Closing Bell - Closing Bell Overtime: More Pain In The Markets 4/12/24

Episode Date: April 12, 2024

The Dow and S&P posted their second straight weekly decline while the is up to three straight. Can bank earnings shift the narrative? Our Leslie Picker on what you need to know ahead of next week while Unlimited Funds CEO Bob Elliott and John Hancock’s Emily Roland break down the market action. Ben Reitzes, Melius Head of Technology Research, on opportunities in this tech sell off. Wedbush’s Matt Bryson on the slide in chip stocks. 

Stocks sinking again as inflation fears and a sell-off in bank stocks weigh on the market. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Deirdre Bosa. Morgan Brennan and John Forte are off. The Dow and the S&P 500 now lower for a second straight week, while the Nasdaq's losing streak, that is hitting three weeks. We've got much more while the Nasdaq's losing streak, that is hitting three weeks. We've got much more on the sell-off ahead. Meanwhile, NVIDIA CEO Jensen Huang is about to give a speech on artificial intelligence at Oregon State University. We're monitoring that, and we will bring you any big headlines. Let's get right to today's action with our market panel, Emily

Rowland of John Hancock and Bob Elliott of Unlimited. Emily, let me come to you first. The VIX, we saw it pretty steady last week and up until today, really, it's now touching nearly 20. How's the resiliency of the first quarter for equities faded? Yeah, I mean, markets were really ignoring the fact that we've been removing the number of rate cuts that are priced into the markets until this last couple of weeks when they're getting the memo. It looks like we're in a period of higher for longer. The market had done nothing but go up in parabolic fashion, really, since the low last October, which coincidentally was when the Fed started talking about cutting interest rates. So what happened was that those remarks,

just talking about cutting rates, caused the loosening in financial conditions. Market rallied. They shrugged off this kind of stalling in terms of the disinflation narrative. But now I think we're starting to contend with the idea that we may be in a holding period before the Fed can actually start to move.

Right, you mentioned the number of rate cuts that investors perceive to be on the table has been declining. Bob, what about geopolitics? How much of a factor here? We've been watching commodities and energy continue to be the outperforming sectors. Well, I think from a global perspective, what we're seeing is to some extent geopolitics, but I think more broadly, the fact that the U.S. or the U.S. economy and the global economy is not nearly in as bad a shape as many folks had expected. And as a result, what we're seeing is we're seeing commodity prices push to post-COVID highs and even their highs of the last 10 or 15 years on a diversified commodity basket.

That overall picture is particularly challenging if you're sitting in the seat of a central bank that's trying to shift towards easing when we see those underlying input price pressures creating an inflationary impulse ahead. And so it's all intersecting between the strength of the global economy, some concerns about the geopolitical landscape flowing through to things like oil, and the need or the concern from global central banks that an easing cycle may be premature. So there's Fed, there's geopolitics, and Emily, now there's also earnings. We saw that kick off today with some of the major banks. And J.P. Morgan, down as much as it is, they weren't bad earnings. We're going to get into it in a moment. But what could that be telling us about the rest of earnings

season? Has the bar been raised? Well, of course, it's just day one. Analysts were penciling in 3 percent earnings growth for the S&P 500. So the bar is pretty low. You know, regarding the banks today, not terrible, but just pretty uninspiring. The hope was that we'd see positive revisions on net interest income, given the fact that the Fed is likely on hold for longer. But expenses went up because consumers are now demanding higher rates on savings. So we really haven't seen that move higher based on this elevated rates backdrop. Of course, a lot more to come here. Three percent, again, a low bar, but that ramps up as the year goes on. And analysts are now

penciling in 17 percent earnings growth for the fourth quarter here. So I think that might be a little bit of a high bar. Well, Emily and Bob, stay right there. We're going to get more on the bank. So let's bring in Leslie Picker for what to expect from next week's bank earnings. Leslie. Hey, Deidre. Yeah, net interest income, what you guys were just talking about, that's that profitability metric for loanmaking. That was really in the spotlight throughout the day today. But ahead of next week's earnings, I wanted to draw your attention to a lesser covered area of today's results, and that is non-interest income, specifically investment banking fees. At Wells Fargo, such fees jumped a whopping 92% to $301 million in Q1. Citigroup

saw that figure surge 32% to $977 million, and JPMorgan experienced gains of 21% to $2 billion. Now, of course, that is off of a low base. Last year was a notably slow year for iBanking fees, but the bright spot among today's reporters could bode well for the banking heavy Goldman Sachs and Morgan Stanley next week. And Bank of America's CFO said in a conference last month that he's also expecting a boon to the top line from this department, guiding gains of investment banking revenue by 15% in Q1. Now, it's worth noting that within investment banking, it was largely equity capital markets and debt capital markets

that drove the growth in today's report. Citi CEO Jane Frazier saying on the call, we could see a measured reopening of the IPO market in the second quarter in light of improved market valuations. And earlier, Deirdre, you and I were chatting about StubHub's plans to go public this summer. I hear JP Morgan is leading that deal alongside Goldman Sachs. However, it would appear that the lucrative M&A advisory fees have yet to make as much of a comeback. So we'll see if there are beneficiaries among the banks that report next week. But kind of an interesting nugget from today's reports that hasn't gotten as much.

You know, Leslie, it's funny you say that. I was going to ask you about the investment banking side of the business. You covered the IPO side and fees there. But what about M&A action over the last few weeks? You've even seen a Google of reports, excuse me, reports that a Google might be looking at a company as big as HubSpot. Was there any commentary on big bank expectations for deals? Yeah. So the pipeline for deals is certainly building. The question is when those deals and if those deals will close, because that is how the banks get paid. Unlike an IPO, where they usually get paid kind of after selling those shares,

it's pretty close to the company's debut date. For an M&A situation where they do advisory work, it can take months to get that deal signed, but they usually don't get paid until that deal closes. So with regulatory headwinds or if a deal happens to fall apart, the banks wouldn't get paid for that. So the pipeline seems to be building. But in terms of kind of how quickly and when they'll be able to turn that into real revenue growth that we saw, maybe not in 21 and even 2020, but kind of

more normalized times remains to be seen. Leslie, thank you. Great color on the deal and IPO part of that proposition. Emily and Bob, let me ask you, Bob, I'm going to come to you first. The volatility that we have seen over the last few weeks, does that hurt the IPO story that seems to just be coming back after a long drought?

Well, I think for most companies that have been desperately waiting to issue, they've needed to see a combination of go to the public markets. If anything, one of the things that's been supportive to the equity markets through the course of this rally that we've seen since the start of the year is the fact that there hasn't been much incremental issuance coming to the market. And so that squeeze higher is really supported by the fact that there's no activity. So I think it's a challenging circumstance ahead where equity markets have to press higher and the risk and

the possibility of increased supply could be weighing on the market as we head to the second half of the year. Emily, let me ask you about the deposit side of bank earnings. And you heard from JP Morgan that customers are shifting their deposits out of low yielding, checking and savings accounts into things like CDs. How big of a challenge is this if we're expecting maybe only one or two rate cuts this year? Yeah, I don't think it should be a huge challenge. The banks are in decent shape. You know, the consumer is really strong right now. You know, credit is very elevated today. So, you know,

we see financials as doing fine in this environment, obviously a more cyclically oriented sector that should do well. As Bob mentioned, the economy is reaccelerating. It's coming in much stronger than many folks expected. So we think, you know, financials should do fine. And in fact, we're seeing an environment in which in general, more cyclically oriented sectors like industrials and energy should also see a bid amidst this modest reacceleration and global economic growth. And Bob, quick one, last one to you. We're going to be talking commercial real estate later on in the hour. What did the big banks tell us about that sector so far? I mean, the reality is the commercial real estate sector is moving like molasses. If there's one thing the bankers are good at,

it's delaying recognizing loans that are a little questionable to bad. Delinquencies are picking up, but it's not really the big story and probably won't be in the near future. We'll be much more interested in what's going on with growth and economic conditions and monetary policy than we are the CRE resolution. Emily and Bob, thank you for your insights. Appreciate it. Have a great weekend. You too. Time now to bring in senior markets commentator Mike Santoli for his dashboard. Hey, Mike.

Hello, Deirdre. You know, we had a couple of tests two weeks in a row here in the S&P 500. Last week, we ended five months without a 2 percent pullback from a high. This week, we touched in the S&P the 50 day moving average for the first time since last November. And it was one of the top, I don't know, 12 or 13 longest stretches with this index being above that level in history in about 80 years. So it shows you that this is a normal pullback in some respects. The question is whether, you know, just one touch, and in fact, we closed above this. It's like 51.10.

But it does show you how unusually steady this ascent was right up until the end of March, until we did see, of course, a little complication in the Fed picture, yields going higher, and essentially an overbought market that was having to work off some very, very optimistic sentiments. So that's the process, I would say, that we've been undergoing here for the last couple of weeks. It would have been easy to say, oh, we need a 3% to 5% pullback. Once a 3% pullback happens, you can find all the other reasons why you should fear for more. So that's the moment we're in. You guys are just talking about commodities.

Take a look at a broad commodity basket against the software sector. They don't always work perfectly inversely. But if you consider that software is obviously a digital sort of disinflationary type of group, whereas, of course, you have reflationary forces driving commodities, you have seen them move kind of, you know, in inverse relationship at times. And that's also happened here. This is a five-year chart. So it shows you the waxing and waning of it. So software hesitating just a little bit, real assets. And, you know, what's also interesting about this is the AI investment boom is driving things like real assets. Of course, copper is up. We're re-electrifying. You're building data centers. It's actually stuff. It's not just code.

So I do find that a little bit of an interesting relationship when it comes to these what would seem polar opposite sectors. Mike, it's interesting that you compared commodities to software. Software, though, hasn't really taken part in this sort of tech rally. Right. It's been lagging, especially in an area like chips, seen as the picks and shovels of the AI trade. What does the chip pullback that we've seen over the last two weeks, which has really been leading the market this year, what does that tell us? Well, what it tells us for now, I think, is that the very leading huge cap semi-companies, obviously it's NVIDIA, it's Broadcom, it's AMD, are the ones that are essentially live and die by AI sentiment. And mostly they've been living. And I think that that's OK.

We're having a little gut check on that along the way. NVIDIA, you know, it's up 70 percent even after a year to date after a 10 percent correction. So I think it's still that same dynamic there. We're not really seeing flight from the group, but it's about really just the confidence in the long-term secular trend is going to be able to drive it. But really, everything is happening in the context of pent-up profit-taking in a market that went straight up for five months. Yep. And the chip space went up a lot. I know we're going to be talking Arista later. Mike Santoli, thank you. On that point, is there trouble in tech land? The sector underperforming the broader market today. And up next, a top analyst on whether he sees this pullback as a buying opportunity.

Plus, we will bring you any headlines from NVIDIA CEO Jensen Wang's conversation on AI. See him right there and what that could mean for his company stock. Another big winner that's given some ground back in recent weeks. Overtime is back in two minutes. Welcome back to Overtime. Semi's taking a hit in today's session. Intel and AMD down 5%, NVIDIA down 4%. But Apple, one of the few in the S&P 500, actually closing higher today by nearly 1%. So should you buy any names on this pullback?

Joining me now is Melia's Head of Technology Research, Ben Rietzes. Ben, thanks for being with us. Now, in Q1, we already saw sort of a broadening out of the tech trade. It was no longer just the mega caps. We saw more sectors participate. Does that continue, or do you think this is an opportunity to pick some of those tech names up? Well, Deirdre, thanks. And it's good to be here. I do think it's an opportunity. Obviously, this is a tough day. There's a lot of geopolitical tensions playing out in the market. So, you know, you don't know how that's going to go over the weekend. But I think that exacerbated

a lot of the weakness we saw today. And you saw First National Bank of Apple outperform because they have recurring revenue and they have a franchise that's really ironclad, in our opinion, over the long term. But I do think it's probably an opportunity. And AI is going to be with us a long time. We're just getting started. And NVIDIA's got a great new product cycle. AMD's got a great product cycle potentially ahead. So we are optimistic over the long term and hope this weekend is a little quiet, you know, God willing. First National Bank of Apple, you're referring to its stellar balance sheet, its huge cash pile. Is that why you buy Apple right now as a safety play, almost a defensive versus innovation growth? It's not growing anyways.

Well, I mean, you know, when you lose your iPhone, it may be more of a crisis than losing your car. So I think that their franchise is very strong right now. We all know that China's a little weak, but they're going to lay out their AI strategy. And I think it'll be very thoughtful. It'll reinforce their app store. It'll reinforce a potential for a major upgrade cycle probably in 2025. So I think the speculation about Apple's demise is way overblown. What about speculation? It doesn't have an AI story. Where are you on that? Oh, I think that's false. I think that Apple doesn't necessarily make the apps. They make the apps we use better. And they'll do the same for AI. A lot of the best apps we have on the iPhone are not Apple's apps. A lot of people complain about Siri and we can't live without

the device anyway. So I think it'll be the same for AI and they'll have a lot of edge processing and make AI enjoyable for the masses. Okay. Aside from Apple, what are you picking up if you're looking to buy technology on the dip? Is that the Magnificent 7, the Fab 4, or are there other areas you can look? Well, we still like NVIDIA. I think that, you know, the pullbacks here are an opportunity. They have a new product cycle. The speculation that they wouldn't have pricing power, et cetera, and that 2025 wouldn't be a growth year, I think have been debunked. So I think we grow next year. Earnings are still going to be revised higher over the long term. So I still like that one on weakness. A real interesting one here would be AMD. It's gotten pummeled. There's some speculation of

execution issues with their AI chip. They probably get it right over the long term. So I think you want to nibble there on weakness. AMD. That's not the only thing hitting AMD today, though. There's also those China concerns. You mentioned it when it came to Apple. You kind of underplayed it, right? How big a concern is it for the chip sector and some of the names we're seeing sell off today, like Intel and AMD? Well, you know, it's funny. Nothing's ever in the stocks. You think it is. I mean, we all know about China. We've known about it for Intel. Some say it's a single-digit percentage of sales that could

go away for Intel, maybe a double-digit percentage for AMD. We've known about this. So this is not necessarily new news, but when it hits, it hits. And we think combined with the lack of buyers today, it exacerbated it. But the China stuff, you know, I think is old news and we'll make our way through it. But look, they're going to need at AMD to execute an AI. And we think eventually they will, even if they have a near-term bump. Before today's sell-off, Ben, when I woke up this morning, I thought maybe we would see Google or Alphabet hit $2 trillion. That certainly went off the table quickly, but it has been sort of quietly rising to all-time highs. And what's plagued this company over the last

year or so is the idea that it might be in an innovator's dilemma. It wouldn't disrupt its own business to take advantage of generative AI. We had the Google Cloud Next event this week. Where are you on this name? Well, we're surprised that it's just come right back. I mean, those were some big missteps they had in AI. And their AI whole strategy is pretty confusing with regard to renaming everything. And, you know, I don't know anybody that can really keep it straight. However, that was a pretty good keynote this week. Tom Kurian did a really good job explaining what they have, and their tools are really good. The thing about Google, which I think has been quietly making its way into the stock, is that a lot more of the investors I speak to are thinking they're going to get more serious about efficiency.

And a lot of folks don't want to be caught offside if they do even a mini Zuck, you know, a mini Facebook, a mini Meta, a Mia Culpa. And that's been something that we're debating with folks. And the potential there is pretty strong. I think a lot of folks realize they're going to be one of the winners in AI. But if they get serious about costs, look out. You know, that's that's if you want to be bearish on Google, that should be your number one worry in our opinion. I feel like Senator Pichai, the CEO, has already sort of been hinting at that. We saw those layoffs at the start of the year, but it sounds like you think that might only be the beginning.

Ben, thank you so much for being with us today. Talk to you again soon. My pleasure, Deidre. Have a great weekend. You too. Still ahead, why some Wall Street firms are hiking their price targets on Netflix ahead of its earnings next week. That's right. We've got tech coming up. Plus, JP Morgan CEO Jamie Dimon warning about the potential fallout rising interest rates

could have on real estate. Up next, a top commercial real estate credit investor gives us his outlook for the industry. Rising rates posing a major risk to the commercial real estate market. J.P. Morgan CEO Jamie Dimon commenting on the potential fallout earlier today on the firm's earnings call. Have a listen. If rates go up, think of the yield curve, the whole yield curve, not Fed funds, but the 10-year bond rate, it goes up 2%. All assets, all assets, every asset on the planet, including real estate, is worth 20% less.

Joining us now, Richard Byrne, president of Benefit Street Partners, a unit of Franklin Templeton, investing in corporate and real estate credit strategies. Richard, thanks for being with us. You just heard from Jamie Dimon. He is typically a little more worried or maybe cautious than some. Do you agree with him? Do you think that the 10-year yield could actually move up by 2 percent? Hi, Deidre. Thanks for having me. Well, our perspective on rates, we've been on the higher for longer path for a while. It's proved to be right. We didn't

necessarily pick higher for longer because we had strong conviction around it, just that as credit investors, you want to pick the worst scenario for your underlying credits and make sure that you have the wherewithal to get through any environment like that. Feels like the economy is strong. It feels like inflation is sticky. It feels like people have kind of like maybe expected rates to come down a lot sooner than they would. We expect they will ultimately, but it may take a while. We may kind of hover around here for a while. I think Mr. Diamond's forecast may be a little bit more dire than anything we're thinking about. So what is the worst case scenario? Is that one rate cut this year? None? What would that mean? From our, I don't know how many rate cuts it is. It's probably one. I would say the over under now

is one or none. And that's worst case scenario. Yeah. Well, in the scenario that we're looking at, obviously there's scenarios that you could look at. That's how we've been thinking about it. But I think the rate discussion is a little bit of a misdirection from the standpoint of a commercial real estate lender like us. I mean, think about it. There's a double-edged sword. I mean, it's the perfect metaphor. When rates go up and you're a lender and you make floating rate loans, what happens? You get a lot higher net interest margin. Of course, the flip side of that or the other edge of the sword is that it puts more credit or pressure on your borrowers and it creates problems at maturity. You know, these borrowers have to somehow refinance or sell the asset or whatever it is to get a, quote, soft landing. Well, if you're a good lender, you know, you kind of relish these opportunities because you're getting spotted so

much more interest rate, so much more base rate that you have a lot of margin for error. So, I mean, if you know what you're doing and you know how to portfolio manage and rates don't get crazy, then we view it as an opportunity. Right. If you are a good lender and you have priced this correctly, but one big lender, one big player going under could have massive ramifications. And I wonder if you think that there's a region that is particularly vulnerable here. I was looking at a Bloomberg analysis showing that California lenders have outsized property debt concentration. Yeah. So I'm going to answer the question this way. And so you said sector or geography. I'm going to say the place where the problem is, is office. So anybody, anybody that's in the commercial real estate lending business

has exposure to office loans. It's just like you almost couldn't avoid it. And the average bank, the average commercial lender, private lender has somewhere in the neighborhood of 25, 30, in some cases as much as 40, 45, 50 percent exposure to office. That's the problem. The interest rates are sort of like the left jab. The the office problem is sort of like the right cross that, you know, the jab just stuns you a little bit. The cross is what knocks you out. And that's that's the issue that we're facing. It's caused most lenders like banks, like a lot of commercial mortgage REITs to be on the sidelines. They're missing what we think is like the best opportunity to lend we've

seen in like over a decade. And the reason is because rates are higher. There's a lot of great properties. Borrowers don't have a lot of choices. And, you know, all the traditional lenders are like on the sidelines right now. You know, it's interesting. We spoke to Tillman Fertitta, big business owner earlier this week, and he just bought, I think, a half a billion dollar property mall in Texas through his own private wealth unit. So there are some people finding other ways to pick up some of those properties. Richard, thank you so much for being with us today and your insights. Richard Byrne, have a good weekend. My pleasure. Thank you. Time now for a CNBC News update with Julia Borst. And Julia.

Hi, Deirdre. Well, U.S. intelligence has found China ramped up its sales of equipment to Russia to help its war effort in Ukraine. Senior U.S. officials tell NBC News equipment is filling gaps in Russia's defense production cycle and that China is providing significant quantities of weapons, materials and equipment. And more than half of all teachers go to work every day anxious that a shooting will happen at their school. That's according to a new Pew Research survey. 60% of the teachers polled also said better mental health screening and treatment for kids and adults would be an effective solution. While half said police or armed security on site would be highly effective. And fashion designer Robert Cavalli, known for his excessively glamorous clothes, has died. While Cavalli was well-known in Europe in the early 1970s for his animal prints,

he became one of the biggest names in fashion during the 90s for reinventing luxury denim. His fashion house announced his death on Instagram, but did not provide any details. He was 83 years old. Deirdre, back over to you. Hello, Jen. Julia, thank you very much. Shares of product testing company UL Solutions surging after going public today. Up next, Mike Santoli is going to look at why this stock could be a good bet for investors. Plus, check out shares of Arista Networks, one of the worst performers in the S&P 500 after Rosenblatt Securities double downgraded the stock to sell and slashed its price target

from 210 to 330. Warning, it may not be as big a winner in the AI space as previously believed. One of the worst performers today, down 8.5%. We'll be right back. Welcome back to Overtime. Product testing company UL Solutions closing 24% higher after making its debut today on the New York Stock Exchange. But could there be more upside ahead for the stock? Let's ask Mike Santoli. Hey, Mike. Hey, Dee. So, first of all, IPOs in general obviously have had a rough go.

This is a pretty decent indicator for the appetite for some at least mature, you know, potential IPOs. This is the IPO ETF. Obviously, this is the peak back in the unprofitable tech boom of early 2021. And it's down a lot over the last three years, although this is kind of trying to set a new uptrend. A lot of these IPOs in this ETF, by the way, aren't really IPOs. They're two, three years old because there just haven't been enough new issues to fill up the ETF. Now, I consider UL, which is the old underwriters limited safety testing company. It's a nonprofit, kind of an industry utility. Stocks that are like this,

that were owned collectively by the members of an industry and then become for profit and come public. There's a pretty good record of them rewarding investors. Visa was owned by the banks. It came public in 2008. Nobody really expected much. It's pretty sleepy. NASDAQ, the stock exchange, also all the securities exchanges used to be these consortiums, essentially. That's been good. This is a 10-year chart, by the way. You see them all outperforming the SPX. This is Verisk. It was a data collection company for the insurance industry. All the insurance companies fed into it. You get the idea. So UL seems to fit into this general mode of we're learning how to be a for-profit company, generally low expectations

coming in, and everybody in the industry kind of needs them and uses them as a kind of central utility. So just a thought as to what sort of file to put UL in. That's interesting. It's not necessarily as exciting as some of the flashy household tech names. Almost the point is the exciting nature of it. And expectations being low. When you said it was a nonprofit, I thought about OpenAI, how it would not go like this. There would be so many expectations. Be very different. Yes. No, this is a hundred plus year old nonprofit. How many more companies are like this in the pipeline? You know, I don't know that there are really many more like this in the pipeline. I think what you're more likely to see is private equity and VC-backed companies that have been sitting there and waiting and have had their ducks in a row and are now going to hit the market.

Because we do seem to have some receptivity, even though we've had a little bit of a bumpy couple of weeks in the indexes. Yeah, that's what I hear. Maybe the companies, not necessarily the flashiest of the flashiest, like the opening eyes or the stripe, but certainly we had StubHub today too. Mike Santoli, thank you. Up next, a top analyst reacts to NVIDIA CEO Jensen Huang's conversation on AI and his take on the stock, which has held up pretty well during this week's market pullback. Shares of animal health giant Zoetis sinking on a Wall Street Journal report,

looking into the safety of the company's arthritis drugs for cats and dogs. We'll be right back. Surging interest rates taking an especially big toll on one part of the tech sector today kate rooney has the details kate hey deirdre yeah fintech that is the really the extreme example of today's tech weakness it's a reflection of growth really getting punished as bond yields spike higher rates not great for this group of stocks you got robin hood today giving up some of its recent gains down more than four 5%, closed lower today, but still up about 40% for the year.

SoFi, an affirm, also lower. Cathie Wood's fintech innovation ETF, really a bellwether for this space, was down as well. Then you got Bitcoin lower, trading down more than 3% today, hitting the crypto proxy stocks even harder. You got Coinbase closing down more than 6% today. And then MicroStrategy, the largest corporate holder of Bitcoin. The mining names as well tend to trade like some of these levered Bitcoin plays. So they tend to see outsized moves in either direction when it comes to Bitcoin's price. The so-called mining names hit some of the hardest. And then one caveat, D, fintech and interest rates. So it is interesting. Some of these names have actually

benefited from higher rates. If they hold customer deposits, they bring in more interest income. So it has been sort of a double edged sword for these companies. Today's move lower, though, seems to be more of a knee jerk backlash when it comes to growth stocks. And Kate, something that unites a lot of the names that you just mentioned is unprofitability. We have seen over the last 12 months they find religion, start becoming more efficient, but not reaching that gap profitability yet. And that changes the valuation view when you're going to get rates higher for longer. Yeah, absolutely. That's been a big theme across tech, especially fintech, when it was growth at all costs during the 2020, 2021 era, very quickly pivoted to, wait a minute, we need to rein in costs.

We need to rein in some of the growth. PayPal is a great example of that as well. Robinhood is one that actually did find profitability. They were able to get to a level where they were once again profitable. Coinbase is still unprofitable. Then you've got Square. So it sort of depends on the company and the business model. We're talking about profitability, right? Not adjusted. Right. Not exactly. There's a distinction. Well, actually, I mean, when it comes to it, it depends on which company you're talking about. And there is a nuance there. But for the most part, I mean, a lot of these companies had been valued as growth names. And that was really their whole thesis. But you are seeing a little bit more belt tightening here. And but it is interesting. The business model has benefited from higher interest rates. Some of these companies, even Coinbase, for example, holds deposits.

Exactly. They hold customer cash in the form of stable coins. So some of them have found this almost surprising upside when it comes to interest rates. But, you know, net negative. I think our commercial real estate guest earlier called it that double-edged sword. It applies here as well. Kate Rooney, thank you very much. Thanks, Dee.

Next, analyst reaction to NVIDIA CEO Jensen Huang's conversation on AI, which is happening right now. See him in his classic leather jacket here. Over time, we'll be right back. NVIDIA CEO Jensen Huang speaking right now at Oregon State University. Steve Kobach has been monitoring that for us. Steve, what's he saying? Yeah, so Jensen Huang kind of giving a broad overview of NVIDIA's kind of space in this AI revolution we're going for, telling the students at Oregon State University, for example, that AI enables us to do, us meaning people, do stuff millions or billions or even trillions of times better, faster, more efficient, and the kind of opportunities that can open up. He touched a little bit on biology, drug creation, but also talking about, he got a really interesting

question, Deirdre, from one of the students in the audience about how AI can kind of level the economic playing field. He talked a little bit about how it can help people who previously didn't know how to code, for example, learn how to code. We have some sound from that. Take a listen to what he said there. I believe that artificial intelligence is the technology industry's single greatest contribution to social elevation, to lift all of the people that has historically been left behind. And I'll give you two evidence of that. It's going to close the technology gap. It's going to close the technology gap. It's going to bridge the economic divide.

So close the technology gap, kind of like the Internet did for so many things that we do every day now. He's saying AI will make that even easier going forward. Also touched on regulation a little bit and said, from my interpretation of what he said, it's not necessarily regulating AI as a whole, but it's going to be specific to each industry that AI touches. And so that's a kind of interesting take that we don't hear too often. That's so funny. That was like word for word what Aaron Levy of Box told me just a few hours ago here. But that seems to be a consensus growing, not overarching regulation, but let the industries do it themselves. Tell that to Congress.

Yeah. Steve Kovach, I think they do. Aaron Levy at least said he did this week. Thank you for that. Let's get more on NVIDIA and the chip space. Joining me now to discuss is Matt Bryson of Wedbush Securities. Matt, thanks for being with us. We know that NVIDIA has this incredible advantage to this ecosystem. The question is, can it keep that dominance? What do you think? I think it certainly can for the foreseeable future. So you head into 2025, I think the largest customers are all teed up to buy substantial amounts of Blackwell in NVL 72 systems. Beyond that, of course, you always have to keep innovating, right? So there's a need to create more energy efficient chips. There's a need to create better chips. And so they'll certainly have to execute around that.

But as we've seen in these industries again and again, one or two companies who establish a leadership position, they tend to hold that leadership position. Right. And NVIDIA has done a good job of doing that and building out its moat, becoming more than just a hardware company. But, you know, over the last few weeks, we've been getting more on chip ambitions from the mega caps that could potentially put them, if not in direct competition with NVIDIA, perhaps reduce their reliance a little bit? What kind of impact do you think that will have, if any? Yeah, you had Marvell talking about that two days ago, right? Yesterday, I'm sorry, at their AI event where they were talking about this custom chip build opportunity growing faster than the AI opportunity overall. I think NVIDIA is able to charge a premium for their product.

And what the large cloud players have done consistently is they've built their own infrastructure in order to gain a cost advantage. So I think to some extent, yes, Amazon, Microsoft, Google, Meta, they're all going to produce their own chips. They're going to be great for certain instances. Having said that, when you think about enterprises who want to use these products, they're bringing on people who are versed in CUDA. And so NVIDIA has made it easier for those enterprises to turn to NVIDIA. Okay, what about the other side of this, Matt? NVIDIA obviously has just gone parabolic over

the last few years because of its place in the AI race. You've seen the mega caps and you've seen the semis really be the winners of this platform shift. But Arista Networks today, an example of what happens if you get a little overhyped or someone pours cold water on your proposition. So as we head into earnings and semis have really been leading the market broadly higher, what is the risk here in particular for NVIDIA that just continues to have to clear a higher and higher bar? Yeah. So, I mean, NVIDIA's got an off quarter, right? So they're going to report a month from now, roughly. Before then, I think a

lot of the semiconductor companies that you're going to see come out with numbers when they talk about AI, I think they're going to talk about their AI businesses or their businesses related to AI doing better. And I also think that we're starting to see a pickup in standard servers, which also has a positive influence on a lot of the semi space. And so generally, I think companies who are tied to AI, who are tied to the server space, they're going to give us relatively better news. And so I don't think that there's any problems for NVIDIA this early season. OK, what about some of the other names, names though? Like could another risk to networks happen? Are there any names that are vulnerable that you think have been overhyped? Yeah. So a lot of the names in my space,

when I think about the memory names, for instance, I think you're on the other side of things. So I think HBM demand, DDR5 demand for servers has been better than expected, that they're struggling to meet demand. And so, if anything, I think expectations are too low. With networking and storage, the storage names, I think, again, what I'm hearing is that the way that storage environments are configured in enterprises, it doesn't work well with AI. And so there's actually a need to go and refresh storage. So I think things are relatively good there.

Server names, so Dell and HPE, I think they're finally getting GPUs. So you'll see strong results from them on the server side. And networking is a little bit outside my belly book, if you will. But, I mean, having said that, if you're putting in more servers, eventually you have to connect them. And so I'm not sure what was said on Rista today,

but if this is a weaker quarter or next quarter is a weaker quarter, at some point, all those servers that are being added, they have to be connected. The idea, too, that they have to be upgraded, what Jensen Huang calls accelerated computing. Matt Bryson, thanks so much for being with us today. A major Wall Street firm says it sees more than 10 percent upside for Netflix, which is reporting earnings next week.

Up next, we're going to tell you what to expect from those results. And don't forget, you can catch us on the go by following the Closing Bell Overtime Podcast on your favorite podcast app. We'll be right back. Breaking news out of Washington. Megan Casella has the details. Megan. Deidre, the Biden administration is just moving to prohibit all imports of Russian origin, aluminum, copper and nickel into the United States. The Treasury Department saying just now they also will be limiting the use of those same metals on global metals exchanges and in over-the-counter derivatives trading. Now, this is, of course, aimed at limiting the amount of revenue that Russia can take in in response to their invasion

of Ukraine. They say that this will apply to all aluminum, copper, and nickel of Russian origin that is produced on or after April 13th or tomorrow's date. Deirdre? Megan, thank you. We know you'll be following that story for us. Meanwhile, we want to look ahead to next week, Netflix shares. Take a look. They were lower today, but it has been one of the biggest winners in the S&P 500 this year. Wall Street issuing a bunch of bullish analyst calls on the stock ahead of next week's earnings. Julia Boorstin has all the details. Julia.

Hey, Deirdre. Well, Netflix shares lost about 1% today, but the stock is still up nearly 28% since the company reported its last earnings in late January. And today, three analysts are weighing in ahead of the company's earnings next week. Morgan Stanley reiterating its overweight rating and raising its price target to $700, saying the company has various underappreciated competitive advantages, including the content it gets from outside the United States. Oppenheimer with an outperforming $725 price target, praising the long tail benefits of Netflix's paid sharing, saying mixed shift to licensed content is positive for margins. Now, on the cautious side, Piper Sandler, with a neutral rating on the stock, warns that expectations are elevated compared to the past few quarters.

Now, expectations are indeed high for nearly 14 percent revenue growth and 57 percent growth in earnings per share. And after subscriber additions soared far past expectations with over 13 million new subscribers in the fourth quarter, the question is how much the company can maintain that kind of subscriber outperformance and how much those Q4 numbers may have been a pull forward from the first quarter. Deirdre? Julie, what do you think is going to be more important this quarter, those subscriber numbers or profitability? Well, look, Deirdre, Netflix has really tried to shift attention away from the subscriber numbers. They no longer give guidance for sub numbers. They say, focus on our profitability. Look how much progress we're making. Look at our consistent revenue growth. But the problem is, is that investors really see

subscriber growth as a sign of the health of the company. And the fact that we saw that massive 13 million number in Q4 really blew away investors and pointed to the fact that specific things were working, including the crackdown on password sharing. So I think the question now is, are they going to keep that up? Are they going to continue to see the benefits on password sharing. So I think the question now is, are they going to keep that up? Are they going to continue to see the benefits from password sharing? And are they doing what it takes in terms of ads, et cetera, to make sure they keep those consumers engaged? We know you'll be tracking it.

Julia, thank you very much. That does it for Overtime. Have a great weekend, everyone. I'll see you back from San Francisco next week. Fast Money begins right now.