Closing Bell - Closing Bell Overtime: Moment of Truth for Tech? 8/24/22

Episode Date: August 24, 2022

Salesforce, Snowflake and Nvidia all reporting results in Overtime. Mad Money host Jim Cramer makes a surprise appearance on the Overtime set with his instant reaction to all of the earnings results. Plus, Nuveen’s Saira Malik breaks down three key areas of the market she is watching given the recent market volatility. And, the Jackson Hole Summit kicks off tomorrow – we dig in on the key themes to watch with Wall Street Journal’s Nick Timiraos.

Mike, thank you very much. Welcome, everybody, to Overtime. I'm Scott Wachner. You just heard the bells. We're just getting started here for Post 9 at the New York Stock Exchange. A very big hour is ahead. Earnings from Salesforce, Snowflake, and NVIDIA, they are imminent. Our reporters are standing by to bring you all you need to know as usual, and so is the number one ranked chip analyst, Stacey Raskin. The Wall Street Journal's Nick Timmeros dropped the story today. It seemed to send bond yields higher. He is with us as well, just as that all-important Fed summit gets set to begin out in Jackson Hole. We begin, though, with our talk of the tape, how critical these tech earnings are tonight, just as that sector starts to teeter after its big bounce back. Let's ask Ritholtz Wealth Management's Josh Brown, also a CNBC contributor,

a member of the Halftime Investment Committee. It's good to see you as always. I know you own NVIDIA. I know you have big thoughts all around. But how important is this now for a tech trade that seems to be a little bit wobbly? Well, I think NVIDIA is an important stock because they touch so many areas within tech. This is not like it's a memory chip maker or it's a PC chip maker. It's really heavily involved everywhere. So the good news for NVIDIA Longs is that this company

has already given guidance and the guidance was not great. But that happened back on, I think, August 5th or August 8th. So if you were trading, I think, based on this particular quarter, you probably already have. So I would say that's the good news. The bad news is there's probably not a recovery between now and the end of the year in some of the markets where Nvidia says things are softening. And those include video games, just generally cryptocurrency, which is a small part of the business, and of course, PCs. But I don't think the investment thesis hinges on a crypto recovery and people racing out to buy GPUs for mining. That's not what really should be moving this stock. The data center is going to become more and more important as the quarters go on. And the data center business is absolutely on fire.

Cloud is on fire. So I think that that's what the bulls will be focused on. I think they'll want some reassurance from that area of the business. But they've already guided to a revenue number that's more than a billion below what the expectations were. And all things considered, the stock has weathered that OK. Well, I mean, look, the stock has been cut in half, right? The big worry, though, is that there's another shoe to drop tonight, even after that pre-announcement. And that would be the news that investors in that stock and tech overall do not want to hear. Of course.

This is always going to be the case. NVIDIA is interesting, though, in that they do have a lot of levers to pull because of the diversified nature of the business. And so if they tell you that the outlook is similar to what they already told us two weeks ago, it's hard to imagine that being a huge stock moving event. Of course, I could be wrong. I'm certainly not in it for this quarter

as a long-term investor at NVIDIA over the course of years. They've had soft quarters before. They've had negative and positive pre-announcements. We've seen it all. So I think focusing on the strength of the most important end markets going out more than one quarter is advisable. Okay. Just to remind everybody, too, Salesforce, a Dow stock is imminent. Snowflake is a very important stock for the cloud universe, the enterprise spend as well. We're waiting on those numbers to cross. Reporters standing by to pop on the minute that all of that happens. So all that said, Josh, and NVIDIA is going to be in just a little bit. Past week alone, NVIDIA is down seven, Meta is down seven. These are percentage losses.

Alphabet five, Microsoft five, Amazon six, Apple five, Nasdaq 100 is down four. How are you feeling right now about tech with Jackson Hole looming? Well, look, these stocks are probably less susceptible to Jackson Hole in terms of their actual fundamentals, their businesses. But of course, from a sentiment standpoint, these are some of the biggest, most widely held stocks. And if people want liquidity or people want less beta, they will be sold if what we hear at a Jackson hole is an adverse development. That being said, rates, 10 year rate over the last five days of 27 basis points. That's a pretty notable move. I think that price is in a lot of potential hawkishness. I don't think the market's going to be completely caught off guard by the Fed continuing to speak vigilantly. And I think

on balance, like that's kind of what you want them to do. I don't think you want them to cave to a stock market correction at this stage in the game. We have to rest this inflation thing to the ground. So I don't I don't know that. How much risk lies in the next couple of days, do you think, as far as you see the markets, which you've made the case pretty consistently that we've been in a downtrend? We haven't been able to get over the 200 day moving average for the S&P. But how much risk do you feel lies ahead over the next 48 hours? Well, I guess I would say we went back and looked at stock market reaction to Jackson Hole historically. And there's not a long history. There's not decades of this. This has really

only become a market event in, let's say, since Bernanke's time. But they don't typically use Jackson Hole to do an about face or to give people some sense that there's a dramatic shift in policy. They actually have tended historically to use it more politically. They've done things like talked about minority unemployment and they've talked about white papers that have more to do with like societal impact of Federal Reserve policy. They haven't used it in the format that maybe some people think they're about to. So if they do, that would probably be a shock. It's just not what I would have as my baseline expectation. Yeah, I'm looking. I see that Salesforce is out right now. Our reporters, I said, is going through that here. They'll keep

an eye on not only what's happened with the earnings from this prior quarter, but certainly the guidance, which matters as much as anything else. If you see the stock here in overtime, looks like we'll keep our eye on that. We showed There it is. It's getting a little bit of a move here. It's an important stock. Obviously, it's from the Dow. FX, they've already told you that the move in currency is going to be a problem, worsening global demand. Enterprise spending is something to keep an eye on. The stock's also down near 30% year to date. So maybe it's trying to get a touch of that back. And it's another one of these once high-flying stocks that was at $311. It's down to $180. It's just below that here again.

So you'll hear from our reporter imminently there. So, Marko Kalanovic, Josh, I'm not going to throw to the sound because I want to make sure we get to our reporter in the next couple of moments here. But Kalanovic was on with us on the halftime report today. He's the number one ranked strategist on the street, not as bearish as others. In fact, I think we got Frank Holland. Are we going to Frank right now? Let's do that. Frank, what do you see here on Salesforce?

Hey Scott, looking over the results right now, as you mentioned, the stock falling after a beat on revenue and a beat on EPS. EPS actually 17 cents above estimates, but the guidance for next quarter and the full year light in both cases. We look at some of the other metrics like remaining performance obligation, RPO, that was in line. But again, we're digging through this guidance right now. You mentioned the foreign

currency impact for the next quarter for Q3. It's coming in at $250 million for the full year, $800 million. Again, still looking through things, but some of the customer metrics like remaining performance obligation in line with estimates. But again, it's that weak guidance for next quarter and the full year weighing on the stock right now. Salesforce down 6%. Yeah, Frank, you pop on again with us the moment you have anything else. I know that margins are closely watched today. Frank mentioned the dollar and the headwind from currency.

Dollar's been obviously especially strong, certainly versus the euro and others. One-third of the revenues for Salesforce come outside of the United States. That's why it matters so very much for a stock that's now down 5.5%, it looks like, in overtime. By the way, Benioff, the CEO, Mark Benioff, is going to be on with Kramer on Mad Money tonight. You don't want to miss that. So you'll hear exactly from him what the environment looks like going forward. So, Josh, let me just get back to you on the point that I wanted you to expand on. And that's this notion, at least according to Marko Kalanovic of J.P. Morgan, the number one ranked strategist on the street, that there's so

much bearishness priced in already and that a lot of the inflation picture is going to work itself out on its own. And that's one of the reasons why he does not join the bear club and he thinks the second half of the year can be okay uh for stocks that maybe we can even get back flat on the year if not even up a couple of percentage points do you share that view in any way so i think he's saying like between short covering and people who are just offsides, like like to risk off coming back into the market combined with buybacks. I think he's saying like that combination is enough to take us back to where we started the year. It's reasonable. I wouldn't I would never say that couldn't happen. But as I'm sure Marco is well aware of, I'll just point it out. We have data going back to 1940 and there has never been a case, not even one time, where inflation has gotten to the level it's at, where it wasn't resolved with the recession.

Never. Like not even one time. And that's through a world war. Vietnam, Saudi oil embargo nine eleven like like whatever inflation causing events we've had uh... it like through through all of that period of time it's never happened even one time so i hope they got a new exception and by the way now i'm sorry to interrupt you i just want to note here as i continue to look through the sales force quarter

uh... btc the stock worsening a bit as we're having this conversation. They did initiate their first ever buyback program, which is quite interesting from Salesforce. If you look at some of the levers that companies try and pull, to try and take advantage of the current circumstances in their stock, that's something to keep an eye on. And on that note, let's expand the conversation and bring in Eugene Profit of Profit Investments, a CNBC contributor, Jason Snipe, as well of Odyssey Capital Advisors.

Jason, you own Salesforce. What's your initial comment here on the reaction to the quarter and the stock move? Yeah, so obviously this has been about the guide. You know, they've been fairly consistent in terms of the beat on revenue and EPS. They motioned towards FX early in the quarter. You know, as you mentioned, Scott, it's 30 percent of their revenue. So I think the guide, the guide is what's hurting the stock right now. You know, from an enterprise and software perspective, I like that business. I like I like the fact that even in an inflationary environment, I do believe that part of this deflationary issue as employers and businesses look to software as as as replacements in some ways for for labor costs. Right. So so I do like CRM here, but it's obviously it's had a tough hole here down almost 40 percent year to date.

You know, we're really 30, 38 percent year to date and still expensive stock here. But it's always traded at a premium. But I think the guide is what's hurt the stock here. All right. I don't think any of you noticed that Jim Cramer has run onto the set here as he prepares his own show and his own interview, frankly, as I said, for the CEO, Mark Benioff. What's your take here? Street doesn't like the guide.

Remember what I said when I was here in your great 1 o'clock, 12 to 1, right near the end, I said, Salesforce is going to report, the stock's going to be down 10, and people aren't even going to listen to what Mark has to say. I've seen this happen a million times, and invariably, when it's down 10, he puts on a pretty good show, and there's got a nice buyback. He explains the guide. The guide probably is very much rooted in currency. People want to sell the stock. They look at the chart. The chart is weak. I think Mark will tell a pretty good story. Would I buy the stock down 10?

Obviously, I'd like to hear more from the call, too. But I wanted to come on the show just to say that this is business as usual, not our first sales force, so to speak. And everybody just panics all at once. It was a great quarter. I never saw this kind of big buyback from Mark. Holy cow. Maybe that takes care of stock-based compensation.

But, I mean, people are selling it on. I'm just looking at what Mark is saying right now to me. People are saying, well, you kind of want to know versus not knowing. Yeah. Let's do this. There's something I've learned in the business. Yep. Better to know than not know. Yeah.

Now, the people who are selling, do you think they have any of the knowledge that I have? The answer is no. So let me do this then. You take a look at your text from Benny off. You catch up there. It's nothing non-public. It's just literally the story that he's going to tell eventually. Well, he's going to tell it to you tonight, right? In about 90 minutes or so. I just say, listen, what's important with the stock we purchased? This is a first ever stock we purchased. So then the question is, is he an idiot?

Is Mark an idiot to buy stock right here? And the answer is, are you kidding me? Well, when I asked you, as smart as people have ever, I asked you, I believe on on half today, whether a decline in these stocks today after, you know, in overtime, NVIDIA, Salesforce, Snowflake was a, you know, an opportunity to buy it. And you weren't a table pounder just because the environment is what it is. I mean, Snowflake's down a great deal. And I think Snowflake won a lot of big business. Now, Mark can talk about L'Oreal. He won that.

He got a really good VA video that I saw that's going to matter a great deal. You know, I just think that what happens with these stocks is everybody wants to move first. And it's not like Salesforce is up a lot this year. You talk about a stock that's just incredibly down. Now, Snowflake, look at that. Look at that. And you know what? Hang on, guys, real quick.

Josh, I've got to get to Frank Holland. He has the details on what is sending Snowflake shares higher by 16%. Isn't that Frank Slootman on the show tonight? Yeah, I know you do. Frank, what do you got? Yeah, you know, shares of Snowflake up 16% right now. After a beat on revenue, EPS, we're not comparing it, but it was a loss of 70 cents a share. This stock appears to be moving on strong product guidance for next quarter.

Guidance of 500 to 505 million. Top end of that above the estimate of 502 million. Also, customer growth above the estimate. Net revenue retention of 171%, maintaining the growth of the previous quarter. Again, beat on revenue. We're not comparing EPS. EPS of a loss of $0.70 a share. Share's up right now, 16%. Back over to you. All right. Frank Collin, thank you so much. The market still wants gains. They don't want losses. But Frank Slutman's model allows you

pretty much to terminate. It's kind of like renting the cloud. And that shows you his business is on fire. And I know he did a big deal with Yum that is just extraordinary. That's great. And I just, I find that he's a remarkable man. Remember what I said, don't buy this stock because of the quarter. You buy this stock because of a long-range vision of a man who wrote a great book about what he does, which is all for a different kind of cloud that's much less expensive. He has a terrific story to tell, including the

New York Stock Exchange. I have to tell you, I mean, one of the headlines, you agree with this or not, from earning season leading into today, all of these enterprise companies are telling almost a similar story. Yes, they have headwinds with FX. Demand is not dropping off. I'm so glad I'm here to tell you how right you are. That we can sit here and make a judgment that these companies maybe didn't or did. The fact is I could be on the Macy's call, the Nordstrom call. I could be on the Walmart

call. I could be on the Target call. I could be on the Macy's call, the Nordstrom call. I could be on the Walmart call. I could be on the Target call. I could be on the call for IBM. I could be on the call for Intel. You know what those calls are like? If we only had more demand. Demand is what drives stock prices. Hey, you know, sure you can cut back like Toll Brothers and housing and have a good day because they're able to, they're able, so able to be able to tell a good story.

I mean, enterprise spend in technology has been a good story to tell. Even the companies that have been somewhat challenged, like in Intel, you know, the CFO. Well, five-year low. CFO, I know, but, you know, the CFO would come out. CFOs from another alpha tell a good story. And say that we haven't seen a big drop off in big deals. But I'll tell you what I like. I think this is the way that penthouse could tell a story. Doing in big deals. No, but I'll tell you what I like. I think this is the way that Benioff's could tell a story.

Doing better, this, this, this, this. But the dollar. Like, have you been to Milan? Have you bought suits? Have you gone to Bruno Cucinelli? If you go to Bruno Cucinelli, you now can buy a suit for what the price you used to be able to buy a jacket for. 99. I'm looking at 99 cents to the dollar.

Well, that's the story. Benioff doesn't just sell in the U.S. He's got a deal. I'm going to Italy next month. I am telling you, it's BOGO. You know what BOGO is? What is it? Buy one, get one. And that's what they're doing over at Salesforce. So, I mean, he's got a problem. He's got a problem with the dollar. But remember, you know, their first quarter is larger than SAP. L'Oreal is using Slack. I think we have to focus on Slack. SAP, another company that said you can't outrun the move in currency. Right. And I think that what we have to

look, there are just so many currency overhangs. But we're not currency people because we live in the United States. One of the things I love about Mark was just, you know, it's a great time to be a tourist. It's the last time to sell software in Europe. Okay, so you go sell it now. Service now, talking about currency. Go sell it now. I urge everyone to sell.

I want every single one of those people to sell. And then I want to hear what Mark says. And then they can go buy it back. I want to, let me get to Eugene Profitt. So your take, and Josh, I'm going to come back to you because I know you wanted to ask him a question. I respect you there. I got you. But Eugene, welcome. It's good to see you as well. Your early take here on what you've seen from the companies that have reported tonight. I'm strong and I do think that in the case of Salesforce at 36 PE and so at the next few quarters they're gonna impact about an economic environment no surprise the will wait on the stock a little bit however it's getting into an area where we would like to buy stock if it gets down around 30 I think over the

long term it's a great holding. But in this environment, and I'm not trying to fight the Fed, I think that from a valuation standpoint, I'm a little bit hesitant to enter here. I understand that. Josh Brown, so back to you. Also noting that I've got about 90 seconds or less, let's call it 60 seconds until I think NVIDIA is going to drop. So I may have to interrupt you, but what's your quick question to Jim? It's like Game of Thrones. Hey, Jim, I would rather see Benioff buy his own stock than buy Zoom. And that's something that Zoom is now 24 billion market cap, which is roughly what Slack got. I think Slack was a 27 billion billion acquisition.

Are you going to be asking Mark about whether or not there might have been more aggressive opportunities and then the buyback just seemed like the safe way to go? Sure. I mean, I know Mark introduced me to Eric Yuan from Zoom, and there's never been any sense that he's interested in buying that at all. He's going to talk on the Comps call about how much business he's won because of Slack. No, he's not going to do that. He'd rather buy his own stock back, which I think is terrific. Remember, it was the first time.

I like the fact that the margins are holding up despite the Forex. That's going to matter. That this quarter was bigger than SAP quarter, which is very big, first time. But, Josh, you're absolutely right, which is, what's his next act? And I think the next act is just to be this getting slack everywhere and crushing Mr. Softee. Mark and Microsoft, they're not friendly.

It's not Harvard-Yale is what I'm saying. You got me? I hear you. Eugene, as I said, imminent are these results from NVIDIA. And I'm going to beg your pardon if I have to break away from you as you answer this question, but you own the stock. Are you worried going in or you

feel a little bit better because they already told you things were bad? Wow. I feel better if they told me that earnings would be bad. However, I think they could be worse. Stocks usually don't perform when PE is higher than the current PE. And I think it's going to take a few quarters for Nvidia to work itself back into a good spot. But essentially, data center is important. Hopefully, it's double digits, not lower than that. Otherwise, I think we'd go a little lower in the stock. Yeah.

Jason Snipe, you own it as well. How about you going in? Yeah, absolutely. So I think i think obviously the expectations are lower obviously as they cut the guy the revenue guy about 17 and a half percent you know the story is all about gaming and data center you know as eugene just mentioned i mean data center year over year last quarter was up 80 i mean these are large numbers i don't think they'll be the same and we all know this whole ecosystem of gaming, we know that that's normalizing and slowing. So, you know, that's kind of what I'm looking at here. And I think, obviously, with expectations lower, the setup is not as bad as previous, you know, if the numbers aren't tremendous here.

Yeah. Here's what we're going to do. Because NVIDIA, remember, they did pre-announce a couple of years ago when they had too many Ethereum cards. They didn't know. And then they guided down the next quarter again. So people were quite surprised. That was one of the greatest bottoms in history. Josh Brown remembers it.

I was on TV with Josh. We talked about the idea that maybe it's finally time and you had to buy it. Josh and I both agreed. And it was a fantastic call. This looks like, I mean, we're watching the stock move here. You've got to run, by the way, because you've got a show to do. They're telling me you've got to leave. You know what? I think it's not yet. You don't have a brewski here, do you? We could do that after the show.

The trust owns Corona. So they pre-announced. So we're not obviously expecting, you know, great things. The question is going to be, and seriously, I know you got it right. No, I'm serious. Will data center be able to overcome weakness in PC and gaming? Of course. We're gaming. Also, will there be inventory write-downs? Hang on, Josh. Hang on. We want Ethereum to be like nothing. We want gaming down to 25%. It's still a great gaming company. And we went digital twin to be talked about. We went edge computing. We went real machine learning.

And we want to be able to hear about how they are the reason why the metaverse is good. At the same time, there they go. And I told you they were going to miss again. And sure enough. It looks like a pretty sizable miss. I told you. This is what they did last time. They preannounced and then they did a much worse number.

It's all the same, same company. But some of the commentary, and by the way, we have the number one ranked chip analyst waiting on the other side, too, Stacy Raskin, to jump on. There was commentary that at least the buy side, this is what he was thinking, sort of wanted like a kitchen sink. Just get it all out. This is one where we want, like, okay, listen, you want to be in our stock? Like, go strap yourself in partner and they won't they'll jump and then you'll get your buy just like josh and i did a couple years ago when this happened all right so we'll see you in a little bit again benny

off and sloopman coming up on mad money with jim thank you so much for coming out you know what i told you please do that and i knew that we could work this out and we're going to work it out many times okay all right look forward to that yeah, my producers want to kill me. And you know what? I have to say, you don't have a Pacifico, do you? I don't. I will soon, though. All right, so Jim's out of here. He's getting ready for his big show. Don't miss that. You'll see him. He walks in front of the camera. That's just the way it works in live television. Steve Kovac, you have the NVIDIA results in some more color for us. What is it? Yes, sir. So, Scott, here's what we got for NVIDIA. We have $6.7 billion in revenue. Now, analysts had $8.1 billion in their estimates, but that's a little off and outdated because remember that revised guide two weeks ago.

So this is actually in line with that revised revenue guide. So $6.7 billion in revenue, and it's a miss here on EPS, 51 cents adjusted versus $1.26 expected. It looks like shares are, let's call it, flat-ish, a little slightly down. And then here's some commentary in the press release. I'm reading through here right now, talking a little bit about navigating some poor supply chains. And we're expecting a lot more commentary from Jensen Wang on the call at 5 o'clock. And I'll be back with updates. You know what? I'm looking at some headlines and it's kind of what I was discussing,

Steve, with Jim just a moment ago is whether the gains in data center can offset some of the weakness in gaming. And they do apparently say that they expect the decline, they expect that decline to be partially offset by sequential growth in data center. So you're getting an idea about where they need to pick up some of the slack for what is slack, if you will, in the business of PCs and gaming. And they're seeing some of the weakness that others are too. Yeah, that's right. And we heard this from the gaming companies just a few weeks ago, just how people are getting out more, not spending a lot on gaming. We heard from companies like Take-Two Interactive delaying or pushing back some games. So yeah, this is playing along with that theme that we've been hearing all earnings season, that demand falling

in certain areas, and they really need to make it up on the data center. But it is growing rapidly, Scott, up 61 percent, three point eight one billion dollars in data center revenue. You know, thank you, Steve Kovac. Well, we'll talk to you again soon. If you got something else, please jump back on in overtime. Eugene, of course, I'm going to get a comment from you. Jason Snipe will get a last one from you and then Josh will get a quick one from you, too. This idea that stocks not moving all that uh because we kind of knew what to uh expect and maybe it wasn't uh any more worse than they already told us it might be and that's key the 61 data center um number does help and i think that um that will allow the stock to kind

of stay in here some um however um that's a big reduction from where we were and everyone loves this stuff um we do as well we'll continue to hold it and watch but it's going to take a couple quarters for this to work itself back into on the growth rate that it was in all right i appreciate you being with us and certainly bearing with uh all of the breaking news uh eugene thank you jason snipe uh your view here before i let you run yeah i think that i think the guide uh cut down obviously was priced into the stock i think that's why you're seeing not a whole lot of movement here and i think as you mentioned i mean data center's still strong 60 plus percent those are those are still good numbers we'll see what the gaming numbers are here but for us it's a long-term hold and a staple in our portfolio.

Okay. You guys are great. I appreciate you rolling with all of this. Eugene, Jay Snipe, and Josh Brown, thank you. I'll talk to you again soon. All of you, I know that. Let's get to our Twitter question of the day. We want to know, what is the best chip stock to own for the next three years? Is it NVIDIA? Is it Intel, Qualcomm, or AMD?

You can head to at CNBC Overtime on Twitter. Cast your vote. We'll share those results later on in the show. Up next, we have three big market opportunities. Nuveen's Sarah Malik breaking down key pockets of potential as markets increasingly price in a recession. OT is back in two. Time for a CNBC News update with Shepard Smith. Hey, Shep. Hi, Scott. From the news on CNBC, here's what's happening.

President Biden announcing $3 billion in aid to Ukraine, the largest aid package since Russia invaded six months ago today. It's also Independence Day there. A defiant President Zelensky saying his country was reborn on February the 24th and that its people will not stop fighting until they defeat the Russians. This as Zelensky says the Russians struck a train station killing 15 people and wounding 50.

It's the first day of school in Columbus, Ohio, but no one's in a classroom. The state's largest school district forced to go online as a teacher's strike enters its third day. The union there pushing for better heating and A.C. in schools, smaller class sizes and a more well-rounded curriculum. The federal mediator in charge ordered both sides back to the bargaining table today. And a federal jury in Los Angeles is now deliberating the case of the first responders who took graphic photos at the helicopter crash site where Kobe Bryant, his daughter, and seven others were killed.

Bryant's widow, Vanessa, brought the suit along with the father of one of the other victims. They're asking for $75 million in damages for violating their constitutional rights and for emotional distress. Tonight, the impact of today's student loan decision. California drops the hammer on gas-powered cars and robot furniture reshaping small places. On the news, right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. All right, Shep, we'll be there. Thanks so much. That's Shepard Smith. Stocks ending higher on the day, the Dow and the S&P recovering from those three day declines. Our next guest finding pockets of opportunity in three key areas of the market, given the recent volatility.

Naveen CIO Sarah Malik joining me now. It's nice to see you again. One of your headlines today is is peak inflation isn't peak Fed. So that says even if inflation has peaked, you still expect things to be hawkish from here, particularly this week. It's nice to see you, Scott. Yes, going into Jackson Hole this week, we think there'll be two key messages. One will be slowing rate of interest rate increases. But we don't see the Fed giving out a timeline for the for the pivot. That's because even though headline inflation is peak, there's a lot of sticky components of core inflation like wages and rent. And that's going to make it challenging for the Fed to give out a timeline for where they may pivot and cut

interest rates. So we aren't surprised to see the market selling off after the July rally, which was based on the hopes of a Fed pivot in early 2023. But what do we do from here forward? Is the stock market going back towards the lows or do you think it can sustain any sort of move, you know move for the next couple of months? I think the risks are more to the downside. We're going into the fall seasonality period, which usually is weak for markets. We have to worry about employment, which could start to become challenged. The consumer, which is dipping into their saving rates in order to spend. And again, earnings, second quarter earnings overall did look good with double digit growth, but

margins are at peak levels and we have to deal with higher input costs, a stronger dollar that you were all just talking about. All of that could be a headwind to earnings going forward. That's what we're facing for the rest of this year. You still like large-cap U.S. equities, though, no? We like large-cap growth stocks because those are less dependent on economic growth, so those can do well in a slowing economy. And then we like energy because of the tight supply situation and producer discipline where they're focusing on returning cash to shareholders. And then looking outside of public areas such as private real estate and farmland have CPI escalators built into them and tend to be

have built in inflation escalators. All of that is positive. So we're looking outside of just public for areas where you can benefit from inflation. I hear you. But if you expect more inflation, if you expect a hawkish Fed, you must expect higher interest rates. And then the obvious question becomes, how does large cap growth tech respond in kind? I mean, that's a good point, right? The longer duration stocks can be at risk as interest rates start to increase. We think, though, the market will start to price in some form of a recession, likely a mild one going forward. And that economic growth will be you'll need those companies that can be more resilient during those periods of growth. So large caps will be the ones that outperform, even as rates continue to creep up, but at a slower pace.

So we don't expect this continued 75 meeting after meeting next meeting, I think about 50 50 chance of 50 versus 75. And then from there, you slow that pace of rate hikes. You do probably go into some some form of a recession, though. And that's what we're worried about is the economic growth and its impact on companies. Forgive me for jumping on your toes there. I know you guys are always thinking about alternatives to at Nuveen and you have an inflation hedge. You like it Real Assets. Farmland? How do I play that? Yeah, farmland.

Yeah. And, you know, farmland, we're the largest farmland owner. It's got built-in CPI escalators. Food prices are going up. Land values are going up. You know, farmland is an area that's very resilient to inflation. It's an area you can look at as opposed to commodities, pure commodities, which may have more demand destruction. And then private real estate, another area of the market

that also very similarly has leases with built in strong cash flows and inflation escalators. Those are two areas we like outside of the public markets. I look forward to talking to you again soon. Sarah, thanks so much. That's Sarah Malik, again, Nuveen's chief investment officer joining us there in overtime. Up next, we are breaking down NVIDIA's results, counting down to the call what top ranked chip analyst Stacey Raskin wants to hear on that call. He joins us when overtime returns. All right. NVIDIA shares down more than 2 percent right now after reporting results just moments ago. The company's call kicking off in less than 30 minutes. Before that, joining us with his instant reaction to the quarter is Bernstein Stacey Raskin. He is the number one ranked chip analyst back with us.

I appreciate you coming back and talking about this. What's your reaction? Yeah, so it's a weak guy. Now, we knew it was going to be weak. The question was how weak. It's very weak. But I will be honest, I don't think I necessarily hate it. Data center at least is growing sequentially, so that trajectory is still holding up. It's all coming from gaming. If these were to work through the math, they must be guiding gaming down like another 40% sequentially. It's probably into the low $1 billion kind of level. It's probably not that far off of where it bottomed at the end of 2018. But we also know we have a product

cycle coming, so they're very clearly squeezing the channel out of all of the older generation stuff in front of that. So it likely means that the setup into those new product cycles over the next quarter or two is going to be better. You've got to pay for it now. But I think you mentioned on the pre-segment, I do think investors in some sense were hoping for a bit of a kitchen sink. At a minimum, I do think we got that here. So we'll see what they say about the trajectory off this bottom. But I find it hard to believe that Q3 won't at least represent a bottom.

I don't think it can be anything but. I mean, I was referencing your words directly when I said you said we are getting the impression that the buy side would actually like to see a further Q3, a further de-risking. And you're suggesting that we actually got that. And maybe that's why you're seeing the stock react as such. Oh, yeah. So, I mean, look, the stock's down, but it's not down that much, like versus like if they had not pre-announced and they just reported the quarter and guided like this, the stock would have been destroyed. To kind of sort of give people some pre-warning, to prep them for it, and to give people some time to think about it, I think they set up a little better. And the stock's down a little bit, a couple of points.

But it's not that bad given the magnitude of where the guide's going. I don't think things can get much worse than where they are. And that's what you tend to look for in semiconductors. You're looking for bottom. It's hard not to believe we don't have a bottom in Q3. I'm looking at some of the metrics here. You know, obviously, gaming data center. That's where the whole story is pretty much told. Gaming down 33 percent revenues from a year ago. Data center up 61 percent from a year ago. The company thinking that they can partially at least offset declines in gaming by strength in data. Can they do that?

Well, I mean, they're guiding this. They're clearly guiding gaming down materially again in Q3. But they did say that data center was growing sequentially. So that's good. So that trajectory is still there. And let's be honest, this is not going to be a gaming stock anymore if you're looking forward the next few years. It's going to be a data center-driven story. Data center, I mean, even before the pre-announcement, I already had data center bigger than gaming this year. Now it's going to be a lot bigger than gaming this year.

And going forward, gaming is going to be a secondary kind of story. We won't have any more crypto cycles to worry about. And the data center opportunity in general, I still believe, is very large over the long term. I still think we're very early. And so that will give that story like more of a chance to shine as we go forward from here. Gaming is going to do whatever it's going to do. Forgive me, but you're talking about, I guess what I could characterize as a new normal for the environment for gaming. So if it's going to be such a bigger drop off, what does that mean for the stock's trajectory going forward? My guess is that wherever they land in Q3 is not the new normal there's clearly some inventory flushing

probably a lot of inventory flushing going on here and you have to remember the last time this happened again a few years ago we had new product cycles but they weren't coming for 18 months this time we have new product cycles coming in both gaming as well as in data center within the next one to two quarters. So especially with gaming where we do have a channel that is stuffed full of the older generation parts and demand is lower because of macro and crypto and everything else. It makes sense to clear that channel completely out of the older generation stuff before the new stuff comes. I think that's what they're doing right now. So my guess is this does not represent a new normal.

But the question certainly is what is the new normal for gaming? That's what people want to know on this call. Yeah. You buy the stock here at 167 and change? You know, let's see how they sound. But like, especially if you can if you can live through volatility and this one is always volatile, I am extremely positive long term on the data center story that seems to still be holding up. And I think it is going to be a data center driven stock. Like clearly, clearly, it's not going to be nearly as much of a gaming driven stock going forward as it was. Yeah. All right. Well, listen to the call. Certainly need center driven stock. Like clearly, clearly it's not going to be nearly as much of a gaming driven stock going forward as it was. Yeah. All right.

We'll listen to the call. Certainly need to do that. Stacey, I appreciate the time as always. That's Stacey Raskin again, Bernstein senior analyst of semiconductors, number one ranked on the street in his space up next Powell's big dilemma. That's J Powell,

the wall street journals, Nick Timrose laying out. What is at stake as we count down to Jackson hole, he joins us next. Welcome back. All eyes on Jackson Hole now as the Federal Reserve convenes its two-day symposium, an event that culminates with a speech from Chairman Jay Powell on Friday. The Wall Street Journal's chief economics correspondent, Nick Timross, is with us now with what we should all expect.

It's good to have you back. I appreciate you being with us. You dropped a story today that said in part, and I'm quoting here, central bankers worry that the recent surge in inflation may represent not a temporary phenomenon, but a transition to a new lasting reality. There were actually some people who suggested that yields moved a tick higher on your story today. How much do you think the Fed really believes that? And may that then lead to a more hawkish surprise from the chairman in the next couple of days? Well, Scott, thanks for having me. I don't know what the chair is going to talk about on Friday, but if you go back and you look at his speech from one year ago, it was a virtual symposium last year.

That speech has aged very poorly. He knows it. We all know it. He went all in in that speech last year on transitory inflation. Chair Powell listed five reasons why it looked at the time like inflation would be transitory. Now, he did say this is a dashboard. The Fed would want to check against those five indicators. So I think this speech is an opportunity perhaps to revisit those five indicators. And if you do look at them, inflation expectations, wages, the breadth of price pressures, the temporary nature of certain high price pressures, and then the forces of globalization and demographics, those have all broken against

the Fed's outlook in really an unhelpful direction over the past year. And so that could be a starting point for the discussion on Friday. So Goldman's Jan Hatzius wrote yesterday, quote, we expect Powell to reiterate the case for slowing the pace of tightening laid out at the press conference and the minutes released last week, we continue to expect the FOMC to slow the pace of rate hikes to 50 basis points in September and 25 in November and December. Is that what you expect? I mean, what are your own expectations on what's going to happen on Friday? I would be surprised if we got too much of a steer about the next meeting in the speech. I mean, anything is possible.

But this doesn't seem like the forum for, you know, providing sort of spot guidance for the next meeting. Really, it's a bigger stage than that. It's a stage to lay out sort of the grand strategy for the next six or 12 or even 18 months. And so, yes, I mean, Jan is right. It is true. If you look at the July press conference and the FOMC minutes that came out last week, clearly, there's a desire by some on the committee to get off of 75 basis points being the norm at every meeting. They don't want to overtide. Powell said that at the last press conference. But there's also a recognition that if financial conditions ease, then the hill becomes steeper for the Fed to climb, that

they will have more work to do. So it will be a difficult balancing act. And I would agree that, you know, Powell won't want to take anything off the table in this speech. But it feels like an opportunity to do something broader than just provide guidance for what they're going to do in three or four weeks you know you're you're always in the room uh of the press conference as is our our own steve leesman uh you guys ask the questions and and the fed chair gives his answers as honestly and and hopefully as clearly as he can. I'm curious in your reaction to how the market reacted to what Chair Powell said at the press conference. We got a big rally on this notion that they were at the so-called beginning of the end of these rate hikes. Do you personally think that the

market got it wrong based on what you heard and what your own reporting has suggested since? I don't know. I mean, I don't get paid to follow what the market is going to do here or there. You know, was it a little bit of a surprise? Sure. But you've seen a lot of that fade away over the past week here. I think the bigger question really is, you know, what's going to happen to inflation? The market seems to be fairly optimistic about inflation and the soft landing story. A lot of economists are not. And so that's, I think, where the challenge comes in. What is the Fed going to do when, you know, the economy is actually slowing, when you see job growth slowing a lot, which it definitely did not in July? And, you know, and if inflation is still

high, if inflation comes down from 8 percent and 7 percent down to the mid four And, you know, and if inflation is still high, if inflation comes down from 8% and 7% down to the mid fours, you know, that's still double their target. So what happens there? I don't think we know. We've spent a lot of time understanding what the Fed's reaction function was for a low growth, low inflation world. But, you know, they don't know what they're going to do in this situation because they haven't faced anything like this in a long time. This will be the first Jackson Hole event. You know, it began in 1982. And it's the first one where they're dealing with inflation continuing to run away from their target.

They didn't have a defined target back then. It's also, you know, it's the first in person gathering in three years and that i think creates an opportunity for side uh you know hallway conversations uh you know time at the bar other central bankers can get together and talk face to face about some of these problems which you just can't do over zoom yeah more reporting you mean for uh for guys like you our own leaseman and everybody else uh who's going to be there covering it. I appreciate your time so very much. Nick Timber of the Wall Street Journal. Yep. Thank you. Still ahead, the three key charts on Mike Santoli's radar. He joins us for his last word next. To our Twitter question of the day, we asked, what is the best chip stock to own now for the

next three years? The big winner, maybe not a big surprise. NVIDIA, 43% of the vote after its earnings in overtime. Mike Santoli is here for his last word. It's good to see you. I mean, I asked Tim Ross, who was just here with us from the journal, you know, about the market's perception and the way the market took the comments from Powell, because it makes me wonder whether Powell needs to correct something on Friday. I think you could have said that a week or so ago, as Nick said, because you have had financial

conditions retighten a little bit. And I think it's actually pretty interesting if you look at oil, you look at Treasury yields, you look at the dollar. They're all back up to levels that in the past have actually given the stock market a little bit of pause, right? You have the two-year note yields above 3.4 again. That's pretty much at the highs. Oil above $95 a barrel. It's the 200-day average. People say it could be a breakout if it goes from here higher.

Also, market-based inflation expectations have ticked back up. So the market took back some of its maybe overexcitement about a potential pivot and things like that. It doesn't mean that Powell's not going to feel like he has to be a little bit of tough love messenger. But I think it could be balanced. I don't think he has to necessarily go hard in that direction. You can't say that or can't think anyway that the Fed officials have been thrilled, at least leading up to this, that financial conditions had actually eased. That's true. They prefer the opposite, at least a little bit. But I think that really where the rubber hits the road is the actual inflation numbers. They're not going to make a show of saying we need to make sure financial conditions stay tight if inflation starts to cooperate. At some point down the road,

if inflation gets sticky again and they feel as if the markets are fueling, are basically being counteractive to their mission, then sure, that might be the case. I don't think that's the moment for this necessarily, but we certainly will know. No big blowups from tech earnings in overtime? Yeah, not yet. I mean, nothing that seems like it's going to necessarily have coattails, though. The NVIDIA moved down in the guide lower after, you know, already you already had one. See if that spills into the broader semis. That has not been a group that's been contributing much to the even now. You look at NVIDIA, you it's not doing too much. It's down two and three quarters percent.

Enterprise seems to be holding up, at least so far. Front spot, yeah. That's key. All right, good stuff. Thank you, as always. That's Mike Santoli. He'll be back with us again for his last word. Fast Money begins now.