economic reservations and caution.

So that's really accounting for it. I do think that the terminal value, if you will, of these large enterprises is going to be much better than the earlier cohort. So it's really about, you know, pay me now, pay me later kind of a thing. So I don't view it as a negative at all. I think it's going to really stabilize our business, make it far more predictable in terms of where it's all going to end up. Okay. Across Snowpark, cloud apps, you're looking to turn Snowflake into more of a platform that developers build on top of. And I'm wondering how you see

things like generative AI potentially coming to play in that. You were on the call last night, I think very pragmatic. You said it's not clear what the business model is around generative AI in specific cases. So you don't want to get ahead of your skis.

But how might that work for investors who want to understand what the benefit might be if you succeed in this platform strategy? Well, I mean, if you know the world of AI, if you want to generate interesting questions and interesting answers, you need data. Data feeds these models. You know, data is also a tremendous gravitational pull for applications. And we have data. It's growing in leaps and bounds. We're already connecting to large language models. People are really combining structured data from Snowflake with textual data from Wikipedia and all kinds of different things.

So we're going to be a tremendous feeding source for the AI generation of applications we're already at for machine learning, obviously, all kinds of new applications. Finally, if the economy, if when the economy does stabilize, what should investors expect to happen with your customer behavior when it comes to taking those bigger bites? Again, on consumption, it's better economics, right? If they do take those bigger bites, is there an expectation that that comes back after things stabilize a certain number of quarters after? How do we look at it? Well, visibility needs to improve, right? You know, people are out there saying, look, I don't know what's going to happen, right? So I take a very short-term wait and see.

As conservative as I can, I'm going to buy enough to enable what I need to do. But I'm going to review it again, you know, a quarter from now or a year from now instead of doing very large, you know, three-year contracts. And the past was I had tons of visibility. I'm anticipating a huge amount of growth. I'm going to do big contracts, get the best economics. And that was the dynamic. So, you know, we really need to turn around from, you know, from a world where visibility is very, very opaque at this point.

That needs to change. Sure. And the market reflecting that, certainly, and how it's reacting to your earnings. But, Frank, appreciate you coming on Overtime and explaining this to us. Snowflake CEO Frank Slootman. After the break, Mike Santoli takes a closer look at Broadcom following that company's earnings report and why it tends to outperform its peers in one specific kind of market environment. Stay with us.

Welcome back to Overtime. Let's get another look at Broadcom on the back of those earnings. You can see shares are basically just above the flat line right now in after hours trade. Mike Santoli is back with a breakdown of the semiconductor and software names performance versus its peers. Mike. Yeah, Morgan, and this is really an illustration of the character of Broadcom relative to the broader semiconductor sector. In fact, this is the stock over the last five years versus the SOXX, Philadelphia Semiconductor Index ETF. And you see when this performs really well relative to the overall sector, it's when the market's very defensive, when we're selling off, when it was a risk-off tone. Because why? It's a slower growth business. It's more diversified, but not really in the hot momentum areas of semiconductors. Much more diversified with

the software component. 3% dividend yield, lower P.E. It's just a kind of steadier and sort of less dramatically kind of exciting performer, frankly. So what I find interesting is you saw this huge run up in the fourth quarter of 2022 of its relative performance. And now with the risk on tone in January, it came right back down. So the question is, are the rest of the semis going to gain on Broadcom, which would mean this line goes lower? Or are we still going to chop around up here and be a little bit more apprehensive about the path ahead, guys? Very interesting as they lean more and more towards software, Mike. Thanks. Semi-confident.

Yes. Coming up, another check on today's big after-hours earnings movers as investors get set for all of the conference calls to kick off. Plus, find out whether Silvergate Capital getting cut in half today could be a red flag for the broader market come back to overtime shares of silvergate capital plunging precipitously today take a look at this down 57 almost 58 on the day after the crypto crypto focused bank delayed its annual report the silver gate saying it needs more time to assess the extent of damage to its finances stemming from last year's crypto route, including warning about its, quote, ability to continue as a going concern. Companies including Galaxy Digital and Coinbase disclosing they are stopping payments through Silvergate. And the news even pressuring rival Signature Bank

and sending the broader KRE regional banks ETF down on the day. As you can see, finishing down 2.5%. Meantime, though, another bank not related to cryptocurrency also continuing to face challenges, and that is Credit Suisse. Those shares falling another 6% today to 5% to record lows, falling below $3 a share. Blame mounting legal bills, regulatory investigations, including a report this week regarding the now-defunct Greensill, below three bucks a share, blame mounting legal bills, regulatory investigations, including a report this week regarding the now defunct Greensill, and a reported flight of clients and bankers, even as the firm attempts this major revamp after years of what's been categorized

as excessive risk-taking. Are these company-specific stories, or do they raise the risk of contagion in a market that continues to adjust to central banks' tightening? Let's bring in Miller Tabak chief market strategist Matt Maley. Matt, it's great to speak with you today. And that is the very question I want to start this conversation with. Company specific or is it really a sign of the times? And does it speak to rising risk in a market right now? Well, I mean, I do think it shows a rising risk in the marketplace. But at the same time, I don't want to start warning that, geez, this is another 2008 all over again.

You know, we saw what happened today in the market. The market acted just fine in the news with Silvergate. I'm a little bit more surprised that the market's not paying a little bit more attention to what's going on with Credit Suisse because of the derivatives. And we have counterparty issues there. So, I mean, I guess my point is if things really start to get much worse there, that can have bigger, broader implications. But thankfully, we don't have the same kind of leverage in the banking system that we had in 2007, 2008. So, again, a bigger fear, but not, you know, not something where we have to worry about staring into the abyss like we did a dozen years ago. The fact that we did see the markets here, the broader averages rally into the afternoon and perceive to channel Steve Leisman here,

perceive maybe slightly more dovish talk, whether it was whether it was, in fact, more dovish or not from Bostick at the Atlanta Fed. Your take on the dynamics we've been seeing in stocks and what's priced into this market. Yeah, I mean, I agree with what Steve had said earlier about I didn't see it as much as dovish as maybe the market saw it. And the one thing I guess that really concerns me on an intermediate term basis is what we're hearing from most of the Fed. I mean, we're hearing they'll say, well, we't, you know, we're not worried about the stock market. And, you know, recessions, you know, are certainly possible. And I guess what comes that I'm concerned about with the way investors look at it is the investors think they seem to think it's like, you know, the Fed's job is to make sure we don't have a recession.

That's not it. I mean, if you listen to what they've said, especially in the last week or so, it's like they are determined to beat inflation. And, you know, that's really the more important thing. I mean, the Fed knows that inflations are not, sorry, recessions are not extinct. They're going to happen. Bear markets are going to happen. And if they need to beat inflation,

they, I think, are telling us that they're going to risk, even if it's just a mild recession, doing that. So I guess my concern is that with interest rates rising the way they have been again and broken above all sorts of trend lines, we have earnings estimates coming down. That's not the kind of recipe that really bodes well for a further rally in the market, at least not right now. And, of course, we've had another busy hour in terms of earnings results. Given what we've been hearing in this earnings season, do you see opportunities right now to buy in? Well, I mean, there's always opportunities in individual stocks. It'd be interesting to see what happens with Broadcom. You know,

the stock last I saw was about unchanged. And you'd like to see after NVIDIA's real good number, I say their number was pretty good. And then, of course, they mentioned AI 500 times in their conference call. So maybe Broadcom will do the same thing and help the stock rally. But my point is that earnings estimates are coming down. We saw, I think it was Credit Suisse today, lowered their earnings estimates for the year. And I guess my point is I think one of the sectors that people should be looking at sectors, certain sectors and individual names. And one of them that I like is, of course, one that you follow so closely is the defensive defense and aerospace area where a world is not becoming a safer place. And all that stuff about cutting defense spending that we heard in early January, I think that's gone by the wayside.

So people should take a look at some of those areas as well. OK, Matt Maley, thank you. Thanks, Morgan. Up next, we're going to break down the big takeaways from today's big slate of after hours earnings, plus a closer look at Okta, one of the biggest winners of the market today when overtime comes right back. Welcome back. A puzzling move here in Zscaler shares after hours. Down about 12% in overtime after reporting results. That's despite beating across the board Q2 earnings and revenue, plus current quarter and full year earnings and revenue guidance.

Investors might have hoped for higher billings growth. It was 34%. But this might also just get cleared up when the regular trade starts in the morning. Now, on the flip side, a strong day for Okta. That stock closed up 13 percent. And I spoke to CEO Todd McKinnon just a little while ago about how he's expanding the business from workforce identity into customer identity and picking up customers like OpenAI. Our journey and our evolution from being a workforce identity provider with some customer identity to truly being this balanced platform of moving toward

50-50 mix of we can appeal to every value center or every buying center in a company, from the marketing team to the technology team to the product team to the information officer. That's part of the journey we're on with the Auth0 acquisition and the changes we've made to optimize that. In parallel, I think what everyone in the tech industry is going through is economic uncertainty. Now, after a very rough patch a couple of quarters ago, McKinnon told me his sales force is showing solid productivity improvements. Cross-selling was a big part of this quarter since deal sizes are smaller, as we were talking about with Slootman, and there are fewer new customers to be had. On the other side of the balance sheet,

though, he wants us to know he plans to run a tight ship. The big thing, John, is that what's happened in the world over the last year is that there's no longer zero interest rates. So, shareholders have a choice, and they have more choices to invest their money, and they favor cash flow and profit versus growth compared to a year ago. And we care a lot about shareholders. So, like a lot of tech companies, we're adjusting accordingly. And that's when you see our record free cash flow of over $70 million in Q4, a non-GAap operating income of over $40 million, an outlook for the year ahead, which is we're proving that we can grow this business into this massive TAM, but also we can do it in a more efficient way, in a way that balances both

growth and profitability. Now you can catch my whole Fort Knox earnings conversation with Okta's CEO on our Twitter page at CNBC Overtime. Morgan, a lot of action. I've got to also point out Samsara, ticker IOT, that is higher by about 3% after hours. We'll have the CEO tomorrow. All right. It's been a very busy week for earnings, especially the tech earnings. Just to go back to Okta for a minute, though, I just think it's very interesting that they ended up with OpenAI as a customer and it wasn't Microsoft. Yeah. Well, they're very specific on what they do on identity and on the customer side, and they're kind of a neutral platform. So

maybe you can sort of have enough Microsoft Cloud tools at a certain point and speed of implementation is important as well. Yeah. Keeping an eye on some of these retail movers we've got after hours as well. Costco has been trending lower. They missed on the top line, I think 6.5% sales growth, which was lower than the street had expected. And Nordstrom also seeing sales declines, forecasting sales declines and weakness, a lot of markdowns. So we continue to see that weakness from the consumer where goods and retail purchases are concerned. I was surprised, though, at the move in Nordstrom after hours.

It's still a little bit higher. You kind of think apparel's not doing well based on what you heard, and then maybe it's not as bad as you would have thought. And on Costco, maybe people just aren't buying those candy bars by the box. Maybe they're getting them one at a time. Or maybe they don't have them in their stores. But, yeah, the Nordstrom Rack also, like the decline there. I think she said 8% decline.

I thought it was pretty fascinating, too. Okay, well, that's going to do it for overtime. Fast Money starts now.