Closing Bell - Closing Bell Overtime: Microsoft President on How AI is Changing Our Workforce; AI Drives Citi’s Higher S&P Target 7/10/25

Episode Date: July 10, 2025

Citi's Drew Pettit defends his new 6300 year-end S&P target, arguing AI justifies premium valuations. Stephanie Link scans for strength Microsoft President Brad Smith on his company’s $4B AI workforce plan and how AI is already changing the labor market. Plus, a leadership check on Apple, and our Kate Rogers with the latest on tariffs — and your coffee.

That bell marks the end of regulation. Colomos Investment ringing the bell at the New York Stock Exchange. The Marzetti Company doing the honors at the NASDAQ. Stocks are up with the NASDAQ and S&P both hitting all-time highs. Investors brushing off tariff developments as the president imposes his highest rate yet on Brazil. The S&P and Dow posting their first positive sessions in three. Consumer discretionary and real estate leading, communication services and tech the laggards,

industrial is hitting another all-time high today. Bitcoin too, crossing 113,000, it is now up 97% just in the past year. Oil falling though for the second day, down more than 2%, crude now on track for its worst week since February. And sticking with commodities, copper, jumping another 2% today now on track for its worst week since February and sticking with commodities copper jumping another 2% Today after the president says copper tariffs will go into effect on August 1st Copper is now on pace for its best week since March 2022 well, that's the scorecard on Wall Street. Welcome to closing bell overtime. I'm Morgan Brennan along with John Ford

We've got another record high for the Nasdaq But if you think the tech Run is running out of steam, we will talk to one trader who sees three other areas of opportunity. Plus, Microsoft's investing billions to train the workforce for an AI era. We'll have more of my interview with Microsoft president, Brad Smith.

And MP Materials gaining 50% today after partnering with the US government. We will hear from the CEO on that company, on that deal, and what it means for these trade talks coming up later. But let's dig deeper into the latest record highs. Christina Parts-Nevelis is looking at some of the day's big movers. Hi, Christina. Hi, Morgan.

Let's start with AMD because it is back in the spotlight. Shares closing 4% higher after HSBC upgraded the stock to a buy, doubling its price target to $200. It's only trading at 144 right now, so there's still a ways to go. The analyst says AMD's new AI chips could rival Nvidia's and command a surprise pricing premium. Cyber stocks, though, on the other hand, trending lower. Take a look at the hack ETF on your screen,

down over 3% today. Driven by a mix of technical selling, there wasn't a particular catalyst, but there was a recent downgrade for CrowdStrike to hold. That's why those shares are down 5%. And this was specifically from CFRA after Piper downgraded shares yesterday. Despite all the AI potential, they don't see a reason for shares to climb higher in the near term. Zscaler lower on your screen, 6 Palo Alto, similar 6% lower. Let's move on to Bloom Energy shares.

Those fell about 10%, almost 10% after SK EcoPlant filed notice of its intent to sell 10 million shares. So why should we care? SK EcoPlant is a major shareholder owning at least 10% of Bloom Energy's outstanding shares. They're getting out, a little bit of concerning. And then last but not least, Estee Lauder shares jumping after Bank of America reinstated coverage with a buy rating. They have a price target of $110. A share is currently trading at 92. And they say it's really about the turnaround plan and a stronger demand coming from Asia. The stock is up about 6% posting its best day in nearly a month now trading at its highest level also since October John all right Christina. Thank you and even as stocks rose today

So did bond yields following this morning's jobless claims data Rick Santelli joining us on that from Chicago Rick Yes, and John there was a big reversal later in the session, but let's start at the beginning 830 Eastern initial jobless claims 227,000 let's put up the chart. That's a four-year chart of claims. What I really want to stress is how consolidated it's been basically between 225,000 and 250,000. Matter of fact, we haven't been above 250,000 since October of last year. So seven weeks, the lowest level since mid-May, and continuing claims, even though it's their seventh week above 1.9 million, it's steady as she goes. Historically, continuing claims is not that high, and initial claims, well, they give credence to the notion

that don't count out the labor market just yet. We had a good jobs report, a decent jolts report, so there's a lot on the positive side of the ledger for the labor market. In terms of 10s and 30s, well there's a chart over three days. We had a 30-year bond auction today, 22 billion. It wasn't a very great auction, it was very middling, but yields fell nonetheless and that was the catalyst. Matter of fact, 20 and 30-year bonds are the only maturity on the curve right now whose yields are a bit lower than yesterday. The curve has flattened rather dramatically and one of the clues on that three day chart was the failure for 30 year intraday rates to take 5%.

On Tuesday we got within three basis points and finally the dollar index is on pace for a two week high close. Right big deal, two weeks, it's at multi-year lows. But it is important, especially when you stack it up against two-year note yields over two weeks why the two years very sensitive to any changes on the Fed and of course the dollar index can be very sensitive to any interest rate changes Morgan back to you all right Rick Santelli thank you all right let's continue with the markets while consumer discretionary was the top performing sector today

and one of the best in the past year, our next guest says he would still be weary of any consumer sector. So let's bring in city director of US equity research, Drew Pettit. Drew, it's great to have you back on. Why? Why are you weary here despite data that's been holding up arguably better than expected and Fed speak bolstering it? despite data that's been holding up arguably better than expected and FedSpeak bolstering it. Yeah, look, so the soft landing trade is kind of in effect, at least for the past couple

weeks here. And look, consumers a little bit pent up. So I kind of I get the move and you even see the move in small cap, to be honest with you. But structurally, we're not there yet. Fundamentally, I don't think we're there yet. I think if you want these types of sectors to continue to outperform more than just a tactical trade, you're going to need the macro data to hold in there

and the Fed to cut rates. It's not an either or structurally, I think it's both and we're not quite there yet. Okay, if we're not quite there yet, where do you invest right now? We have some secular growth stories playing out. AI AI for example does that trade still have legs. I think so to be honest with you with some of these growth trades if it ain't broke don't fix it. So AI important theme still one of our favorite growth themes. I actually don't think the market has really overpriced the opportunity and a lot of stocks. If I was gonna be cute here and put new money to work,

I would probably look at AI plays that are outside of the US to pair with some of the structural growth names you get that are already big names in the index. Does the consumer matter to the second half, Drew, or is it more just about the general conditions and the momentum? And I ask that because there's this unknown amount

of inventory that perhaps got pulled in ahead of expected tariffs. There are these credit issues that are hitting a number of consumers at the working class end of the economy and perhaps more pressures to come there. It does matter, yes. You know, when we look at the markets right now, it feels like we're kind of running out of momentum

when it's just been growth led. So if you want to be bullish in the second half and you want a bullish narrative to play out, the cyclical, including the consumer, has to work and kick in. Honestly, if we're going to get to our bull case of 7,000, you do need better earnings growth and you need stronger contribution outside of the growth sides of the market. So yeah, consumer will matter for the bulls. How about contribution outside of the U.S.?

You mentioned AI plays outside the U.S., but we've got a lot of multinationals here that are making money in various places. Are there weightings toward particular regions that you think are gonna be beneficial for particular kinds of companies, for particular kinds of themes? Look, I'm not gonna be too picky when I think about this. When it comes to some of these structural themes, it's going to move beyond geographies.

So again, thematically spending, companies that are improving quality, getting more efficient, regardless of the economic backdrop, are ones that we want to buy and good companies are doing that globally. I think some great examples that kind of show up in our eye basket is kind of users or adopters of the tool. Like an SAP is a great company out there. You can invest in names like that because they're structural improvers and not and still not priced to perfection. JP Morgan's Jamie Dimon

warning today at an event in Dublin that markets are too complacent on tariffs. He also took a very contrarian take and said that he thinks inflation may be stickier here and that he wouldn't even be surprised if you saw a Fed that was hiking rates. Your reaction. I don't think we got a Fed hike on the horizon. That's not our base case at Citi. That would be a surprise to equity markets. I'll tell you that right now.

And you know, honestly, like short term, like, you know, our end of year target, our fair value on S&P 500 is 6300. So we're pricing in, I think at least in the short term, a lot of good news in the fundamentals. So yeah, it sent them in a little bit stretched here. Some of our indicators are elevated again, not at the levels we were entering this year, but look, earnings season has to deliver.

So to heed to Jamie Dimon's advice, short term, be careful. Longer term, you need the structural to play out. Not much upside left for you in the S&P with that year end target from here. Do we have to get a rate cut even to meet that

year end target of yours? I don't think so. Again, bull case, I think you probably need the Fed to really help out as well. And you need the cycl Fed to really help out as well, and you need the cyclical to kick in. On top of that, we might have to get even more bullish on some of the terminal multiples

we can put on some of these structural themes. It's funny that we don't talk about this now, and it feels like it was ages ago, but just at the beginning of the year, we challenged USAI dominance with DeepSeek. I still think we're working off of some of that, but honestly, you put it all together, a lot is priced in right now. I think if you're thinking about risk reward, a little bit more to the downside than upside, but the bullish case

does kind of stream on more things contributing. Okay, we'll have to see how it all goes. And by the way, beginning of the year does feel like ages ago. Drew Pettit, thank you. The S&P closing at a record high 62.80. We've got Levi Strauss earnings out. Courtney Reagan has the numbers for us. Hi, court.

Hi, Morgan. Yeah, when you take a look at this report, it's pretty much good across the board. Levi Strauss putting up an earnings beat of 22 cents adjusted. The street estimate was for 13 cents, also well above what the company had predicted itself for the quarter. Levi Strauss revenues also stronger than expected at 1.45 billion. The street was looking for 1.37 billion. America's revenue, Europe also higher than expected. The operating margin coming in at 7.5%. The street was looking for 6%.

Gross margin also at 62.6%, slightly above analyst expectations. Direct to consumer revenues, this is important because this is where the company is sort of really heading and pushing a lot of its muscle. They increased 11% and now they say 50% of their net revenues came from the direct to consumer business wholesale revenues increased 3%. Their company also raising its full year top and bottom line guidance

and is now incorporating the impact of tariffs. They are assuming though that these tariffs were made at about 30% on China and then 10% for the rest of the world. And then one last note, they are raising their dividend to 14 cents a share. You can see here, shares are moving higher in response here by almost 8.5% on Levi's results. Morgan? Okay, we know consumers are buying jeans. Courtney Reagan, thank you.

Don't miss Jim Cramer's exclusive interview with Levi's CEO. That is coming up at 6 p.m. Eastern on Mad Money. Well, tech once again hitting new highs as everybody piles into Nvidia and the like but there are other maybe better opportunities for your money. We're going to look at three sectors investors might want to play instead. Plus MP materials up 50% today after entering into a partnership with the U.S. government. We're going to hear what the CEO had to say about the deal. You don't want to miss that.

Overtime is back in two. Welcome back to Overtime. MP materials surging today, closing almost 51% higher. The rare earths, miner and manufacturer announcing a major and unprecedented deal with the Department of Defense to expand rare earth magnet production tenfold. The government will take a 15% stake in MP

becoming the largest shareholder. It's gonna commit investment to expand mining, processing, the building of a new production facility to make these magnets. The deal includes at least, for at least 10 years, off take agreements both for the government and commercial customers, and establishes a price floor for these minerals.

Now I asked MP Materials CEO, Chairman, and founder Jim Latinsky why this deal was necessary now and how quickly supply can come online. We're in a very unique time. We're in a time where we essentially our economy and our strategic supply chains. We have Chinese mercantilism, which is a real adversary for us. And so I'd like to think that this is sort of the first. It's a model. We have to deliver it MP and show that this is an incredible route to go. But this is what this really is, is it's a new way forward

to accelerate free markets, to get the supply chain onshore that we want, and make sure that mercantilism is not going to hurt our ability to do so. We could have all the rarest in the world and we could have them flowing, but if we can't make a magnet economically, it's still going to China.

This is the feedstock to physical AI. We've had on your air, we've had Jensen Wong, Elon Musk and many others talking about robotics, drones being, you know, certainly robotics being the expectation is it's gonna be the largest industry in the history of the world. Well, rare earth magnets are essential. And so if we don't bring this supply chain on now,

and it's gonna take us several years to bring on more, then we're really leaving trillions of dollars at risk. So MP materials has worked with the Pentagon since 2020, but this deal emerged and really came together all post Liberation Day, especially as rarest have become a lightning rod in China trade negotiations. Here's the big takeaway for investors. We're talking about MP materials today and certainly there's upside for the government, commercial customers of these magnets and for the taxpayer directly, but it really signals

that the federal government is open for business and willing to engage with the private sector in new and dynamic ways. So public-private partnerships, new ways of contracting with the government, and this is in part why you've seen so much money both in public and private markets, funneling into things like defense tech and dual use technologies and commercial space, AI software companies that are starting to contract with the government, while you're seeing names like Meta

do more work with the government as well. It all sort of speaks to this new environment of public private partnerships and this new environment of government contracting. John? It is nationally important, Morgan. Well, the NASDAQ hitting another all-time high as tech stays hot, but our next guest has three other areas where there might be opportunity.

Joining us now is Stephanie Link, chief investment strategist at Hightower Advisors and a CNBC contributor. Stephanie, good to see you. Let's start with financials. Why do you say they're cheap? Yeah, they're cheap. I think deregulation is totally underappreciated. We had really good stress tests a couple of weeks ago.

You're going to see more buybacks, more dividend increases. We're going to see a reduction in the SLR ratios. We are also going to see the Basel endgame, Basel III endgame come to fruition. All this means is that there's more capital for the banks to buy back stocks, increase dividends, and most importantly, lend. And I do think the quarters are gonna be good next week, John, and I think you're gonna see an uptick in M&A,

capital markets, and we're gonna see an improvement in net interest income. And so the one name that I've been buying has been Truist because it's trading at one time spoke with a 4. half percent dividend yield. Okay, now let's talk housing. The construction ETFs on pace for its best weekly gain since mid-January, but still down for the year

off 22% from its 52 week high. How are you playing this space? Yeah, so I own DR Horton, and I like DR Horton because they have a lot of exposure to the first time buyer. That's about 57% of their mix. I also think they have a favorable geographic mix in the southeast and the south central. That's about 52% of the mix.

Numbers are already de-risked. Last quarter they lowered numbers on deliveries, gross margins, and I think they could probably do $11 a share this year, 12 next, and they're buying back about $4 billion of stock, which is 11% market cap. And the stock trades at 11 times forward estimates, really cheap. Yeah, interesting, especially in a week where the ITV

is up something like 5% so far. We've seen that renewed trade higher here. Finally, let's talk industrials. It's the top sector of the year for the S&P so far. It's up 14% at another record high today. Stephanie, you and I have been's talk industrials. It's the top sector of the year for the S&P so far. It's up 14% at another record high today. Stephanie, you and I have been talking about industrials for years, you still like them? I do still like them.

And I actually bought a little bit of Vertiv today on the news that AWS was building out a liquid cooling system, which I do not think is a threat to Vertiv because I do think that they have size and scale and they have the complete end-to-end operation. The stock is down about 25% from its high. They're going to grow mid-teens revenue growth, 25% earnings growth, and margins are going to expand. They're going to outgrow the industry by 3% to 5%. I still think you want to stay

on this AI data center power grid theme and buy on the dips. And then I like aviation. You know, you and I talked about Boeing January was my favorite idea for the year and out of every stock. And I think it's really starting to work now we're a lot of momentum deliveries yesterday we got for the second quarter

the best since twenty eighteen that means free cash flows going higher it's negative two billion today I think it gets to twelve billion by twenty twenty seven. And the stock is trading at twenty four times price to free cash flow Historically, it has traded 36 times. Yeah, that was a good call

I mean stocks up 27% so far year-to-date Do you want to get your thoughts as we do go into its earnings season more broadly what you think of the markets with the S&P? And ASEC trading at record highs right now. Do you think earning estimates have come down too far? I Do I actually think earnings are have come down too far? I do. I actually think earnings are going to grow double digits, expectations for about 5%. And the reason is because the economy has stayed strong. We're running at about 2.5% GDP growth.

That usually equates to mid single digit revenues and that 8% to 10% earnings growth. Throw in a little bit of margin help, then you can get to 10% plus. And I do think that the economy has stayed quite strong and that the labor market is really what is driving it. And inflation is coming down. And some of these unknowns are kind of going away with regards to tariffs and that sort of thing. So I think, you know, you want to carefully be buying here because we've had a nice run from the lows, up 25%. But on days where certain sectors that are my favorite

that get hit, that's where you buy the, that's where you see the opportunity to do the buying. Interesting optimism at the highs. Stephanie Link, thank you. Thank you, guys. Well, coming up, stocks continuing to reach new highs this summer, seemingly shaking off all these potential negatives.

But are the markets shaking off too many worries? We'll discuss that next on Overtime. Welcome back to Overtime. Shares of Delta Airlines, one of the biggest gainers on the&P 500 today they beat on earnings issued new guidance that seemed to goose investor confidence the afterglow spilling over to other airlines with big gains for those names and not just the airlines Norwegian cruise lines and Expedia also getting some sun today in the stock sense. Well, the major averages have hit record highs thanks to an outbreak of calm, but can that last? Well, let's ask senior markets commentator Mike Santoli. Mike. Yeah, Morgan, it can't last forever, but it can last for a while.

And the question is what the message we're being sent here by things like corporate credit being in a very, very calm state right here. This is the spread for triple B rated corporate bonds. So this is the lowest rung of investment grade relative to treasuries. And you see on this five year chart, pretty much as low as it gets, as tight as these spreads tend to get. It's about one percentage point. What it says is the bond market is not sniffing out a lot of macro stress or economic downturn or corporate credit issues to worry about. Maybe it means that they're

getting not well compensated for even the risk they are taking. But look right here, I mean, this was about a three or four month period when we just stuck at these levels from November to February of this year, all the while the stock market continued to grind higher and basically more confidence in the macro picture set up.

So at some point we can get a jolt and maybe we're not prepared for it, but there's no way to necessarily look at this and say automatically it's time to get worried no way to necessarily look at this and say, automatically it's time to get worried. Now take a look at the volatility index, basically tells a similar story. Also has really retreated down below 16, the 15s range. Hasn't been here since February, once again, when we did get that big run higher.

This is a one year chart. It mostly reflects the actual traction in the market itself. The lowest low volatility action in the S and P 500. I think a lot of rotation within the index. It's kind of constraining the volatility of the S and P itself. And so at some point it

can get too low. 15 is probably not that number. But you know again we're not necessarily prepared for anything out of left field with these numbers but they can persist for some time, Morgan. It's interesting, because we know there's been a lot of money sitting on the sidelines. There's been this massive rotation out of U.S. equities. We talked about it with a number of guests even this week.

JP Morgan was out with a note, and he basically said retail investors in this cohort will help drive $500 billion towards stocks in the latter half of this year. They expect that to drive gains of up to 10%. The term they use is the boycotting of US equities by foreign buyers won't last. I wonder how much that factors into what we're seeing right now. Yeah, it's difficult to gain that out.

I mean, I'm always fascinated by the precision with which people try to investigate six months worth of various types of flows from different directions. I do see that there are the conditions to foster that kind of activity. What I always point out though is as the market goes higher, that means the equities within portfolios of people who hold them goes higher

and they don't have to buy as much, they might, but it's one of those things where the market can do, it's kind of rebalancing and reinvesting for you. So I don't argue with the idea that we have kind of an upward bias to the market as long as the macro holds together i don't know if 500 billion dollars it sounds like a huge number if it's coming from one source but we now have a 60 trillion dollar u.s equity market so to me there's a lot of offsetting currents that could could get in the way but but it certainly seems like that would be a decent premise to operate on for the next few months.

In your pocket, that's a lot of money. But in that other... That's right. Hard to fit in your pocket even. Yeah. Yeah. Gotta work it in. Time for a CNBC News update now with Angelica Peebles.

Angelica. Hey, John. President Trump is still on the hook to pay $5 million in damages to the writer E. Jean Carroll, a federal appeals court today upholding a civil jury verdict that found the president was liable for sexually abusing and defaming her, ruling that he did not prove that there were errors that would warrant a new trial. Mahmoud Khalil is seeking $20 million in restitution from the Trump administration. In a claim filed today, lawyers for Khalil alleged that the activist was falsely imprisoned

and arrested as well as maliciously prosecuted when they tried to deport him for his participation in protests at Columbia University. DHS called Khalil's claim absurd. The State Department says actions taken against him were lawful. And a San Francisco judge ruled this week that Elon Musk and his social media platform X will face ex-CNN anchor Don Lemon at trial. Last August, Lemon sued Musk and X after the platform canceled the partnership with the broadcast journalist after taping a tense interview with Musk.

Attorneys for Musk did not respond to requests for comment. Back over to you. All right, Angelica Peebles, thank you. Coming up is a 50% tariff on Brazil going to be a buzzkill for coffee drinkers and coffee chains. Hmm, and Microsoft spending billions to ready the world's workforce for AI. We're going to hear from the company's president, Brad Smith, when overtime comes right back. Another record day for markets higher across the board. New records for the S&P 500 and for the NASDAQ.

Intraday highs, closing highs as well. Tesla the biggest gainer in the NASDAQ 100, up nearly 5 percent but not quite getting back to one trillion dollars in market cap. Reports that its robotaxi service could soon be expanding. And the software and cybersecurity names dominating at the bottom of the indexes today. Atlassian falling nearly 10% after the CEO sold shares. Palo Alto, Fortinet, CrowdStrike also with sizable declines. And Levi Strauss higher right here in after hours after beating on earnings and revenue.

Also raising its outlook and its dividend. Those shares are spiking 7% right now. PriceSmart is also a big overtime mover. Earnings and revenue both beating estimates and rising from last year. Price Smart also saying it's evaluating Chile as a potential new market. You can see those shares are 12%.

All right. Well, on the tech side, I spoke with Microsoft President Brad Smith yesterday as the company announces an outlay of $4 billion over five years to get the workforce announces an outlay of $4 billion over five years to get the workforce ready for an AI era. This is spending on education collaboration, on an AI think tank. On education, Smith said it's important to respect the way AI changes the classroom.

It's one thing to say don't worry about students cheating. Let's figure out how to equip students with these AI skills. That's sort of an easy thing for a tech company to say, and personally I believe that that will advance much more than hinder education. But a closely related question is just, in my view, starting to get the attention it deserves. How do we help people use AI to think more not less? How do we help them think about when to start using it as a tool and when to stop? You said AI isn't yet

driving significant layoffs either at Microsoft or across the industry but having the right AI skills can get you hired. Where you do tend to see it is in very specific areas like call centers and customer support and the like, where the early productivity gains are genuinely reducing the number of people in a particular occupation. I do think, though, it is starting to influence the workforce and who gets hired. Then there's global economic impacts. Smith said there's the risk of AI opening up a new economic divide. For us, the question is not just what's happening at Microsoft. It's what are we seeing across the board?

We do get great data from LinkedIn, and we're working with academics on independent research to support them. And I'll say the first thing it shows, not surprisingly probably, is that if you have a credential that indicates that you have some AI skills, much the way 20 years ago people started to say, I know how to use Microsoft Office, and I'm a financial analyst and I can use Excel. You know, we're now reaching a point where the ability to use Microsoft Copilot or Chat GPT or some more specialized tool is helping people get hired. I'll still say at the end of the day that is an indicator of a broader trait that will always matter. Are you curious? Are you somebody who can

learn new things? Can you adapt to a changing workplace? And that was, of course, the second half of his previous point, not his last point on the divide that could open up with AI. He really likened it to electricity and the difference that you saw in economies that were able to adopt electricity, to electrify and to expand their industrialization, and the ones that weren't able to and still have an AI could do something similar. And we talked about the $100 PC, this dream from 20 years ago that actually came to light

in the form of the smartphone. How do we get some of these economies that have been left behind the right kind of access to AI now so that they'll be able to grow and not be left behind in the future. That's why they're making some investments in data centers and other sorts of training, for example, in some African economies where the population is growing hugely, but the infrastructure isn't always there.

It's super fascinating. I mean, when it comes to Brad Smith, I also think of somebody who's sort of, from a Microsoft standpoint, sits at the intersection of policy and technology. And I just wonder how he thinks about this currency, current policy environment and what it means to do this work and roll out such a new fundamentally

transformational technology in it. Well, I think he's being nuanced about it. He of course leads the external affairs, the legal efforts, all of that globally. I get the sense that Microsoft is very aware of what could happen years from now. If you look back and you think, boy, these tech companies were bringing this technology

into the world and really just had no appreciation for how it was gonna change the lives of working people. Why didn't they prepare us? This seems like in a way, you know, that Terminator style, let's go back in time, even as we are back in time, and try to do the right thing for the future. I really hope, especially on the education front,

both globally and here locally, we're able to figure this out, because even higher ed in the US right now, within an individual school, some professors are saying, you absolutely can't use AI ever. Some are saying, absolutely use it. Just tell me how you used it.

And students are confused. In the workforce, they're gonna have to use it. All right, super interesting. We'll see how it all shakes out. Is Tim Cook's goose cooked? Well, that's what Lightshed Partners thinks. Calling for his ouster because the company's stock and AI struggles as we stick with the AI theme.

So up next, we're gonna discuss how hot Tim Cook's seat is. And speaking of hot, a brewing trade conflict heating up between the US and Brazil that could make the cost of your morning cup of coffee a lot more expensive. Details coming up on overtime. MUSIC Welcome back to overtime. Apple CEO Tim Cook is on the hot seat right now with his stock, one of the worst outperformers this year.

One firm says now that it's time for Cook to go. So Steve Kovac has the details for us in this. This note got a lot of attention today. Yeah, it got a lot. Also Walter Pichak, who was the author of that note was on Fast Money last night, kind walking through it and and John and I were talking about this during power lunch This is not a new criticism of Tim Cook that he's the operations guy He's the supply chain guru genius who made the iPhone business what it is today took what Steve Jobs created and just made it Into a three trillion dollar behemoth, etc. We've that argument before, but if you look every time this comes up,

it came up when Johnny Ive left, it came up when Samsung was coming out with cool and innovative designs. They've always figured out a way under Tim Cook to manage through it and figure it out. This one is focused on artificial intelligence, of course. We know about the MIS. At the same time, I would also point out

no other company besides ChatGPT and Nvidia are having any real tangible success in artificial intelligence. And oh, by the way, how are you using ChatGPT? You're doing it on your iPhone. We confuse sometimes popularity with business success. Exactly. Right?

Open AI, ChatGPT, I'm not saying it's not a great innovation, it is, but it is not yet a business success. They are losing tons of money. Apple is not into losing money. Apple's very much into making money, and there hasn't been anybody yet eating Apple's lunch, making money at AI in a way that Apple historically has.

And it is a fair criticism to say, I agree with all that, and it is fair what Pichak and so many people have said in the last couple months that they over-promised on artificial intelligence. It sounded great on paper at WWDC a little over a year ago, 13 months ago. That's what we wanted, right? This personal assistant, Siri is finally gonna live up

to that promise that we thought it was gonna live up to. This is what Steve Jobs wanted, by the way, when he first bought Syria and brought it in, and they failed to deliver. They had to come out and do a mea culpa and say we need some more time to work on it. So give them another year, see what happens in 2026. Maybe they can pull it off.

It's true that it's been a rough year so far for Apple, a lot of negative headlines, and you gotta talk about the tariff situation, because it's not just the AI thing weighing on the stock. It's the tariff, they are exposed to tariffs in a way none of their peers are. Facebook doesn't, sure, the Oculus headsets and so forth are a little bit of their business, but not really.

It's really, Apple's exposed there, and they're fixing it. They're doing the best they can to fix it. They were very smart during COVID to accelerate production in India and they're stepping on the gas again, even more so. They had to come out and, cause now it's material. Now they have to tell investors on earnings calls, here's what we're doing in India.

So we're getting more clarity than ever what the supply chain looks like outside of China. So there's room, there's more room for Tim Cook to steer this around. Well, if he's a supply chain guru, maybe just because of the point you laid out, he's the right person for the job right now. I would, by the way, there are some names

that are making money hand over fist on AI, Palantir being one of them. Oh, Palantir is a big one, yeah. Okay, that aside, was it a succession layout, essentially, unofficially, that we got from Apple earlier this week? How do we read through to the COO based on the conversation we're having right now

about Tim Cook? Yeah, so this is a related but not related, I guess. I mean, this was a- But I think it's the idea of a talent bench, right? It is the idea of a talent bench. And like I said the other day, when we found out that Jeff Williams was gonna be stepping down, he was the heir apparent.

Everyone thought if Tim Cook decided tomorrow that he was gonna retire or step down or get poached somewhere else or something, Jeff Williams would be the guy who fills in and takes over at least for some short period of time. He's no spring chicken himself. He's in his early 60s. And here we go.

There's some of the potential candidates on the senior leadership team there that could be the successor, including Savik Khan. And the Hare Force One. Hair Force One, aka Craig Federighi, yes. Thank you. Best haircut of any CEO at Apple probably, if he gets that job. Up next, Mike Santelli is going to look at whether momentum is favoring large growth stocks or small caps as earnings season gets set to heat up next week. And Cinemark shares. Those are higher today. Deutsche Bank initiating coverage on the stock with a buy rating, a $36 price target,

implying a more than 20% upside from yesterday's close because the company is well positioned to cash in on the recovering box office. Stay with us. Welcome back to Overtime. Investors love in McDonald's today. Goldman Sachs upgrading the fast food giant to buy from neutral, citing the return of its popular snack wraps and other menu changes that could help gain

market share and attract more value hungry customers. The stock has underperformed the broader market. It's up only 1 percent, but up almost 2% today. Oh, well while Microsoft closed, well McDonald's I should say closed higher, the Nasdaq 100 closed in the red after hitting a record high yesterday. But the biggest growth stocks still have some momentum.

Mike Santoli is back for more on that, Mike. Yeah, John, it might come as a surprise to many folks, even if they watch the market a lot, that the Russell 2000 small cap index and the NASDAQ 100 on a one-year basis are basically neck and neck. And why is this? Well, the start point. Look at what happened right around this time last year, mid-July, July 16th to be precise. NASDAQ 100 had a real sharp break lower. There was this very forced mechanical rotation out of mega cap growth into the average stock and benefiting small caps.

The other thing that happened of course, massive post-election rally in the Russell 2000. All of it was lost, but it did set a higher threshold for what it was falling from. So now we're back to about even on any other longer time span, of course, small caps have vastly underperformed. We are seeing a similar rotation, by the way,

month to date, Russell 2000 up 4%, NASDAQ 100 down small. So we'll see if it stays orderly. That's one of the big questions, I think, going into the second half of July. Now take a look though at the fundamental underpinnings. This is just the 12 month forward forecast earnings for each of these indexes. Big tack basically the magnificent six let's call it.

Still climbing right over recent months. You're still seeing the forward profit estimates go higher. The rest of the S&P 500 holding its own actually up slightly about near less than 1% and then small cap 600 which is the subset of small caps that are generally more profitable and higher quality slight decline so you're still not seeing that fundamental push that would be a catalyst to a more wholesale rotation we may get fed rate cuts you may just get a broader better risk appetite in the market that benefits small caps but so far the the fundamental advantage of the mega cap growth sector has been hard to crack.

So how correlated is that with risk in general with Bitcoin? Well, it's proven to be quite correlated. I mean, just in general, the enthusiasm for dominant disruptive tech, whatever you wanna call the AI trade, has been pretty close to how Bitcoin has acted. Now it's been also able to coexist with a strong moment for small caps as well.

So I don't think it's sort of either or when it comes to Bitcoin, but given the fact that both crypto and the NASDAQ type stocks have been in longer term uptrends together, that seems the more relevant relationship. They just, by the way, the Russell 2000, everyone kind of thinks it's mom

and pop metal bending companies. It's kind of cult penny stock tech stocks at the top of it. Hims and Herds is the top four holding the quantum names. So my point is that some of that stuff does rise to the top of the Russell. It's just there's 2000 stocks in it. So it's hard for any one subset to really do a lot. Some good context. Mike Santoli, thank you, as always. Look what you made me brew. Up next, find out whether your favorite cup of Joe could cost a whole lot more because

of President Trump's new 50 percent tariff against Brazil. Stay with us. Welcome back to overtime. Talk about a buzzkill. President Trump's new 50 percent tariffs on Brazil could potentially impact the price of your favorite cup of coffee. That is, if and when they go into effect. Kate Rogers explains why.

Hey, Morgan, Brazil is a key import partner for U.S. coffee retailers, accounting for about 22% of U.S. coffee imports last year and about 20% over the last five years according to TD Cowan. The next largest is Columbia at 17% last year and 19% in the last five according to that group's April research report. Now two names in the restaurant space that have exposure here Starbucks and Dutch Bros which TD Cowan estimates source about 22% and 56% of beans from Brazil each if they're in line with 2024 import proportions. Starbucks says it remains focused on its back to Starbucks plan and continues to monitor potential impacts to its business. It does source from more than 450,000 farmers in 30 countries. So does it mean your coffee will wind up being more expensive? Not so fast. I spoke with Andrew Charles today of TD Cowan. He said, the obvious, what you mentioned is that these tariffs may or

may not stick. Companies across the restaurant space are not keen to take price right now, especially Starbucks, which said it's not increasing its consumer costs through 2025. Also, there are mitigation tactics in place for any coffee importer to source from elsewhere, places along the coffee belt, South America, including Colombia. But again, coffee is very discretionary for consumers, even though it is a ritual for so many people. It's also something that you can kind of easily cut out of your routine and make at home guys so that's something to consider as well. I can't I mean Kate I if I could intravenously put coffee into my arm I would I cannot cut that out of my diet. I am curious though to go back and you touched on it with Starbucks and that is when it comes to tariff dynamics it's not always automatically inflationary for the consumer because sometimes companies eat the cost and it just chips away at margin. So is that something we should be watching for when we start to get earnings?

So TD did point out that there are pennies to risk, right, in terms of their EPS. And so that's what they're kind of forecasting. I believe Andrew wrote that there was a potential three penny hit for Starbucks and two for Dutch Bros. So it's not a huge impact there. But again, if you're looking at a Starbucks, right, that is so focused right now, heads down on this back to Starbucks plan

and making it a better experience for the consumer, that's where all the attention is gonna be not in raising prices and passing off these costs to a consumer that's already price sensitive and particularly sensitive with that brand. Okay, Kate Rogers, thank you. Great breakdown. Thank you. Of course, we did have record highs for the S&P and the Nasdaq today. Almost all of the major averages actually finishing higher and the transports in particular,

the Outperformer in part because of Delta and the better than expected results this morning. And a couple of conversations we had today about the future. One, MP materials, trying to get some resources to the country that are necessary. Another, with Microsoft trying to get the workforce ready. Yeah. Super interesting and certainly speaks to the dynamics here at the intersection of policy and business right now. That does it for us here at Overtime. Fast Money starts now.