Closing Bell - Closing Bell Overtime: New AWS CEO’s First Interview; Booking Holdings CEO On Busy Holiday Travel Season 7/1/24

Episode Date: July 1, 2024

Matt Garman has been AWS CEO for a month. Jon sits down with him in his first interview since starting the role – he talks AI plans, power needs and capital spending. Booking Holdings CEO Glenn Fogel on the consumer, summer travel demand and global hotspots. 

Well, stocks struggling for direction as we begin the third quarter, but the Nasdaq climbing to a new record close. All the major averages finishing higher, driven by a big pop for Tesla. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. And we have got a big interview coming your way. Amazon Web Services CEO Matt Garman joins us in his first interview since taking the job at the beginning of June. That's a role once held by current Amazon CEO Andy Jassy and part of the business crucial to Amazon's push above two trillion dollars in market cap. Plus, we will talk to the CEO of Booking Holdings as we kick off what could be a record setting week for travel.

But first, let's begin with the market action as the second half of the year gets underway. Let's bring in our market panel, Paul Hickey of Bespoke Investment Group and Bob Dahl of Crossmark Global Investments. Great to have you both here. And as I mentioned, the S&P, the Nasdaq and the Dow all finished higher, although the Russell 2000 finished down about eight tenths of one percent. Transport's also lower here, too. Paul, to kick this off with you, I mean, a lot of focus right now, short term on seasonality and how strong the first half of July tends to be on an annual basis. The AI trade continues. We're awaiting earnings. But we also know in an election year, the stock market tends to be strong in the second half, especially if you have momentum in the first half. So how does that position us here for equities? Yes, I think, Morgan, to your point,

you know, we had a strong start to the, you know, the first half here with all the major averages up, but breadth was negative. So what else is new? I mean, it's a pickup of where we were in the last month of the second quarter. To your point, seasonality is positive for the first half of July. And I think more importantly, though, you have heading into earnings season, you have negative analyst sentiment in terms of earnings revision. So we're seeing more negative revisions than positive revisions. And for all the talk about complacency in the market and strategists

raising their targets, the average strategist target, the mean target is only about a percent above where we currently are now. And six out of 13 strategists at CNBC tracks are looking for negative returns between now and year end based on their targets. So it's not a whole lot of complacency in that respect. And just the rates picture, the Fed is going to be lowering rates at some point. It's a matter of when, not if. So those are the positives we have working in our favor. But go ahead. OK, well, Bob, I mean, we have seen this Treasury yield back up a pretty sizable move here in recent trading sessions. You do have an S&P that's trading at what, 21 times forward earnings right now. Is there more room left in the tank or as Paul talks about the fact that maybe there's not so much complacency and maybe there is more caution than we've seen more recently with strategists. Are you in that camp?

To the extent the economy shows more signs of weakness, particularly around the U.S. consumer, I think the stock market will begin to struggle because earnings estimates, which are pretty lofty, a double-digit gain this year and next. We'll have trouble getting there if that weakness sets in. Otherwise, it's momentum market. I mean, today was just like the second quarter. S&P 500 up, average stock down. 4% the S&P in the second quarter, average stock down 3%. That's a tough headwind for stock pickers. I think we'll see more of the same till this momentum gives up. And the give up could be if earnings begin to disappoint. Paul, if I understand you right, you're making the argument that there hasn't been a lot of

breadth in this market. The mega caps and AI names have been running ahead. But that doesn't mean that the mega caps not outperforming will take down the rest of the market. They might just hand the baton over. How much of a risk is there, though, if there's some kind of external event that spooks people, given where valuations are right now, that in between that baton handoff, somebody could fall down? Yeah, I mean, an unexpected geopolitical event could certainly break out. It's hard to plan for those. And to Bob's point earlier, we have some economic momentum has slowed. The city surprise index is near two-year lows. So we're going to have a lot of data this week that's going to give us a sense of more urgency,

whether or not there will be more urgency from the Fed to hike, to cut rates going forward, not because inflation is eased, but because the economy is showing weakness. So this is a big week for economic data, I think. But our overall, you know, blueprint and what we're expecting for is not the market, the mega caps to catch down to the rest of the market, but to, like you said, for the baton to be passed off in more of a relay. You look at the equal weight index over the last three years, it's up 8 percent. Its average three year return throughout its history going back to 1990 is closer to 34 percent. So it's not like all stocks have been going crazy here. As Bob said again earlier, the second quarter,

we saw the Russell 1000 up three and a half percent. Half of that was Nvidia and the other half was Apple, Google and Microsoft. So the rest of the market here, I think, has a lot of room for improvement. And if we do start to see, you know, if we can get through this economic soft patch that we've been seeing of slower momentum, I think these names can really start to rally in the second half once we get past the late summer week seasonals. Okay, then, Bob, are there known knowns out there, singles and doubles that you see? I mean, it seems like in a way this is a 1998 market. I don't mean in terms of stocks. I mean, like we're watching home runs getting hit with the NVIDIAs and others like that. But are there singles and doubles where investors can look and see, you know what,

this is just an obvious, solid gain that you can sort of expect if you're in the market for more than a minute or two, a year or two that you should be back here i wish i could give an easy yes to that question uh... that question if it happens is involved in the leadership passing of the baton that uh... we've all referred to uh... those changes in leadership almost never come without a space off patch a a pullback a correction then you get the new leadership. So I would expect some sort of selling squall if that leadership change is going to happen.

Look, today is a good example. Economy is so-so. So you've got a lot of economic sensitive areas struggling. You've got most of the magnificent seven. You're running to the upside as people go to the areas where they think they have higher probability of the earnings delivery despite holding their nose for valuations. All right. Bob, Paul, thank you both. Thank you. Now let's turn to Senior Markets Commentator Mike Santoli for a look at the performance of cyclical stocks and what that might say about the health of the overall market, Mike? Yeah, John, this is one answer to the

criticism of the market that it has been too narrow and that it's all been about the big secular growth stocks. That's definitely true in terms of the aggregate gains and how they've been delivered. But this does show that cyclical sectors have maintained their outperformance over pure traditional defensive groups in the market. So this is one of those, you know, little things you check the box and say, OK, there's not a really worrisome macro message coming out of the sector performance, the relative trends inside the market. That said, we have had a little bit of a gut check in this relationship here. So if you look at it since the, you know, since the October lows of last year,

we're still in that channel. But we have had this run of weaker-than-expected economic numbers over the last few weeks that has taken its toll. And I'm actually in particular watching industrials, which have been this stalwart group that's been leading the market, along with semis and others, and it has flagged a little bit. Still, again, in an uptrend, but it's lost a little bit of momentum, guys. Mike, what kind of a dip would it take for that chart to show concern?

I think you'd probably if you if you went back to, you know, this sort of breakout level and broke below that, it's probably a little bit of a concern. And again, you know, some people have been pointing to consumer staples as actually performing pretty well in the first half. And maybe that's showing you that the investors are gearing for some kind of a deeper slowdown. But I was showing last week that a lot of that is Costco and Walmart, as opposed to, you know, the soap and diaper companies. So that's on net also a positive sign that it's not so much the outright defensive parts of Staples even that are starting to perform, John. All right. Bringing us back to what matters, Mike. Thanks. Thanks. After the break, a rare interview you don bringing us back to what matters. Mike, thanks. Thanks.

After the break, a rare interview you don't want to miss. Matt Garman, the new head of Amazon Web Services, joins us on a first on CNBC interview. As Amazon stock trades above $2 trillion in market cap, we're going to hear about his plans for this crucial part of Amazon's business. Plus, the CEO of Booking Holdings joins us to discuss the record-breaking travel expected to take place across America this week and his Garman in his first interview in the role. Out of the gate, he argued there's a lot more to enterprise AI than chat GPT. It's not just one application. It's not just a chat bot that you can put on your website and have talked to your customers, which is a very cool application, by the way. But many customers, if they stop there,

they're not going to get the true value out of what this technology is bringing to them. We want a set of services that'll help customers be able to build guardrails so they can build safe applications, combine multiple models together, where it's not just one model that's going to give them the best performance.

It's going to be sometimes a small model and a big model and a variety of different providers that are bringing models together. It's capabilities like associating it with your enterprise data and a RAG index so that you can make sure that you have sources of truth when you're trying to answer questions. And when we look across our customer set, it's again, it's not just chatbots. We have folks like Pfizer who are actually using generative AI to help them do drug discovery. And they estimate it saves AWS and Bedrock, which is our service that kind of helps you build these applications, save them over a billion dollars this year in going and building and finding new drugs.

Garmin's been at AWS for nearly 20 years, since pretty much the beginning of the effort. He was recruited out of business school by none other than current Amazon CEO, Andy Jassy. The pitch that Andy gave was, we're doing kind of an internal startup, and it's going to be technology-related, and I can't really tell you more than that. And to me, that sounded pretty interesting. I was like, oh, I'd love to see how a big company goes and does a startup inside of a company. And I like technology. It sounded awesome. Most of my business school classmates were kind of scared off by that.

They wanted to go work in books or sporting goods or something that was a little bit more well-known. But even there, I think Amazon, we look at hiring smart people that can go and solve problems. And so there is ambiguity in that space. We want, we kind of embrace that. We want people that are going to be curious and go learn about a space and then really focus on what is the customer problem. And I think if you're too prescriptive early on, you may not have an

open mind about what customers actually want you to go deliver. Okay. So football metaphor, where did you get that tap on the shoulder saying, okay, you know, like as a quarterback, now it's get ready to get in the game and lead the division. Yeah, well, the first so I, you know, I started out in the in the product and engineering side of Amazon, and I built many of our early services. And so that's the where that I grew up, right. And I was our effectively AWS his first product manager. And so I started there. And then I took on engineering teams and led our compute business and built some storage offerings and kind of a lot of that product and engineering side. And I did that for probably 13 years. And I led some very technical teams. I had hypervisor teams and operating systems teams and deep storage focus teams. And then one day, you know, Andy asked me into his

office said, Hey, Matt, I think you should lead our sales and marketing organization. And I literally looked over my shoulder and I was like, me? I don't know. I don't know about that. He's like, you'll be great. It'll be a good opportunity for you to go learn that space. And so I think that was one of the first times that I was like, okay. I mean, that is a good, like, if I really am going to take over for the whole organization,

that would be a very good spot for me to learn and be well-versed in. And I had a great time. I've led that organization for the last four years. I also spoke to Garmin about CNBC's report that he's been in Silicon Valley meeting with startups and sweetening the deal for them to operate on AWS. Startups are an incredibly important part of what we do. Today's startups are the enterprises of tomorrow.

They rapidly grab onto new technologies and they push us. And I think one of the things that we love at AWS and why I love working in this space is we get to learn from our customers. And it's one of the things that we do is we take that feedback. We learn where are the ways that our services can get better? What are the capabilities that people are looking for?

And startups are on that bleeding edge, right? They really want to push us and understand how we can help them move faster. And so it's a huge priority for me to spend time with those early startups to really understand. And you're right, I was fortunate enough to get to spend some time last week with some startups up in Silicon Valley. And to me, there's nothing more exciting and energizing than listening to those early startups and understanding what are the challenges they're seeing? What are the things they're most excited about, and how can we help them accelerate what their view is and go faster in there because, you know, time is money for them. The startups push you, but they also end

up pushing the bigger customers, don't they? I mean, it seems like, I mean, they're the ones who pushed on cloud, right? When the big enterprises saw, hey, these startups are going to eat my lunch if they're dealing with, you know, this cutting edge technology, they're able to get better performance, they're able to get it at better cost if we don't start adopting this, right? Isn't that part of how this works? It's part of it for sure. And I remember, you know, early on in the cloud, startups thought this was an incredible, like they didn't have to spend their VC money on building and buying infrastructure. They could just rent it by the hour. And the value proposition was incredible for them. And then it wasn't, but it wasn't just cost. They

found out that they move faster, that they could innovate more rapidly. They could take advantage of all the services that we are providing. And you're right. It was, you know, I remember early on in AWS, I went and met with a number of banks out in New York and, you know, and I got a lot of, wow, we'll never run in the cloud. And, you know, and to be honest, like the services have obviously matured over the last 15, 20 years so that there's a lot more capabilities that didn't exist back then where they might have been right back in 2007. But today, you know, there's that push. There is a feeling like, you know, a startup financial services company could push a traditional bank. There is a, you know, one of the very first companies to come out with a COVID vaccine was Moderna. It wasn't one of the big original

pharma folks. And Moderna was 100% in AWS in the cloud and it gave them a lot of that agility. We've got more coming up later in the show on what Jeff Bezos said to Garmin early in his tenure when a service he managed melted down, and how AWS is managing capital costs of AI that could top $100 billion over the course of a decade. Which, of course, is one of the things I'm really curious to hear about. I mean, it's so fascinating. There's so much there. And some of the questions that just listening to him talk raised for me was how they're thinking about pricing, how they're thinking about competitive landscape, especially when right or wrong. There seems to be this narrative out there in the market that Microsoft is really taking the lion's share of big enterprise customers, using that to grow its cloud market share and to to a lesser extent, perhaps Alphabet, and that Amazon's behind the ball. Yeah, I pushed him on that.

The quarter that Amazon just had sort of created more of a different narrative, right, because their growth was right in line with Microsoft, with Google as well. And really the tack that Garmin is taking is if you want broad choice, if you want to avoid getting locked in, if you want longer cost, good total cost of ownership, you want to be with AWS and that, you know, pretty soon people will start to see that benefit. We'll see. And we'll hear more from what he's got to say in just a little bit in the show. I am I am very curious to hear about the investment piece of this because you had Constellation Energy, which, by the way, been one of the best performers in the S&P 500 this year. You had reports that they're nearing

a deal to supply nuclear power directly to the AWS unit. And so I wonder how he's thinking about the infrastructure build out, the power needs, everything else that's going to go into this next era. Very insightful. He talks a bit about power as well. OK, that's a good tease right there. When we come back, ceo of booking holdings talks about the record-breaking summer travel happening right now in america and if the strong dollar is impacting international tourism and later roaring kitty gets into the pets business shares of chewy jumped earlier in the session after keith gill revealed a stake in the company but those gains quickly faded we're going to look how Chewy's long-term returns compared to some of its e-commerce peers.

Be right back. It's time for a CNBC News update with Pippa Stevens. Pippa. Hey, John. The Democratic National Committee is considering formally nominating Joe Biden as the party's candidate as early as mid-July. That's according to Bloomberg, which reports that the move would help ensure Biden is on the ballot in November and silence any speculation about whether he will be the party's candidate. The case of Karen Reid, who was accused of killing her Boston police officer boyfriend with her SUV and leaving him to die in 2022, has ended in a mistrial. Jurors were deadlocked following a two-month trial. Reid was charged with second-degree murder, but her lawyers argued that the police framed her. And Google will require advertisers to disclose digitally altered content in election ads.

The tech giant updated its disclosure requirements to include an in-ad notice. That's the company's latest step to battle election misinformation ahead of November. Back to you. All right, Pippa Stevens, thank you. Well, if you're heading to the airport this week for this holiday week, get ready for crowds. The TSA set a single day screening record last week and says more records could fall in the coming days. Joining us now to discuss the surge in travel and what it says about the consumer is Glenn Fogle, CEO of $130 billion online travel firm Booking Holdings. Glenn, it's great to have you back on Overtime. And let's start right there.

What are you seeing in terms of travel trends this week? What is supposed to be a record setting week? Yeah, no, absolutely. Thanks for having me. And it will be a record, record July 4th week for the U.S. Of course, we're very global, not that much of an impact elsewhere in the world, but certainly here in the States can be very crowded. And even in Europe, where you have a lot of outbound Americans going to Europe. I came back Friday night from Europe and it was crowded. Okay. So in terms of those travel trends, where are people going? What does that look like from an air travel standpoint, a hotel standpoint? Are people spending a lot of money? Are they being more cost conscious in terms of what they're booking?

Well, they're definitely spending a lot of money because prices are high, no doubt about that. And they're going to the typical places. In the U.S., we're seeing a lot of beach traffic happening. We're seeing people going to Ocean City. They want to go to Destin. They want to go to Panama City. And of course, Vegas, always popular. And right now, we're seeing a lot of searches for Las Vegas. Outside, we're seeing the usual London, Paris, Tokyo a big number right now. And I think that may be because the foreign exchange rates. I mean, I won't say it's free in Tokyo, but it's a lot cheaper than it used to be because of the power of the U.S. dollar against the Japanese yen. And then we're even seeing things like Barcelona. Barcelona is up 70 percent versus last year,

which is really remarkable. Glenn, is there any bifurcation that you're seeing in consumer behavior? We're seeing it elsewhere in the economy where the more well healed consumers are spending a lot, but then there's a mainstream consumer that's trying to spend less, that's maybe doing more car travel or staying closer to home. Are you able to pick up any signal on that or is it just all kinds of travel booming equally? Well, there's definitely a lot of travel, but I have seen industry reports that do indicate what you're saying, where the lower-priced things are not moving as fast as the luxury area. And that is that bifurcation, I think, of a two-speed economy in the U.S. right now. And so how do you expect that to pan out? Is this the sort of travel that feeds on itself and continues into next year?

Or are people still trying to get something out of their system or doing the sort of travel that they don't do every year, but do, you know, once every couple of years? Well, I think that the we used to call very, very recently revenge travel. I think that's because of the pandemic. That's kind of gone. We're into a much more normalized rate right now, but that's still very positive. You know, if you look over many decades, travel has always increased faster than GDP.

That's a little variation, of course, but that's the long-term trend, and that's the way we look at it. So yes, there may have been a little bit more travel last year or maybe the year before because people really want to get back in the travel mode from the pandemic. Now it's normal, but that's still great for us. OK, there's a lot of focus right now on what we're seeing with elections across the world this week.

It's UK in focus. It's France in focus. You've talked about geopolitics and the impact that's had specifically Middle East, I believe, on your business at Booking Holdings. Are these types of dynamics you're tracking, do they impact travel or does it really take something like a conflict for it to actually change people's patterns? Yeah, look, there's always something happening somewhere in the world and we're very global. So there's always something that's going to impact travel. Middle East, certainly an example that we called out in the last couple of earnings calls. And yes, people are always concerned when there is some type of potential threat not to travel there. There's also weather. There's a hurricane right now in the Caribbean that's going to affect

some people. There's always something happening somewhere. Because we are so global and we are a large company, the individual localized things, they can impact a little bit, but they're localized and they're usually relatively short-term and we always want to look to the long term. Glenn, do you have a sense of what's happened with the Airbnb effect or maybe to put it the other way, how strong are hotels right now or do they continue to be as a place to stay? Well, no, there's no doubt that both are very powerful, whether it's the homes area, which we are very strong in, or the hotel, which we're also strong in. We're the only company that really does both at scale. It's something

that I think that because there's so much travel, it's fortunate that there are homes for people to go to. Otherwise, the hotel prices would be that much higher. You know, I called out in our last call how our homes area, that's just the homes area, we're two-thirds the size of Airbnb. And our growth rate has increased faster than Airbnb's over the last 11 out of the last 12 quarters. So we're doing very well in the homes area, but we're also doing well in the hotel area. And I am glad that there are enough places to stay so that while prices are high, they're not higher than they otherwise would be. So Booking Holdings closed at $3,884.88 a share today. In a year where we're seeing this big trend across industries for stock splits and the appetite to lure more retail investors with them, are you thinking about it?

Well, look, we're always evaluating every way we think that we can best do what's good for our investors and what's good for all of our stakeholders. I will, again, I always point out that just because you slice up the pie and more slices does not make a bigger pie. But that doesn't mean that we wouldn't always look at it. If we think it's advantageous, we'll do it. But right now, we have not announced anything. Okay. Glenn Fogle of Booking Holdings, thanks for joining us. Thanks for having me. Happy Fourth of July week. Well, after the break, Mike Santoli looks at Roaring Kitty's latest move into online pet supply retailer Chewy and how the stock has stacked up versus other e-commerce names.

And much more from my interview with AWS CEO Matt Garman, including what he said about a reported $100 billion capital spend on data centers over the next 10 years. We'll be right back. welcome back shares of chewy ending the day in the red despite this morning's rally that was prompted by roaring kitty an sec filing showed the meme stock trader bought nine million shares of chewy which amounts to a 6.6 percent stake in the company. Mike Santoli is back. He's taking a look at the e-commerce darling's performance compared to its peers. You're chewing on it. What do you find? Morgan, absolutely. And, you know, the roaring kitty news, his involvement in the stock has created a little bit of a tail on the back end of this chart for Chewy. I bundled them together now. DoorDash, Airbnb, Uber, of course, been public for longer. But the reason is that moment in early 2021 when the whole game was huge total addressable market,

e-commerce approach, just get new users, new subscribers on the platform. Don't worry about profits. Just get top line growth. That was this period here. And then kind of this long period of maybe disillusionment or figuring out whether indeed the business models were going to scale, were going to work. And you've seen some of them pull out of here. Obviously, Airbnb, sort of the incumbent in its own space. And then DoorDash has also actually started to perform a little bit, too. And these are really, you know, arguably kind of these long bases there. So Chewy, you know, is a long way to go before it gets anywhere near those prior highs.

We have no idea if there's any plan associated with this new stake by Roaring Kitty. But I do think the market is starting to reward the companies in this area that can demonstrably say we have a path to free cash flow on a sustainable basis. Okay. This is an interesting chart, but I'd be curious how Chewy is performing against, say, some of its pet peers. You look at a Petco, which is now a billion-dollar company. I mean, that stock has done nothing but go down in recent years. And you can argue that we've seen this pull forward in pet demand from the pandemic. Maybe it's petering out. No, there's no doubt about it that Chewy is genuinely disruptive and obviously is now, you know, almost the default in terms of a provider in this area. So I don't think there's a lot of questioning of whether, you know, Chewy's here to

stay. For example, it's much more about whether the math is going to start to work in their favor. You know, they ship lots of heavy stuff to a lot of people every month and maybe they don't have as much pricing power. But obviously, there's a certain number in terms of scale of customers where you can make it work. All right. Well, my cat, Opal, doesn't roar, but she likes Chewy. However, Roaring Kitty put the stock in the litter box today. I'm sure that wasn't on purpose. Deep effing value. Yes, there you go. Up next, much more of our first on CNBC interview with Amazon Web Services CEO Matt Garman. Find out what he says about AWS's eye-popping capital costs in the AI era.

And shares of the cruise line operators among the biggest losers in the S&P 500 today as Hurricane Beryl hits Grenada and forces those companies to alter itineraries. Welcome back. I spoke this afternoon with Matt Garman, the new CEO of AWS, in his first interview in the role. He told me about a formative moment early in his time at Amazon where one of the AWS services he ran failed, taking down several big customers for days, and Jeff Bezos and others helped him through it. I didn't sleep for about three days, just really focused on getting everything back up and running and help customers because their businesses were, you know, they were stuck. And obviously, that was a question of like, well, see if I'm going to make it out of this with a job or not. But either way, I'm going to make sure that the service is back up and running first. Who coached you through that? Actually, it was Andy, it was Jeff. Charlie Bell was very instrumental in that as well.

But yeah, actually, Jeff got us together. And we're like, Oh, is this the end of AWS? And he's like, Look, if you guys, if you respond the right way, if you do the right things, like you guys have a great technology, mistakes are going to happen. And and you'll be okay. And I think that kind of calming coaching was was super valuable at the time where, you know, I was new to Amazon AWS and I didn't know what to expect from that. But I think that everyone there, you know, they had seen various degrees of that before in different settings. And so a lot of that coaching was super helpful. Now Amazon's embarking on a capital spending push to support AI in the data center. The Wall Street Journal saying the bill could top

$100 billion over a decade. There's a lot of capital costs going in and building a cloud, and we've been at this for a while, and we've gotten quite good at managing those capital costs and thinking about how are we efficient in acquiring power, building data centers, making sure that we have enough servers. And, you know, the industry is tight on many of those dimensions today, but I think that part of where we get a benefit is that we've spent a lot of time thinking about that. And I've been thinking about it at a scale that others haven't so far. And so we have teams who think about three, five, seven years down the road, what are our power footprints going to need? How do we make sure that we have enough? And, and, and the volumes

are getting to be such that, that that's the thing that are getting to be such that that's a thing that we need to think about. It's not just that the municipalities will be able to provide power. We have to think about how do we get power and how do we get power in a sustainable way, right? AWS and Amazon overall has been the largest purchaser of renewable energy for the last several years in the world because we focus on how do we think ahead? And right, those projects take many years to come online. But we've been thinking about this for some time as to how do we make sure that we have sustainable sources of power, so that we can build data centers around them and support the needs of customers. We think about the same with regard

to supply chain, we think about the same with regards to working with many of our partners, we think about memory, we think about storage, we think about processors, we think about networking. All of those pieces are super important for us so that customers don't have to worry about it. Like our goal is that customers never have to worry about those pieces. And look, today the industry is more constrained than we would like with regards to GPUs and accelerated computing. And I think the industry, you know, it's the ramp up, I think, caught everyone by surprise in a positive way. But there's lots of capital involved

in that whole value creation, right? The fabs are expensive to go build. There's a lot of pieces in there that the whole industry is working on ramping up. There's a lot more, 50 minutes total. You can catch the entire interview by scanning that QR code on your screen, following us on LinkedIn,

where we're going to post this right after the show and tons of other exclusive content. Well, let's bring in Rohit Kalkarni. He's Senior Internet Analyst at Roth MKM Capital Partners, and has a buy rating, a $210 price target on Amazon. It is his top mega cap idea. Rohit, what do you think about Matt Garman, what he's saying coming in, and do you buy the idea that they're not behind in AI right now? Matt Garman is at a spot where he needs to prove out that AWS, the leader in cloud, can maintain the leadership in AI in the next three to five years. 23 was a year when investors didn't believe that that could happen.

The 24 has gotten off to a start where investors and the narrative is starting to slowly shift in the favor of Amazon, where accelerating AWS growth, a hundred billion dollar ARR company is helping Matt Garman shift that narrative in his way that, look, we built the best stack for internet and we can build the best tech stack for AI. Whether they can do that over the next three to five years remains to be seen. The competition is much tougher this time around. Microsoft is opening

in its wings. So we shall see. But I think they're playing catch up. And so far, what we're hearing is very encouraging. And that's why Amazon is our top idea for second half. Aside from raw revenue growth, what are the metrics investors should watch to check on whether that's happening? Revenue growth and just the dispersion between the revenue growth that Amazon is showing versus what Microsoft and Google would be demonstrating over the next couple of quarters. Also each of these companies have their own flavor of showing what the future revenues could look like. Is it performance obligations? Is it commitments? And all those kinds of things. Amazon has been doing a lot better in the last six months versus peers. That's a great leading indicator.

RPO, revenue performance obligation. That's a positive sign. And finally, anecdotes around AI wins versus other companies. I think they talk about Pfizer. They talk about self-driving cars. They talk about some other anecdotes here and there. But I think just better disclosure about how much AI native workload is coming to AWS versus just the recovery from almost a mini IT spending recession that we had during 22 and 23. So, I mean, we're focused on this interview and Garmin specifically today,

but this month also marks the three-year anniversary of Andy Jassy taking the helm from Jeff Bezos. The stock had hit a record high just before or just as that was happening. And then it petered out from there. It had raised some questions initially around what Jassy's tenure would look like, how long it would last. The fact that we've just had this blistering rally from $1 to $2 trillion in a matter of weeks, how much further can it run? How much of this is AWS versus what we're seeing in e-commerce, what we're seeing in advertising, what we're seeing with cost controls

continuing to boost profit margins? I think it's all of the above. I think it's, there were two biggest questions coming into 24 for Amazon. Can they provide accelerating growth in AWS? Yes, they did. And second biggest question was, can they demonstrate a rising profitability

in both North America and international retail? Yes, they did. And we are approaching probably record high margins in retail in the next six to nine months. That's what is something that investors strongly believe who are bullish in Amazon, that retail profitability is going to help go beyond what we even saw in 2018-19 levels.

So that's a fundamental restructuring of the business that Andy Jassy has kind of orchestrated and that is going to help the stock. While doing that, AWS narrative is slowly shifting in their favor so both both the pillars in Amazon's kind of growth engine are starting to fire while they're outperforming on advertising while they are including new layers of growth like supply chain as a service healthcare related new things so so Amazon is coming together unlike what we saw in 22 and 23. And so that's why we like it over the next, not just six months, but probably into 25. Yeah. So with Wall Street Journal reporting up to $100 billion over the next 10 years on data centers, you've got Garmin

acknowledging that there's going to be costs, there's going to be investment associated with this rollout for Amazon. Do those numbers worry you at all? Is there a point at which you would say, wait a second, wait a second, return on investment here is very, very questionable. Why is this taking so long? Why is it so much money? I think the investor narrative is just like, okay, I think everybody's spending on data centers and AI-related infrastructure. Facebook is spending, Microsoft is spending, Google is spending. I think Amazon has this kind of curious little retail business that they can hide some of the capex under. By that what I mean is they can slow down retail while they accelerate

AI spend in AWS. Other companies don't have that cushion. So the optics, when it comes to investors' kind of comparative analysis between which of the big four are spending the most and which of the big four have the worst optics, Amazon has actually the best optics when it comes to CapEx spend over the next couple of years. And probably that puts them at a much more favorable position, comparatively speaking. But yes, it's going to be very, very expensive and we don't know where the expenses end. Okay. Raheet Kulkarni, thanks for joining us. Thank you. We have a news alert on GE Aerospace and Phil LeBeau has the details for us. Hi, Phil. Morgan, GE Aerospace announcing that chairman and CEO Larry Culp has extended his employment contract with

the company through December 31st of 2027 and actually could extend a fourth year into 2028. Basically going to be paid roughly the same as to what he is paid right now, though all of his pay over the last several years has been strictly performance-based. That is going to shift under the new terms of the agreement, including a $2 million annual base salary. There will be an annual equity grant of potentially worth $15.5 million and a one-time grant payment that we haven't calculated exactly what the total value of that will be. But this is essentially GE Aerospace saying, Larry Culp, you brought us back from the edge and we are going to make sure that you stay here. We're pleased with the performance

of GE Aerospace and they have locked them in. As you guys know, there's been a lot of discussion that Boeing would make a run at Larry Culp, even though he has told me, he has told others, he is happy at GE Aerospace. He is now locked into a contract through the end of 2027. Guys, back to you. Exactly. Perhaps not surprising given the enthusiasm he has expressed for now getting to run GE Aerospace as a sole source aerospace and defense provider, which we know has been years in the making. All right, Phil, thank you. Up next, why the first round of results of the parliamentary elections in France could have a big impact on your portfolio in the U.S. And shares of Chinese EV maker NIO are surging after announcing June deliveries nearly doubled from a year ago.

Overtime will be right back. Welcome back to Overtime. The first round of France's election is in the books. It's having a big impact on global markets. And Seema Modi has all the details for us. Hi, Seema. Hey, Morgan. The first round results point to far-right leader Marie Le Pen's party winning but lacking an absolute majority.

And Wall Street is trying to game out what this scenario could mean for the broader market. Goldman Sachs' Johnny Fine tells CNBC a hung parliament will spark a rally in French bonds. We did see spreads tighten a bit today, but then reversed. French stocks higher, pairing gains towards a close. Le Pen has pledged to claw back clean energy policies, and that seems to be priced in. We saw oil and gas producers in France, as well as construction company stocks end higher on the day. The euro rising to 107 against the dollar, the highest in two weeks. In a hung parliament scenario, Le Pen would be in charge of domestic affairs and the budget,

while Macron would potentially set foreign policy. However, strategists at Jefferies, they warned that Le Pen and her party have both signaled in the past that they would challenge the president's authority on defense and foreign policy, which they say will likely alarm global allies as well as markets. Perhaps why portfolio managers at J.P. Morgan, among others we spoke to, are taking a more defensive tilt towards European stocks. Since the start of June, you'll see Europe and French stocks in general have underperformed global markets, including the U.S., guys. All right. So I get that we saw this rallying in French assets because the National Party does not seem to be getting an absolute majority. How much is this next round of elections that come up on Sunday going to matter? Or does this really sort of give us the blueprint

for what to expect? Yeah, it's a great point, Morgan. In fact, many of the portfolio managers we spoke to today say don't put too much into these first round results because the second round is when we'll get the definitive answer as to what this government scenario will look like. So we really have to wait till the results come out this time next week. In the meantime, many investors say they're sort of using a wait and see approach and watching these intraday moves to see how investors are positioning themselves. We also get the Eurozone inflation data, which will likely have a broader effect as well.

And that's tomorrow, Morgan. All right, Seema, thanks. Now, key readings on the labor market and consumer spending could be big market movers tomorrow. Details straight ahead. Welcome back to Overtime. Investors will closely watch a pair of key economic reports tomorrow. The May job openings and labor turnover survey, JOLTS, and the June auto sales report. Also tomorrow, the ECB forum in Sintra, Portugal.

Our Sarah Eisen is there. And you can watch her conversation with ECB President Lagarde, Fed Chair Powell, and the head of Brazil's central bank. That's tomorrow on Squawk on the Street. Boy, what else do you want? Yeah, it's going to be one to watch, particularly Powell. That's in focus because we are seeing this wave of global central bank easing. We know the Fed continues to hold steady, so comments that he makes, especially in a week where we get jobs data, is going to matter.

Matt Maley at Miller-Tabak basically says, yeah, it's a holiday-shortened week. There's not a lot of liquidity. There's not a lot of volume to this market. But that politics, and we got some of that today with the SCOTUS decision, the jobs data and actually FX market volatility all could have an outsized impact because of that. We talked about the yen versus the dollar earlier with Glenn Fogle. but obviously what's going on with the euro with elections there matters too. And as all of this happens, mega caps largely continue to run, including Amazon, which is being powered higher largely by AWS. And we'll see if that continues. Yeah, big tech largely leading the way here, at least in afternoon trading,

although Nvidia a little bit of a drag. Nonetheless, a new record closing high for the Nasdaq. That's going to do it for us here at Overtime. Fast money starts now.