Closing Bell - Closing Bell Overtime: Nvidia Crushes Expectations…Again; What You Should Do With The Stock Now 8/23/23

Episode Date: August 23, 2023

Another blowout quarter from Nvidia is sending the stock jumping higher in after hours. Bernstein analyst Stacy Rasgon, Main Street Research CIO and shareholder James Demmert and AI Squared CEO Benjamin Harvey break down the numbers and how investors should react. JPMorgan’s Phil camporeale and Madrona Venture Group’s Matt McIlwain talk the broader market action. Earnings from Snowflake, Splunk and Autodesk. Plus, Jason Furman looks ahead to Jackson Hole.

Well, that was a strong day on Wall Street and Winner Stay Late. Welcome to Closing Bell Overtime. I'm John Fort. Morgan Brennan is off today, and this is the moment Wall Street has been waiting for. NVIDIA's second quarter earnings report is just minutes away. One expert this week called it the single most important print of the entire year. And for good reason. NVIDIA has been the poster child of the AI-driven tech gains,

propelling the stock above a $1 trillion market cap this year. And it's seen some huge moves after earnings this year. After Q4 results in February, the stock jumped 14%. And after May's earnings report, it spiked nearly 25%. And you can see it's kept running since then. Today's options implied move is plus or minus around 10%. And boy, the guidance expectations are high.

We've got full team coverage ready to break down the results as soon as they cross. And as we await NVIDIA earnings and numbers from Snowflake and Autodesk, let's bring in our market panel. Joining us now, Phil Camparelli of J.P. Morgan Asset Management and Matt McElwain of Madrona Venture Group. Guys, welcome. Phil, yields backed off today with the 10-year below, I think it was 4.2 percent, and stocks ran. So does that, I mean, it seems like it raises the bar for tech results tonight. What do you think? Yeah, John, huge exhale today because investors were absolutely paralyzed by the last 50 basis point move in rates. And it brought up all of those bad memories from 2022 when instead of stocks and bonds being negatively correlated and providing

diversification, we were in this world where bonds were the problem for the last few weeks. Now, today, what we're seeing is and what we believe is this is a story still about disinflation. This is not a story about above trend growth. I think on Friday, I think Friday at 10 a.m. is a little bit more interesting than NVIDIA results, personally, because Jerome Powell is going to choose, you know, one of two roads. The one road is going to be we're close to done, maybe not done, but we're close to done. We're going to keep rates up here,

but we're going to be data dependent. Or the second road, which investors would not like, would be if him and the committee were nervous about this latest run-up in growth, Atlanta Fed, and hinted at additional multiple hikes. We think that the probability of that is lower than the disinflationary story, and we think that's still a very compelling backdrop

for both stocks and bonds in the near term, John. Okay, Matt, the whisper numbers that I've been seeing on Nvidia's guide for the current quarter, around 14 and a half billion dollars, which I think is like 2x what they did last quarter before, you know, they guided to what we're expecting now. I mean, how much, how out of this world is that expectation? Does it flip on its head the big outperformance that we got in the guidance versus expectations three months ago?

Well, that is the risk. It's an expectation game. And I'm actually more interested in the Nvidia earnings. We'll see what the folks do on Friday. The reason it's so important is because Nvidia is the leading edge of the curve of what's happening in AI. And it's only the beginning because they're really still primarily focused on training models versus inference of models or running these models. And there's so many things that NVIDIA can do in that area. And we'll see how much demand that they've generated so far and what the more importantly, the guide's going to be for Q3. So I think it's really critical to look at the guide. And then you can look through to things like Snowflake, which is also about to come out with earnings. I think the Snowflake trick is the

balance between optimization that's been going on for the last four quarters and the future of new workloads like these AI-driven workloads. Here's one stat. There are 100 exabytes. That means 100 million terabytes of unstructured data sitting on premise still today. A lot of that data is going to move to the cloud. It's going to move to places like Snowflake that are trying to be relevant as not just a data warehouse, but a data modeling system for AI workloads. So it's so much opportunity. We've got data moving right now on earnings. Autodesk earnings are out. That stock popping after hours.

Kate Rooney has the numbers. Kate. Hey, John. So it looks like a beat here on earnings and revenue here for Autodesk. Let's start with that EPS number, $1.91 adjusted. That was better than expected. Street was looking for $1.73 there on EPS. Revenue coming in stronger than expected as well, $1.35 billion.

That was up 9% year over year. Better than the street was looking for at 1.3.32 billion. Also looking like Q3 revenue and EPS guidance is better than expected. And as well here, it looks like in the release, they're raising the lower end of their guidance ranges, which is why you likely see the stock popping more than 6% here after hours. Back to you, John. Yeah, Kate, thank you. And I know they've made some accounting changes that have the street nervous over the past couple of quarters, and perhaps that's starting to get

digested now. Phil, given this pop that we're seeing after hours, after a strong day for the NASDAQ and tech stocks overall, how much are you going to read into how that sets us up? Surely we've got Jackson Hole at the end of the week, but for what to do portfolio adjustment-wise the rest of the summer? Yeah, John, we're not underweight stocks here, okay? I think if the economy avoids recession, which we expect that it will, we only have a 20% chance of recession over the next six to nine months, combined with a Fed that can actually pause interest rate hikes, we expect that it will. We only have a 20% chance of recession over the next six to nine months.

Combined with a Fed that can actually pause interest rate hikes, I think that's a really supportive environment for stocks. So we don't want to be underweight. But there is a really important opportunity, John, which we've spoken about before that remains in the front end of the U.S. yield curve, where we can get about 8% in yield, in high quality, high yield, which looks exactly like the long-term capital market assumption for stocks, but with less risk. So again, we don't want to be underweight stocks. I think that would be a mistake in a world where the U.S. economy avoids recession, but we are looking for better ways for risk-adjusted return, and the yield play is really important there. And as far as the tech story goes, John, this is all the same story. If we continue to march higher in rates or multiple hikes have to happen, I don't care what the name of your stock is in tech, you're going to face some pressure

as multiples contract and yields march higher. So it's all the same macro backdrop. And I'm telling you, the 10 o'clock story on Friday, John, is where all the action is. Well, maybe not all the action. We've got a lot of action happening right now, including Snowflake's numbers starting to cross. We will bring you those as soon as we have gone through them. Matt, you were talking about Snowflake before. And speaking of a stock where there's been some chop post earnings, the consumption model here and the kind of quick reaction that you're able to see in what enterprise demand looks like and how companies are trying to save money. That's sort of an interesting trend when you put it up against AI, where I have heard about

concerns that people are stockpiling chips. It's really hard in some cases to tell what the real demand on the ground is, And it's really easy in some others, right? Well, you're exactly right, because it goes chips and then data and then models and then apps. And Snowflake is in the data, data management. And they traditionally have been a data warehouse and not an AI data modeling business either. So on the one hand, they've got this headwind where consumption has slowed down. Some of their big enterprise customers are saying, we've got to optimize our spend with Snowflake. But all of these customers, and we just did a survey, over 400 recent earnings reports,

on average, six times in every one of those, whether it's a tech company or a non-tech company, they're mentioning AI six times in their Q2 earnings. Everybody's talking about it. It's the very early days. Clearly, NVIDIA is out ahead, but Snowflake is going to have a tailwind of a whole bunch of that business, whether it shows up in this quarter or not, because the optimization means in a consumption model that you don't actually use, so that you therefore can't recognize the revenues as quickly as you might have otherwise thought the company was going to do so. That's a headwind. That's going to take some time to work itself out. But the AI tailwind will build quarter after quarter going forward here. I think Snowflake will be a beneficiary of that. And look at that company with only being 15%

up this year compared to the Nasdaq and a lot of the other tech stocks and metrics. Well, those numbers are out. The stock at at least initially, moving down at the moment. Let's get to Kate Rooney with the numbers. Kate. Beat here for Snowflake in Q2. Starting with EPS, this is the adjusted number, 22 cents on EPS, about 12 cents better than expected. On revenue, also beat $674 million for the quarter. That was up 36 percent year over year. Stronger than expected there. Product revenue for the quarter. That was up 36% year over year. Stronger than expected there. Product revenue for the quarter, $640 million or so. That was up 37% year over year. And then product revenue guidance. This is a key area. It looks like it's in line here, $670 to $675 million. Street was looking for $675 million, so slightly lower in terms of the revenue guidance on products for Q3.

Also, a quote here from Frank Slootman talks about enterprises and institutions being increasingly aware that they can't have an AI strategy without a data strategy. And so mentioning AI there, but again, stock down here. Slight miss on that product revenue, though. John, back to you. Yeah, the midpoint a bit below consensus, but the consumption trends here are going to be important. Kate, thank you. Let's see. Do we still have Phil and Matt or are we moving on?

We still got Phil and Matt. Matt, I want to go to you on the reaction here because I know Phil's really excited about Friday and Jackson Hole software results. When it comes to what investors need to pay attention to on the snowflake call, I'll be speaking to Frank Slootman actually after that call for even more detail. But the consumption trends, not just for the quarter, but longer term and the remaining performance obligations, how should investors parse that as they try to understand what's happening here with the data and the demand? I think the change in RPO, so calculated RPO, will be very important to see of what people are signing up to spend later. My read on what we just heard on those numbers is this is a stabilization quarter,

and there's probably some conservative guidance into Q3 of how much more of this optimization is going to happen. And they'd rather not, they'd rather be able to have another beat in Q3. And I think the other question to ask Frank is, you know, ask him for some specific AI use cases that are showing the way that Snowflake can be relevant in the very early days of data and data modeling of next generation generative AI apps and services. Yeah, it looks like remaining performance obligations for Snowflake coming in at $3.5 billion, which is about in line with expectations, 30% year-over-year growth. Phil, I won't leave you out, though, because all of this is still setting us up for

Jackson Hole at the end of the week, right? So once we get done with this tech stuff, we got to look more broadly. What would a surprise constitute for you or particular details that we need to listen for as investors? A surprise would be, John, listen, they expect one more hike. That's either going to be in September and November. That's what they told us in June. A surprise would be that if they increase that amount or explicitly point to the fact that they really need to get growth back to below trend to have any chance of controlling inflation. That's just not the case, John. Inflation has fallen.

It's working, right? We have a very good labor market. Things are okay. So that would be a surprise. And just real quick on kind of the macro theme from AI. Listen, if it creates productivity over the next couple of years, which we expect it would, that's a really good US story for some of these companies,

or from a GDP perspective, where trend growth could be a little bit higher than what was originally expected, John. So I don't want to completely ignore what's happening over there. You said it another way. But for more, it's more of a structural story than a tactical story. Said another way, and I tie it to Friday as well. The deflationary impact of innovation and AI-driven innovation, all these co-pilots, is to be a big upside and you could have deflationary impact as well as growth. We've done surveying, we've seen surveying of some of the early price

points that the Microsofts and Salesforce's and others are putting out there for their AI enhancements, like 30 bucks per user per month. And people are saying, we're getting a lot of value out of this. So there's both going to be deflationary effects and there's going to be revenue growth and upside for a lot of these companies that can deliver compelling gen AI apps. Let's see if those deflationary impacts and the interest rate impacts trying to slow things, if those are working fast enough when it comes to inflation. Phil, Matt, thank you. John, the answer is the 60-40. You know it. We talked about it before. I'm with you. Investors need to be aware, even though they've forgotten those numbers over the past decade, apparently.

Good to see you guys. Speaking of data, Splunk earnings are out. That stock is spiking. Bertha Coombs has those numbers. Bertha? That's right, John. The company beating on both the top and the bottom line, reporting adjusted earnings of 71 cents a share. The street was looking for 45 cents on revenues of 911 million versus an estimate of

886 million. Gary Steele, the CEO, says second quarter represents a strong quarter of growth, execution, operating leverage. We generated 16 percent annual recurring revenue growth as we reduce our non-gap operating expenses by 3% year over year. They actually saw a doubling, a 111% increase, or a 111 increase in the number of customers that have annual recurring revenue of a million dollars. They are boosting their third quarter guidance to $1.02 billion to $1.035 billion in revenue. The street had them at $981.3 billion. They are also boosting the numbers for full year. Their efficiency apparently paying off here, John.

All right, yeah, that stock spiking better than 7% after hours, which if it stays there would take it back to the levels at the beginning of August. Bertha, thanks. Let's bring in now Senior Markets Commentator Michael Santoli to talk about NVIDIA, which we expect in just minutes. Mike? Yeah, John, just to talk about NVIDIA, which we expect in just minutes. Mike? Yeah, John, just to pan out a little bit, a lot of talk about how NVIDIA has replaced Tesla as kind of the favorite sort of secular growth mega cap plaything of some short-term speculators.

Going back to the end of 2019, that basically takes you right before the COVID sort of digital acceleration, secular growth enthusiasm moment. You see that NVIDIA has really caught up. Not quite exactly, but on this bigger chart with those types of gains, it looks pretty close. Tesla's still slightly ahead. And you see the NASDAQ 100, it's gone up 10x more than the NASDAQ 100, which itself has beaten the market.

So really a class of two. And right now, Tesla no longer above a trillion dollars, but we know that NVIDIA is around $1.1 trillion, 3% of the S&P 500, also with the charismatic CEO. A lot of the same attributes that Tesla had right around there. So we'll see if it can kind of last for a while. But on a valuation side, interestingly, Tesla screens out as more expensive on a 12-month forward PE basis.

Why? Because NVIDIA earnings estimates have been racing higher over the last couple of quarters, especially in the last three months, whereas Tesla has had its earnings estimates cut pretty dramatically, actually, as they've been slicing into their sale prices and also some volume considerations. So it's still a, you know, 40-plus P.E. on NVIDIA right now based on 12 months forward on next year's earnings. It's basically like 35 ish or 30, whereas you're up above 50 again for Tesla. And again, I throw the Nasdaq 100 in there at 24 times. So clearly a lot of eggs in these baskets for proving that it can have growth independent of what's happening in the rest of the market in the economy. John, a lot of expensive eggs, Mike. Thanks. And yeah, the final countdown is on.

We are expecting NVIDIA earnings to come out in just minutes. Team standing by to bring you the results and real-time analysis. We're going to pay some bills right now. Overtime's back in two. Welcome back. The investing world is waiting with bated breath for those second quarter numbers from NVIDIA. Do out any moment now. And joining us now, Stacey Raskin, Bernstein Senior Analyst, who has an outperform rating on the stock,

and James Demert, Main Street Research CIO and an NVIDIA shareholder. Stacey, the guidance is what I'm focused on here. I mean, we assume they're going to meet or beat their number they expected for the quarter we just expect to see. But how strong is this going to be? The whisper number is like above $14.5 billion. Realistic? Yeah, maybe. I think right now they're going to sell everything that they can make. So in the near term, supply, I think, is going to be the big driver, especially on the data center side. Yeah, I do think the whisper numbers are probably $14 billion plus and probably $10 billion for the guide for data center. If the supply is there, they will be able to sell that. I think the demand is there at least.

Okay, James, how much are investors going to care about the supply versus the demand? I think they are going to care, but I think Stacey's right. I mean, you know, this is a good problem to have. Demand is not a problem for what we call the superhero of AI and, you know, sort of leading this technological sort of transformation that's probably got legs that's going to go on for years. So they've got demand for sure. The question is, are they getting enough parts and pieces from Taiwan Semi and so on? So I'm very interested to hear Jensen talk on the call about supply chain issues. Stacey, it seems to me that this is one where you really do need to pay attention to the call

versus just the initial numbers or even the initial guidance, because I wonder how durable is this demand? How much stockpiling is going on? Do you think NVIDIA has a true sense of that? These data centers got longer lead times and more visibility probably than gaming did so they probably got visibility actually for a few quarters but as we get into next year clearly that is the question is this like a new baseline for growth or is it you know panic buying and pull forward right um and we'll see what they have to say in terms of uh both the supply and demand as we get to next

year to get some gauge of that i'll mention I'm starting to see those numbers cross. We will bring them to you as soon as we've got them solid. For now, James, how important is it in this commentary to hear about the partnerships that NVIDIA continues to forge to try to build an ecosystem and a moat around the AI strategy as AMD, even Intel, some others are trying to break in. Hold on. Got those numbers. Now, Christina Parks-Nevillis has them. Christina? Wow. We're talking about revenues of $13.5 billion, beating the $11 billion estimated.

Sorry, the reaction was quite enthusiastic. EPS of $2.70. The street was estimating $2.09. We're talking about Q3 guidance. This is where everyone wants to see what was materializing for all of this AI hype. $16 billion. The street was anticipating $12 billion. So $16 billion.

From the report, we're just also seeing data center revenue coming in, too, at $10.3 billion. Estimate was $8 billion. $10.3. You can see the stock jumping 5%. John? Yeah, I mean, wow is appropriate. This reminds me of a quarter from Apple. I know, but I shouldn't show emotion, right?

Because I'm reporting the news. I mean, it's a wow moment. I remember a quarter from Apple about 10 years ago that was similar in that wow sense when people are first beginning to realize the full impact of the iPhone. James, the stock is up at least 5% so far on these numbers, $16 billion on the guide. That's the number that I can't stop looking at here. What do you want to know about that? It's a superhero number.

I mean, they have got the lead. And yes, there'll be room for AMD and everybody else later on. But they've got just such a lead. And we're excited to listen to the call and sort of see where the revenue is coming from. And I think Stacey had mentioned a couple of those sectors, which, you know, again, that comes to our attention. But here again, you know, this is a company that you got to own, you know, in this new tech bull market is what we look at it as. And this is the leader. I mean, Stacey, 13 and a half billion, up 88 percent from Q1, a little more than doubling from a year ago. So, I mean, if you were just expecting them to meet the guide, you got upside surprised, not even getting to the guidance for next quarter, for the current quarter. Yeah, so

look, nobody was expecting them to just meet the guidance, and so they blew that away. Look, people were hoping for at least $10 billion on data center on the guide. They did more than $10 billion in the quarter. With a $16 billion revenue guide, that's got to suggest data center next quarter, 12.5 to 13, just given the rough magnitudes of the other segments. That's a very, very powerful guide. It looks like the demand is there.

It looks like the supply is starting to show up as well. So this looks really good. Christina Partsenevelis still with us. Anything else? Yeah, I was- I mean, once the shock wears off, looking through the numbers- I know, my reaction right away,

this is in real time, but the adjusted gross margins, looking through the numbers, what else do you see? I know. My reaction right away, this is in real time. But the adjusted gross margins also stands out to me at 70%. When you compare that to Intel with its latest quarter, their adjusted gross margin, which is a measure of profitability, was at 40%. So you have 70% versus 40%. And 71. 71, okay. And then I'm seeing also here from my producer, there's a $25 billion buyback also that is in store here. So I just got to go through that to get you more information regarding that. I mean, that margin point says a lot.

I mean, Intel's hoping, Stacey, to get back to the 60% margin range. They've got fabs that are underutilized. That's an issue for them as well as they're just behind in the technology, though we expect some announcements from them next month where they hope to make the case of catching up. But even if you're not just talking about Intel, even if you're talking about AMD, what position does this put the competition in? Intel, AMD, even Amazon and the hyperscalers who are trying to argue that their AI capabilities from a value perspective are gonna allow them to stand up against Nvidia? Well, I mean, clearly, nobody's having a problem

paying the prices that Nvidia is charging for these parts. Now, you could argue that the competition isn't there yet, but I mean, nobody's gonna be putting this much infrastructure in place if there was no value to do it, right? And so clearly there's value here. I don't know what it means for the others. They're quite a bit farther behind. Now, you could argue that maybe the opportunity itself

is large enough that even if they just get the dregs, it's big enough for the others. Maybe that's true. But even if the opportunity is that big, this is the one I'd want to own. I think of all of them. Christina, you got more? Yeah. So two points so that the board of directors approved an additional twenty five billion in share repurchases without expiration. And they plan to continue with these buybacks later this year. The other point, too, I wanted to make was gaming, contributing about 24 percent, 25 percent of total revenue. Gaming came in at $2.49 billion. The street was anticipating $2.38. So that category, we can't discount it. I know it's all about AI, but it's still coming out strong despite some weakness that we saw from other players. Yeah, it's kind of like the Mac

line in Apple's report. I mean, the iPhone is driving it, but you can remember that older core business as well. James, to what degree do those other businesses matter in this report, or is investor attention going to be really focused on data center, on AI, perhaps on hyperscaler buying patterns? I think those are the businesses that matter to investors. I mean, that's really where the lead is. I mean, the others are important, but those are the businesses that are going to matter the most. And I think these numbers, these superhero numbers, are going to alleviate a lot of investors from the biggest problem they've had of buying the stock, which is valuation. Everybody says, oh, gosh, it's too expensive. Well, these numbers clearly show us that kind of growth rate, that kind of demand, PE versus growth, it still makes

sense to own the company here. And it is the leader, and it will be a while before anybody can take market share of any significance. So it is a stock to own. Interesting point, Stacey. We just had someone on yesterday talking about it being unrealistic or, you know, NVIDIA being uninvestable at the valuation levels where it is now. But I know that you've said that in a way, as the stock keeps going higher over the years, NVIDIA keeps getting cheaper because you got to keep changing that denominator when you're calculating this out. So what kind of an argument do you think Jensen's going to make about this being, yes, a chip company, but also more than that? What kind of

platform and partnership moves are becoming part of this story that perhaps investors would need to believe in to stay bullish? I mean, so look, to stay bullish, you need to believe that the numbers are going up. And I told this story last time, but we launched on it in 2017, and it was 50 times earnings, and it wasn't. It was actually incredibly cheap because the E in the price to pour earnings was wrong, right? And it still looks like it's wrong. The stock is not nearly, it's not expensive, frankly, if you sort of extrapolate where these numbers are going to go.

Jensen's going to have to give people some confidence that this is early and that this is the new sort of trajectory that we can be on. But we are early, right? And I can't imagine that anybody's going to walk off of this call thinking to themselves, boy, this AI opportunity is smaller than I thought it was going into it. We're not going to have that impression from Jensen like once he's done tonight. Stacey, I just want to mention one thing. Think about the customer base that NVIDIA has. These are companies with tons of cash on their balance sheet, and it's a race to win

the AI war, whether it's Google, Meta, whatever you want to look at, there's a tremendous amount of cash going towards the superhero, the only game in town. So this thing's got legs. Okay, and I want to note, Christina, that this was a strong day for the NASDAQ already. I think NVIDIA was up 2-ish percent already. I'm looking at other AI names. Supermicro was up 7.5 percent during the regular session. It's now up 4.5 percent after hours, seemingly in sympathy with these NVIDIA numbers.

AMD is up just a couple percent or so. It's up less. But it seems like there's a broader story even than NVIDIA here for this AI trade, perhaps. What stocks are you watching as you watch that AI trade? Well, if we can bring up Taiwan Semi, because they're the largest chip contractor and they make most of these GPU chips, their stock right now is trading at at least 3% higher after this earnings report. So that's definitely one to watch, especially because they hold the power when it comes to supply. There's been concerns about,

you know, supply constraints. That's probably a conversation that maybe Stacey will bring up on the phone call with analysts and maybe other analysts, because that is something that could hamper growth going forward. We were going to want to see visibility into orders in the future. So we're going to want to hear about that. And then to your point, AMD, Q4, we're expecting their own AI chip. Will that happen? There's a market for it. There's clearly a lot of demand. So that's why you're seeing that stock up on your screen, just two and a half percent post earnings. People would like to pay less for AI chips. Oh, yes. It's supposed to be much cheaper, too, right? Is it 20 percent or 40 percent cheaper than NVIDIA's chip?

Well, with those 71 percent margins, it's hard to get more expensive. Stacey, James and Christina Partsenevelis, thank you. Of course, we can't stop talking about NVIDIA and AI. Joining us now for more on this conversation is Benjamin Harvey. He's the CEO and founder of AI Squared. That's a platform that allows businesses to integrate machine learning into their web-based applications. Benjamin, strong numbers from NVIDIA and strong margins, and you're sort of experiencing that as you serve your customers, right? Yes, 100%. You know, one of the big things that we're seeing in the market is, you know, really, you know, 71% of these companies are saying that, you know, we want to experiment with

a journey of AI in the next two years. And what that does for a company like mine, which is a startup, gives us the opportunity to start to integrate these generative AI use cases inside of solutions within these organizations. You know, one of the real big things that we're also seeing is, you know, a lot of the organizations are interested in not just using, you know, generative AI and large language models in the

traditional chat application, right? They're trying to break out of the chat application and integrate it just as prevalently as we've seen predictive AI over the years, where the AI is being used in currently existing applications across the entire organization. So right now, the market is booming and we're really benefiting from it as a startup. So Ben, I'm trying to get a sense of the durability of this demand. And not only did NVIDIA beat on the revenues for Q2, but the guide, 16 billion, when the whisper number was maybe in the mid 14 billion range. Pretty extraordinary. How singular is the strength of NVIDIA right now when we're talking about AI instances that you

need to get this work done? How much are your platforms and customers scrambling for an alternative that doesn't seem to be there? Yeah, great, great question. I mean, right now, what we're seeing is that many of these organizations are looking at two things. You know, one is the speed to market, right? You know, the buzz around these organizations, a lot of C-level executives that are sitting on boards, their boards are saying, hey, we need to understand how we can get more value out of artificial intelligence, particularly generative AI. But they're also saying, hey, you know, as we increase speed to market, let's think about ways in which we can cut costs, right, that are associated with these generative AI technologies. Now, speed to market is really number one, but they're also looking at ways and how they could, you know, cut the costs in the future.

And, you know, what we're really seeing is that, you know, as and even in our organization, as we strive to, you know, deploy these generative AI technologies, the first thing we do is we look at the balance between, you know, traditional CPU resources and then GPU resources. The traditional CPU resources that are in like an AWS or an Azure environment, they can get you to a solution, but it takes so much longer. So when you think about speed to market, you can't get there as fast with the traditional CPU resources. So you do go to NVIDIA and look at the A10s and A100s, the V100s, all the way to the H100 DGXs. And that's really what we use as an organization to power our large language models to deliver value. And you see the impact of that need for speed to market in these results. NVIDIA stock up 7% after hours on very high expectations. For that perspective. We thank you, Benjamin Harvey. And time now for a CNBC News update with our Pippa Stevens.

Pippa? Hey, John. Here's your CNBC News update at this hour. Authorities said Wagner mercenary chief Yevgeny Prigozhin was on the passenger list, but it still isn't clear whether he was on board a private jet that crashed in Russia today. This video appears to show the plane plummeting to Earth, then exploding. Russian emergency officials said the jet was flying from Moscow to St. Petersburg, and all 10 people on board were killed.

A Biden administration immigration policy is heading to court tomorrow, as Republican-controlled states challenge its legality. The humanitarian parole program allows as many as 30,000 people from Latin America and the Caribbean to temporarily live and work in the U.S. Twenty-one states oppose the policy, saying it effectively creates a new visa program without legislation from Congress. And a jet ski rider washed up on South Korea's coast over the weekend. The Coast Guard there says it appears he traveled more than 200 miles on the water,

pulling fuel barrels behind him in order to escape from China. A pro-democracy activist identified the man as a Chinese dissident. John, back to you. Thank you. After the break, Mike Santoli is going to join us with his first reaction to NVIDIA's blowout report. He's going to put the stock's huge move this year into context against its peers. And later, we're looking ahead to the other event that Wall Street has been waiting for, the Fed's gathering at Jackson Hole. We will preview what to expect with former Council of Economic Advisors Chair Jason Furman.

Overtime will be right back. Welcome back to Overtime. Michael Santoli, looking at NVIDIA, it's up better than 7% after hours. You should be all-time highs, trading about $500 a share. And this is a stock that started $23 under $150, right? Exactly. So, you know, for as much as you'd want to say, look, it's really kind of gotten ahead of itself, perhaps, and it has over over time here. This is on a on a, you know, since the end of 2019 as well. I pointed out against the semiconductor ETF, the equal weighted one and the broader S&P tech sector, mainly to say that it's so disengaged from those price

patterns. In other words, such a massive outperformer that it's unclear if it's a specific read through to the rest or it's just kind of a sentiment. It's a source of good feeling that might surround the rest of tech. But it shows you there a massive advantage that had been built up. And also, of course, it had happened once before back in in 2022. So take a look here, though, at how fund managers, specifically active fund managers of long only equity funds, are positioned, according to Bank of America, in NVIDIA. So this is basically whether they're overweight or underweight, their benchmark in NVIDIA or the S&P 500. Right now, it's basically neutral. So you can see at times this goes back to oh nine they had a big overweight uh as a group in the stock now

right about neutral we they were underweight you could see a few years ago so it's what this means in s&p terms is that on average they own about a three percent plus position in uh in nvidia if they are a s&p 500 growth benchmarked investor maybe they own closer to six percent uh so it seems as if it's not under-owned, but it's also not one of those stocks that feels like everybody is crowded into it all at once. Mike, I mentioned it earlier and actually yesterday. Yesterday, I mentioned that people were doing this calculation on Apple 15, 20 years ago on, well, it's overvalued because how many iPods would they have to sell to justify this?

And then it seems like it was around 10, 11 years ago, Apple had this quarter that just made people push away from the desk and go, whoa, wait a minute. And here, once again, we have a guidance beat that's more than $3 billion. When's the last time you saw something like this? Twice in a row. Three months ago from NVIDIA. I mean, twice in a row. Three months ago from NVIDIA. No, I don't know that there's one at this scale that we've seen. Now, fundamental momentum is a real thing. You get a company that is basically has the must have product and there's a feeding frenzy. So we've seen it. What we haven't seen it is in a stock that's already a trillion dollar

market cap. And so that to me really magnifies both the scale of the business, of the opportunity, and I guess on the attention that's now placed on the stock. So to your Apple point, I agree with you. There were times over the last 15 years when it seems like, you know, Apple had kind of a dormant period, it went sideways. They were fully penetrated in the short term. Who knows where that moment is for NVIDIA? I really think the big question is going to be down the road when the customers feel as if they've

done this initial build out and they've got what they need for the moment. Then is there going to have to be a we catch our breath and we have to see exactly what the payback is on that. You know, who knows where that moment is? Yeah, that sideways moment for NVIDIA, not tonight. It's up 8.7% at the moment in overtime. Max Santoli, thank you. Now, it might feel like NVIDIA is the only stock reporting after hours today, but it's not. The action in brick and mortar space this week has been wilder than a Black Friday sale. We're going to talk about those major moves in retail when Overtime returns. Check out shares of Guess. They're getting a big spike in overtime, up 13 plus percent after reporting results. Adjusted earnings coming in

at 72 cents per share on $665 million of revenue. It's just the latest big move in retail. Abercrombie spiked today after its report, while Foot Locker plunged. And tomorrow we will hear from Gap, Nordstrom and Dollar Tree. Joining us now is CNBC.com's Melissa Repko. Melissa, it seems like the farther you get from the feet in what you're selling, the better you're doing right now. Yes, John, we're really seeing that split today. And the reality is that for retailers, it is a more challenging environment. And when it comes to discretionary, consumers are being much more selective.

That being said, Abercrombie really showed clearly today that if you sell the right stuff, shoppers are still buying. Okay. So what is the difference between, let's say, the retailers who are doing particularly well on the high end and then those that are having more trouble? I mean, Target was having trouble. TJ Maxx still doing pretty well. But then at the same time, you've got some of these names like Abercrombie also doing well. Is that just style? Is it focusing on a particular demographic, you think? There seems to be really two commonalities here. One is in the case of Abercrombie that they are tapped into trends and what their customer wants, and that's really resonating. On the other hand, we saw with Target, it found itself in the crosshairs of the culture wars and fell out of favor with some consumers and is seeing some softness among consumers who are choosing to spend on travel or other types of things.

The other thing that's helping certain retailers like Walmart and TJX win is that they're leaning into value. And that's something that's really resonating across the board right now. And as middle and higher income consumers in some cases trade down, those players can win. And we may see that dynamic play out tomorrow with Dollar Tree, depending on how it does and if it is able to capture some of those more price sensitive shoppers. Fourteen and a half percent after hours in overtime for guests. Melissa Repko, thank you. Thank you. And now we've got breaking news on CVS entering the biosimilar market with a new venture.

Bertha Coombs, you're going to tell us the story and tell us what biosimilars are. That's right, John. CVS is partnering with drugmaker Sandoz to make a biosimilar version of Humira or Humira rather at 80 percent below list price. It's part of a new initiative to source and in some cases co-produce these biosimilar drugs. Think of them as the generic versions of these difficult to make biologic drugs. The new subsidiary called Cordavis will operate like CVS's seven-year-old purchasing unit Red Oak, which focuses on sourcing generic drugs. But Cordavis will focus on not just sourcing the biologics, but in some cases co-producing them because they're much more complex to produce than generic pills. The first deal is for a biosimilar version of AbbVie's blockbuster arthritis drug Humira, which this year is facing competition in the U.S. for the first time. with Novartis' Sandoz on its version called Hiramos with an investment of an undisclosed amount in order to ensure supply and provide a competitive price.

We've invested in committing to certain volumes for the U.S. marketplace so that we have a durable supply of product. We want to ensure that once we bring this into the U.S. marketplace, we don't have any supply issues. We have a high quality biosimilar product available, and it'll be launched at a much lower list price than the originator molecule that exists, you know, at a greater than an 80 percent lower price. Now, Amgen, which makes the first approved Humira biosimilar, says, you know, it's still trying to get a sense of demand as insurers have taken a few months to really put those biosimilars onto their coverage lists.

Mirror maker AbbVie, meantime, says the drop off in its sales has not been as sharp as expected so far. Maybe because of this, they say it's going to be a different story in 2024. CVS sees Cordavis as a way to get a strong foothold in this biosimilar market, which is expected to reach $100 billion over the next five years. This deal was in the works, John, before last week's news from Blue Shield of California that it is dropping CVS Pharmacy benefits for Amazon and Mark Cuban's Cost Plus and others. But it just underscores the fierce competition in this space these days. Yeah. Makes you wonder what happens with margins across the board. We'll look forward to hearing more from you over the weeks and months on that, Bertha.

Thank you. Up next, a look at the names making big moves after hours, not just NVIDIA. Plus, we'll look ahead to the Fed's big event in Jackson Hole and why one expert says the Fed should start changing its tune eventually. We'll be right back. Welcome back to an action-packed overtime. Here's a quick look at the biggest earnings movers this hour. Nvidia posting a blowout quarter, beating on the top and bottom lines, and a huge beat on guidance. The number on paper was $12.6 billion expected. Whisper number 14.5.

It turned in 16. Also issuing a billion-dollar buyback. Splunk moving higher after a huge beat on EPS. Revenue also topping estimates. Autodesk beating on both lines, giving strong guidance. And Snowflake also beating on both lines. It was actually down after its own report, but popped after Nvidia's showing how the data story and the AI story linked together.

That's now up better than 3%. I will be sitting down with Snowflake CEO, Frank Slootman for an exclusive interview to talk about the quarter. We'll bring you those highlights tomorrow here on Overtime and throughout the day. All right, what matters more now to the market? NVIDIA or Jay Powell? We'll soon have an answer perhaps to that question when Fed officials kick

off their gathering in Jackson Hole. We will preview what to expect next. Well, with NVIDIA earnings out, investor attention eventually is going to turn to Jackson Hole over the next few hours, especially with the sharp move in bond yields that we've seen lately. Joining us now with a preview of what to expect is former Council of Economic Advisors Chair Jason Furman. Jason, welcome. So you would argue that the Fed doesn't have to get all the way down to 2 percent, but does need to below 3% and stay there for six months before it can change the language. So you wouldn't expect to hear any dovishness on that front this week? Yeah. So first of all, there's a difference between what I think the Fed should do and what I think the Fed will do. They will be completely focused on inflation. That's the

side of the mandate that's out of whack. What they can't do is tell us anything about their policy in that they don't know what they're going to do with interest rates because at this point they really are very data dependent. So I expect them to stress that as well. So if you expect that perhaps the Fed won't have to get all the way to 2%, how would you position yourself differently as an investor right now versus if you think they really do? Right now, if you look at break-evens, bonds are priced as if inflation is going to get back to 2%. I think that's an overly optimistic reading of the data, where part of the low inflation we've had lately I think has been good luck and isn't necessarily sustainable. And I think that is reading into the Fed more resolved

than they might possibly have. So in some sense, people are looking at these high bond yields right now. And you add in some extra expected inflation, you could see yields going even higher at some point. So do you think the Fed has to sound like there's more than one hike ahead? I think the Fed should be preparing everyone for more hikes. And look, it's always easier to surprise people by saying, hey, great news. The economy did better than we thought. We don't need to raise rates like we thought we did. So I think they have been appropriately, since the last Jackson Jackson Hole in the mode of hoping for the best but preparing for the worst. And part of the reason the economy is coming in better than people

were expecting is that people got their hopes down. And I think that was the, you know, that was the right way to do economic policies is just not to do useful thinking. Now, the hopes are down in China for a different reason. How much is that going to affect the U.S. economy and the rest of the world? You know, we'd be better off with a stronger Chinese economy. I don't think we benefit when the world's second largest economy is going into the types of difficulties it's going into. And it's totally unnecessary what China is going through. There's very simple policy remedies for an economy that has low inflation and slow economic growth, but they don't want to do it. Instead, they're engaged in denial. They're hiding the data. They're not taking the obvious steps. And that's going to spill over, not in a huge way, but it's a mild negative for the U.S. economy.

And the U.K. and Europe, how are you feeling about them? Quickly, if you can. They're in a more difficult situation than us. They have more inflation than we do, and they have slower economic growth than we do. So they have both sides of the soft landing are threatened for them in a way that hasn't happened here, at least so far. All right. Jason Furman, former Council of Economic Advisors chair. Thanks for joining us on Overtime. And what an overtime it has been. The big story is NVIDIA. Expectations were high and boy, did they deliver. Right now, the stock is up better than eight and a half percent in overtime as we await that call. And there are other stocks rising in sympathy.

Supermicro, which is a hardware maker that uses NVIDIA, up better than 7%. We'll see what else follows. That's going to do it for overtime. Fast Money starts now.