Closing Bell - Closing Bell Overtime: Nvidia Earnings From Every Angle; Coinbase CEO Responds To Binance’s CZ Stepping Down 11/21/23

Episode Date: November 21, 2023

Investors were keyed in Nvidia reporting Q3 numbers after the bell and we have you covered from every angle. Analysts Stacy Rasgon of Bernstein and Neuberger Berman’s Dan Flax on the stock reaction while Main Street Research CIO James Demmert talks the shareholder angle. Our Kate Rooney sits down with Coinbase CEO Brian Armstrong in his first comments responding to Binance CEO CZ stepping down after pleading guilty to violating criminal U.S. anti-money-laundering requirements. 

Range bad and down as the S&P and Nasdaq snap their five-day winning streaks. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. Good to have you back. NVIDIA front and center this hour as the quintessential example of AI-driven gains gets ready to report earnings in just moments. The stock hitting fresh highs this week ahead of the print. We've got a great lineup of experts ready to parse the report. Plus, we'll talk to the CEO of $100 billion medical device company Medtronic, getting a pop today on the back of results and perhaps easing

some of the fears around weight loss drugs eating into Medtech market share. Eating in. I see what you did there. Major breaking news in the crypto world today. Binance chief CZ pleading guilty to federal charges, stepping down from the firm. We're going to talk to Coinbase CEO Brian Armstrong about the news in a first on CNBC interview. But as we watch for NVIDIA's results, let's get to the market action. Stocks paused today with tech leading the pullback. The S&P and NASDAQ snapping five-day win streaks. Fed minutes signal no appetite for cutting rates soon, favoring keeping policy restrictive. Mike Santoli joins us from the New York Stock Exchange. Mike, more of this as, again, not a ton of selling, but, you know, not a ton of buying either. No, it seemed like a pretty decent

little pause day. I do think the market could use a breather. This is a really benign way for it to happen if this is, you know, the mode of just kind of backing and filling a little bit. I do think that what's key, you know, out of the Fed minutes is that the bond markets are nothing particularly to react to because they're not trying to put a December hike back on the calendar. This is a patient Fed. They want to be done. They think they have the ingredients for being done. And we can go on this assumption that the recent decline in longer-term treasury yields,

which has really helped the stock market recover, is based on at least that part of it, that we're not up and away in terms of what the Fed wants to do. So all of it is a decent little, maybe tenuous, but for the moment, comfortable equilibrium. Yeah. I mean, how much is going to hinge here on NVIDIA, Mike? And we had we had the stock closing at an all time high yesterday. You've met and now trading at levels not seen since January of 2022.

Microsoft all time high recently as well. We know that these big cap tech names have really driven the gains we've seen in the averages more broadly this year. The expectations are very strong going into this. Very high. Obviously, the index effect is real and it's pretty profound when it comes to these, you know, one point two trillion dollar market cap company like NVIDIA, two point eight trillion like Microsoft. That being said, NVIDIA went up 240% this year, and the average stock's done nothing. So I don't know which way NVIDIA moves after the close today necessarily is going to be,

you know, the cue ball for sending all the other stocks in various different directions. But for risk appetite's sake, for this idea that we have a secular growth story to believe in and play in AI and the hardware demand for it, I think that all matters quite a bit. I think the real kind of benefit of the last couple of weeks is that the problem parts of the market have come off the mat. They've not led, but they at least are not looking like they're poised for multi-year breakdowns like small caps as they were a few

weeks ago. Okay. Mike, stay close because we're going to come back to you in just a little bit. Let's continue the conversation with our panel, though. Joining us now is Barbara Duran of BD8 Capital Partners and Scott Renn of Wells Fargo Investment Institute. Good afternoon to you both. I mean, stocks took a pause here. This rally took a pause here. Barbara, Bespoke tells me that three-week rallies in the S&P and NASDAQ are the largest since the first half of 2020. Do you take profit here? Well, I think that for risk management purposes, if you're a portfolio manager, yeah, you start to trim positions a little bit, but not much because I think this rally could continue.

I think some backing and filling, to use Mike's words, is normal here after, particularly when you've had in November, NASDAQ up over 10 percent, S&P up over 8 percent. But I think the fact that the Fed is pretty much done hiking provides some support and downside protection in this market. And I think the NVIDIA, I think we'll see what happens there. But I think, you know, you asked Mike the question if you think that would affect market psychology. And I think it can, because I think we're in the midst of a major chase here. And that's to get positioned into year end. If you saw last week what happened to Palo Alto, the stock was down 20 points on some misunderstanding or confusion about their

billings. But the stock has recovered all. People are racing to get back into good names. So I think NVIDIA is reflective of a psychology that we're experiencing right now. So I think after a little more pause, we could see a resume higher. Yeah, Scott, I mean, the Fed minutes, if there was one takeaway, it's that it continues to lean towards higher for longer. There continues to be caution. There continues to be a data driven nature to the Fed. But even even as we see that today, you're starting to hear the D word tossed around a little bit more, whether it was PPI last week, whether it's been in some of the retail earnings we've gotten so far and the D word being deflation. Are we entering a deflationary environment in real time?

Morgan, I think for goods, we've been there in deflation. But the question is, is services. And so for us, inflation is going to be sticky in terms of services. You know, the message higher for longer, that's not anything different. You know, we don't want to chase, that's not anything different. You know, we don't want to chase this rally from here. The opportunity was a few weeks ago when the market was down near 4,100. So I think pullbacks are good spots to buy. We think the market's going to be higher than where it is now a year from now, but we're definitely not chasing this rally. We think the Fed is going to be higher for longer. We're going to see a volatile market. So for those people who missed the last pullback, we think you're

going to get another opportunity at least. OK, so we talked a bit about equities. Barbara, how should investors use fixed income here? Well, I use fixed income really as a supplement or a balance to my equity portfolios. I mean, right now, you can get five plus percent on short-term treasuries. So it can be a good balance to a portfolio. But in the long term, if you want to make real wealth, it's really in stocks. And so right now, if people are concerned, as Scott just said, that the rally won't continue, you could shift a little bit money in there sort of as a placeholder. But even that's risky. Market timing is very risky. But for me, it's a supplement to my basic stock portfolios. Watching the consumer this week and beyond, Scott, how much does the jobs picture influence

how much the consumer spends and how healthy this economy looks through the end of the year and maybe even trickle through to market sentiment? Well, John, I think if Americans have jobs and money in their pocket, they're going to spend it. And so, you know, we're going to see that until the unemployment rate works its way higher, which we think it will. We all know that credit card balances are really high. And I would argue and we would argue based on our research that, you, that only the very top end of the income scale really has cash to spend. The lower, let's call it 80 percent, they're pretty tapped out, whether it's credit, whether it's cash. So we don't see a lot right there.

It's the top end carrying things. And so the Fed would, they're not going to tell you this, but they want the unemployment rate higher because they want less spending in the economy that's going to help inflation and those kinds of things. But, you know, in the near term, when you've got a sub 4 percent unemployment rate, when you have Americans with money in their pockets, they're going to spend it. So, Barbara, where would you be putting money to work right now? What what looks compelling in this market, especially given the fact that we have seen this recent rally? Well, I think that people are talking about health care.

Health care is cheap. It has defensive and growth qualities. And so you can look in there. UnitedHealthcare is a name I have liked for a long time. I think the tech right here is hard to buy at this particular moment, but I think it's long-term going to continue to outperform. So I think you have to wait for some fullbacks. But I think in the near term, there is a lot of chase going on. And I think you look at small caps, although it can be hard to buy because if you want to buy individual names, you really have to have an expertise there.

And also, I think you look at the regional banks. That is assuming if you think rates are going to be cut in the first half of next year, which I think there's a growing probability that could happen. All right. Barbara, Scott, thank you. Thanks, guys. Now, let's bring back Mike Santoli with a closer look at NVIDIA as we wait for those numbers. Mike. Yeah, John, specifically at the sell side sentiment toward the stock, which, as you can imagine, given how much it is up and how great the fundamentals have been, is decidedly positive. You see here it's basically all buy ratings. It's 94 percent buys. That's a real contrast to where it was before this run started, where you did have a little more of a mixed sentiment.

This is the price target consensus price target not far from 700. Actually, I guess it's more like 655 or 670 in that range for the price target, implying 30 percent upside from here. That rarely happens for a stock that's already trading at or near its highs. Usually that's when a stock goes down a lot and there's a stale consensus price target at those. So it's pretty safe to say that the sell side is pretty aggressive, aggressive, expecting a lot more kind of reasons to raise their sights on earnings for this stock. Now, take a look at the market cap. I've tracked NVIDIA versus Tesla for a long time. They seem to feed off of a similar source of energy in terms of the secular growth themes, companies that are going to save the world.

You have these sort of Pied Piper visionary CEO types in each case. Together, they're $2 trillion. But right now, they flipped $1.2 trillion and change for NVIDIA, a little under $800 billion for Tesla. And that was the reverse over here. So it's sort of like the same amount of market cap being bet on these twin themes. They've just sort of flipped at this point. On a given day, they also are the two stocks that trade the most dollar volume. They have the most call option volume. So there's just a tremendous amount of kind of energy and directional excitement around these names. And so we'll see how it plays once those numbers are out, John.

Is Nvidia right now, Mike, in a class of its own in the sense that it's been an enormous grower over the year. So you look at that part. Wow. But then it's also still near those all time highs. So it's both special and stable. Yeah. You don't see many mega cap stocks that are up 240 percent year to date. And the price earnings multiple went down over that period of time because of how much expected earnings went up. That is the case with NVIDIA. It's been remarked many times. So that is pretty singular in terms of the market right now. Usually it's the other way around, like with Tesla. The market cap was surging because the market was giving Tesla credit for stuff that it hadn't yet achieved in the far distant future.

Okay. Mike Santoli, we'll see you later this hour. After the break, much more on NVIDIA with results just minutes away. We're going to bring you all of the key numbers as soon as they cross. And Medtronic getting a healthy boost today, turning positive for the year after the $100 billion medical device maker topped estimates and upped its full year forecast. CEO Jeff Martha is going to join us to talk about the quarter when Overtime comes right back. Welcome back to Overtime.

The final countdown is on to NVIDIA earnings coming up in just a few moments. The stock's up 240% this year. It hit new highs yesterday. We'll bring you those numbers as soon as we have them. Some other earnings to mention in the meantime that just crossed. Autodesk beating on the top and bottom lines, though fourth quarter earnings guidance was below estimates. That stock, nonetheless, is moving higher. It's up about 3% right now. Nordstrom turning in a mixed quarter, though, missing on revenues but beating on the bottom line. Those shares are down fractionally. Meantime, Medtronic shares closing up almost, let's see, more than 4%. The MedTech company reported Q2 results this morning, topped estimates, raised guidance.

Medtronic and the broader MedTech sector have been pressured by investor concerns about the impact of weight loss drugs. Joining us now in exclusive interview, Medtronic CEO Jeff Martha. Jeff, good to see you. Any impact at all from these GLP-1s? People have been talking about them a lot, but maybe too much. Yeah, no, I would agree. First of all, good to be here, John, on a great day for Medtronic, a really strong quarter, broad-based growth across our different businesses and regions around the world and powered by a lot of great innovation. And, you know, getting back to the GLP-1 question, you know, the effect we've seen is negligible. In the short term, we've seen a little bit of effect on our bariatric surgery business, but our physicians are predicting

that actually to flip back to growth. And beyond that, we're seeing really no effect. We don't even anticipate seeing an effect long term. And on our earnings call today, we brought in our chief medical officer who walked investors through the science-backed analysis that we had done based on epidemiology and also what we learned about the GLP-1s over the last couple of months and even last weekend with the select trial readout. And the conclusion was a strong opinion that this is not going to impact us in the long term. And like I said, the impact short term has been negligible. Okay. So you had particularly strong results in the surgical business. Tell us about the tailwinds behind that, what we should expect to have happen from here, how much of that is a continuing kind of return to normalcy for those kinds of procedures, and how much of it is driven

by technology or unique advantages you feel that Medtronic has? Sure. Well, first of all, the markets, one of the things we also talked about is the markets around the world are pretty stable with these elective procedures starting up again. We're seeing that all around the world. Then also, that particular business was impacted over the last year with supply chain issues. Those are also in the rearview mirror. That's really helped.

Then on top of that, there is a lot of innovation in that business. We are one of the leaders globally on this surgery, going from open surgery to laparoscopic surgery, where we lead, and now into robotic surgery. And Hugo, our soft tissue surgical robot, which is on the market outside the U.S. and especially in Europe, is doing really well. And we're really excited about the impact that's going to have on not just our surgery business, but overall Medtronic as that enters the U.S. here in the future. The clinical trial is ongoing in the U.S. for FDA approval. And we're really excited about the future prospects of that product and that business. Jeff, I want to go back to the future prospects of that product and that business. Jeff, I want to go back to the comment you just made about your physicians noting a flip back to growth for bariatric products. Why specifically, and how does it speak to, I guess, the sustainability

of a new healthcare system where you do have these GLP-1 drugs in place? Well, in this, Morgan, in this particular case, a number of these patients are actually so, you know, obese that, you know, bariatric surgery, which we believe will continue to be the gold standard for, you know, here, they're too heavy for that. It's dangerous. And the GLP-1s are actually helping them get down to a weight that the surgery actually can be performed. And so we actually think over time that's going to be a bit of a tailwind for us. And don't get me wrong on the GLP-1s.

They are a very important new class of drugs. And I'm sure like you, I've talked to many people that are on these drugs, and the impact is quite profound in terms of weight loss. But it's in that 10% to 15% range. And many of the patients that we operate on need 25-plus percent weight loss to get back to a healthy position. And these GLP drugs are actually helping them do that. Some key nuance there for the conversation for investors. I do need to shift gears, though, Jeff,

because earlier this year, we had a CNBC investigation reporting on a whistleblower lawsuit that alleges that for nearly a decade, Medtronic sales representatives operated a bribery scheme at a veterans hospital in Kansas. I realize that the company has pushed back on these allegations. It's a lawsuit that is still active. But to ask you directly, what have you done to ensure that the corporate culture doesn't lead to something similar occurring elsewhere?

Well, first of all, ethics are table stakes in the medtech industry and at Medtronic. And it's tied to our mission. It's tied to what we do every day. And it's a reason why we do every day and it's a reason why we've been around and thrive for 75 years. That trust that we have with physicians and patients is paramount and the issue that you're referring to is an allegation, a whistleblower allegation by a competitive sales rep from

one of our competitors and we've looked into this situation and, you know, just do not believe these allegations are true. And at this point, don't have any further comment on that one. All right. Jeff Martha, CEO of Medtronic. Appreciate you joining us on earnings and everything else. Well, NVIDIA earnings are expected to be released just moments from now. Let's bring in Stacey Raskin from Bernstein and James Demert from Main Street Research. As we do await those numbers, Stacey, I got to start with you because you were on in the past hour giving a preview to our viewers of what to look for. So if we could just as we do await these numbers, if we could just recap what the key is going to be here for this stock and the most likely direction, given the fact that expectations are so high going into this print.

Yeah, I mean, it's the data center number. That's in the quarter. And then whatever is implied in the guide, that's what's important. And presumably it's going to go up. The question is how much, right? I mean, so that's what everybody's going to watch for. And it looks like the numbers just hit, actually. So we'll see where it is. But that's that's the number that's going to be most important. The data center number. OK, it looks like it is crossing. We do have the stock up one percent right now. Our team is going through those results. We're going to bring them as quickly as we can. In the meantime, James, what are you watching for? Yeah, I'm also looking for data center. That's where their margins are the biggest. But, you know, this is a need for speed. It's a race to get these data centers running as fast as possible.

And we think they're probably likely to beat here because their customer base has got a ton of money. Microsoft, Google, Meta, and they've got the fastest GPUs in the H100, H200. So let me ask you to pause there. We are ready to bring you those numbers. Our Christina Parts Nevelis has them. Christina? Yeah, beat on the top and bottom line for Q3. Revenues of $18.12 billion.

That's almost $2 billion more than what the street was anticipating on EPS earnings per share of $4.02. So, again, that is $4 adjusted, almost a 70 cent beat again. And then for Q4 revenue guidance, that's an important number, $20 billion. That's what the company is estimating, $20 billion. The estimate was 17.86. And then last but not least, data center revenue, since it drives most of this, The estimate was coming in at $13 billion and data center revenue came in actually at $14.5 billion. So a beat on all of those metrics. And yet the share or the stock price is dropping 4%. So I'll go through it and come back with more. All right, Christina, thanks. James, I'm going to let you finish because we have the numbers

now. A beat and a raise expected, beat and a is delivered. Was the bar just that high? Yeah, I think the bar is high. But, you know, again, the demand, the need for speed across these data centers. And I'm really looking forward to hearing the conference call if a lot of the sales were in that space. But, you know, there's a lot of deep pocket customers out there that are willing and need to spend this money. So I think it's really important in all these conversations about NVIDIA and AI and this need for speed that we're early in the cycle. I think when people get concerned about the stock's movement, they have to realize this is a multi-year transformational change in technology. And we're really at the early

stages. And they are at the pole position. I'd like to say they're the only game in town or as we like to call them, the magnificent one. Well, we're also in the early stages of the after hours action. Stacey, the stock initially moved higher, then it moved a lot lower. Now it's kind of in the middle. It's only, you know, it's down 2%. But what's particularly important to hear color wise on the call? Is it really about, I think you mentioned demand and the degree to which NVIDIA understands exactly how these chips are being put to use right now versus how many might be stockpiled? Yeah, again, the question is, like I said, the numbers, like I said this earlier, the numbers get so big so quickly, people wonder

about sustainability. And so we'll want to get some better feeling for how much visibility they have in terms of like how long are there cycle times? How involved are they in the deployments? And by the way, I do think they're very involved in those deployments. I don't think they're just like throwing GPUs over the wall. Right. I think they know. But anything they can give us on that. The other thing I'll be listening for clearly is China. I'd love to know if the China sanctions actually impacted these results at all. Like would they have even been higher without that? And what are they doing in China? What are their expectations for that market? And how should we be thinking about their prospects or ability to sell into that market over time? James, I mean, we know supply has not been keeping pace with demand. But when I see EPS numbers that are up 12-fold over the past year. I mean, how quickly can this company ramp that

supply? And what does it mean in terms of the investments that have to come alongside it, even as it earns hand over fist here? Yeah, Morgan, great question. You know, that is certainly a concern. Can they keep up with this incredible demand? You know, and I think that this is where you have a company that's extremely well managed. I mean, Jensen really knows this business and knows it well. And I think that's where, as a stockholder, shareholder ourselves, we really want to look at management. Can they maneuver their way through this transformational change from the number one position? And frankly

speaking, that's where you have to have a lot of confidence in management, and we do in Jensen here. And the stock right now is barely down at all, just fractionally. Let's get back to Christina Partsenevelis on more from the numbers. Christina? Yeah, so I was just going through gross margins, which shows how efficient a company is in converting revenues into profit. For Q3, gross margins actually came in higher than expected, 75%. But it was interesting for Q4, the outlook they're putting forward is 74.5. So yes, that's higher than what the street was anticipating, but that's showing a decrease from Q3. So the question is, have they plateaued in their efficiency? The other factor, gaming was weak for AMD, but we're seeing gaming come in stronger for NVIDIA, beating

estimates at $2.86 billion for Q3. And then automotive, another, I guess, weaker segment we've seen across the chip space. Automotive actually came in lower than street estimates, $261 million. Estimates were $263 million. So those are two just little added caveats for this company. But it was a top and bottom line beat. Strong revenue guidance for Q4. John? Christina, thanks. Stacey, are mid-70s margins anywhere near sustainable, or does that just reflect the scarcity and really high demand for NVIDIA chips right now?

Yeah, so the pro forma gross margin guide is actually 75.5. So the gap number was 74.5. The pro forma is 75.5. So it is up a little bit. No, I think it's just a reflection of the mix of the business. Data center itself has very high margins. Most of the revenues are data center. And so I mean, that's what's driving this, right? Clearly, they're getting a lot of very high ASPs for these parts. There's a lot of value add people are willing to pay for them.

It will be interesting over time, especially as the software story, and people aren't even talking about software anymore, but there's a longer term software leg to this narrative as well. You're probably waiting for that to see gross margins go materially higher than this. Once you're in the mid-70s, you can't really go that much higher. Software itself probably is a mechanism over time to take gross margins higher, assuming that the current levels of data center mix within the business can hold at these levels. OK, Stacey, I'm going to ask you a question we've asked you in the past, the recent past. Stocks up 240 percent. It's down fractionally on these results. Do you buy here?

I think you have to own it. I always say you need a strong stomach with this one. It has its ups and its downs. And I've covered it for many years. And we've seen a number of those kind of peaks and valleys over the years. But at the end of the day, if you believe, forget the quarter for a minute, at the end of the day, if you believe that the long-term opportunity is large and that we are early, these guys are in the driver's seat. They're out there actually creating that market and driving. I think you have to be there. Yeah. OK, well, you have to own it, James. But do you have to buy it all the time? It's a question of timing. Will there be perhaps a better entry point? How should investors think about the

strategy of when to buy NVIDIA and how much when it's trading at these levels? Thanks, John, because that's a tactical question and we're sort of tactical investors. I think here I would agree. You've got to own the stock. This is the early part of the cycle. It's not to be missed. And I would be very careful not owning it at all. But here, you know, if I didn't own it, I'd say, OK, how much do I want to own? I'm going to buy 25% of the shares I eventually want to own. And then I'm going to wait for a normal market correction, which tends to bring all these stocks down anyway. And then I would add to the position.

Or maybe the investors are confused about the analyst report or the report tonight, and the stock trades down. Then I would add more. So I would be a little more tactical. I would say, yes, I would put 25, 30% of my money into it here, and I'd wait for an overall market correction to go ahead and buy a full position. You know, investors had that window of opportunity four weeks ago. I mean, it just sat there for days to do so. So I would think about it that way. Okay. We're going to go back to Christina

Partsenevelis, who has more on NVIDIA. Christina. Yeah, now I'm going through the CFO commentary. And there is a whole section on the China-U.S. export restrictions. I should say the U.S. export restrictions for China. We know that China contributes 20% to 25% of NVIDIA's data center revenue. In this, they say, quote, we expect that our sales to these destinations, destinations being the China region, will decline significantly in the fourth quarter of fiscal 2024, though we believe the decline will be more than offset by strong growth in other regions.

So although they said there was no near term impact in Q3, they do believe there'll be a significant decline in Q4, which are currently in right now. And maybe it'll be offset by other regions. And the stock is up almost, you know, around half a percent. So life comes at you fast in overtime. Our thanks to Stacey Raskin and James Demert. And they still and they're still putting up a stronger forecast, a stronger Q4 outlook than what the street expected, despite that commentary about China. Then the average expectation. But they had to.

Average expectation. They had to. Because, I mean, come on, right? This is like Jordan in the 90s. Like, if you don't get more than 30 points, more than 40 points in a game, people are like, oh, does he have the flu? What's going on? Jensen doesn't have the flu. Well, we're going to have much more on NVIDIA throughout the show,

including the first take on results from Neuberger Berman's tech expert. And up next, a first on CNBC interview you do not want to miss. Coinbase CEO Brian Armstrong with his first reaction to the CZ pleading guilty to federal charges and stepping down as chief of Binance news that we just got a short while ago. Stay with us. Major news in the crypto world. The CEO of Binance, CZ, agreeing to plead guilty to federal charges and step down from the company. Binance agreeing to pay more than $4 billion to settle money laundering charges. Our Kate Rooney joins us now with Coinbase CEO Brian Armstrong. Kate.

Hi, John. Thanks for that. So, Brian, thank you for being here. We really appreciate your time today. I want to start with the significance of what John just mentioned, Binance and CZ pleading guilty. What is the impact on your company, Coinbase, and the industry here? Yeah, well, for us at Coinbase, I mean, this is really a vindication of the long-term strategy that we've taken to focus on compliance, make sure we were building a trusted company. And I

have to tell you, over the last 10 years since we've been doing that, it has been frustrating at times. We've seen competitors come on the scenes and not take that approach. Sometimes they're able to offer products that we didn't think was legal. And in this environment, we're seeing that regulators are finally acting and they're creating that level playing field. So I think this is vindicating of our strategy. And I think it's good for the industry to sort of turn the page, make sure that we're following the laws where it's clear today around AML and KYC. And then also make sure that we're getting clarity about the areas of the law where it's not yet clear in terms of commodities, securities, and there's new legislation on the

horizon that I think Congress can help with there. And Brian, so the DOJ just held this press conference. They talked about some of the awful, really, use cases for crypto. They talked about terrorist financing, transactions that facilitate child sexual abuse. How is the industry going to move on from that? Really, the dark side of crypto, some of the nefarious use cases at a time when this industry is also gaining legitimacy on Wall Street. There's a lot of hope for an ETF. How is the industry going to move on to become more legitimate, especially in light of what happened today? Yeah, well, centralized services in cryptocurrency, just like custodians and exchanges, I mean, they need to be following the exact same rules that exist in traditional financial services to be looking out for that type of criminal behavior.

And one thing I think a lot of people don't realize is that if you look at the best third party data out there, less than 1% of activity in crypto is for illicit purposes like those that you just described. By the way, the U.S. dollar cash is about 4% used for illicit activity. So crypto is certainly not unique in that a small percentage of bad actors try to use it. That's why we at Coinbase, for instance, have really strong transaction monitoring programs, and we've invested a lot in these programs around KYC and AML. But the centralized actors need to follow those rules. I think we saw that Binance in this case was not maybe following those rules as well as they should have. But the decentralized aspects of crypto are probably going to be regulated differently. They're protocols,

they're self-custodial wallets. And so the industry needs to figure out how it can apply those rules with regulatory clarity, not just in the U.S., but these offshore unregulated exchanges as well. And then we also need to make sure we preserve the innovation potential in the decentralized aspects of crypto to balance that. So how do regulators prevent some of this from happening again in the future? It sounds a lot like just banking regulation, things like KYC and AML that you think of really applying to some of the more traditional financial institutions. The industry has pushed back on that and said we want different regulation. Is that possible at a time when Congress might have some different priorities,

especially with an election coming up next year? Yeah, well, I think some areas of the law are already quite clear around OFAC and KYC and AML, like we saw. And I don't think the industry has been pushing against that. In fact, quite the opposite. The companies that I engage with and, you know, in the U.S. that are based here are all leaning into that. We've been doing that for many, many years. Now, there are areas of the law today that are still not clear in crypto, for instance, which of these assets are commodities and securities. And that's where we've seen some of this draft legislation going through Congress. In the absence of that regulatory clarity, we're also availing ourselves of the court to go get case law created that can create that clarity as well.

So, look, the first and best choice would be to have regulators come together and publish clear guidance. We haven't had that happen yet. So we're unfortunately having to rely on the courts and now Congress to pass some of that. Congress does have many priorities priorities as you put it but i know that for instance patrick mchenry and those have made this crypto legislation a priority and you never know exactly how and when things may become law in the united states but we're going to keep trying that and i feel confident that the us is going to get it right eventually and so brian coinbase has not been immune from its own legal troubles can you give us any sort of update on the legal battle with the SEC?

The SEC has sued Coinbase for what it says is an unregistered broker. Does any of the action today impact the way you think about your own legal battle with U.S. regulators? Yeah, well, obviously it's important for people to remember that these two things are apples and oranges. Ours is a civil case over some technical issues about what is a commodity of security. And as I mentioned, we're availing ourselves of the court here to go create that regulatory clarity for the industry. And so almost regardless of the outcome, at least we'll finally start to have some clarity from the court. The Binance case here was a criminal matter, obviously, with much different facts and circumstances and a huge dollar amount is quite a bit different but look i think

the important thing for people to remember here is that 52 million americans have used crypto now 400 million people globally roughly this technology is not going anywhere more americans have used like five times as many americans have used this technology as have an electric vehicle for instance and so we have a real opportunity with this technology to update the financial system, make it faster, less expensive for people, more efficient, more fair, more global. And that's going to bring an incredible amount of positive aspects to the global economy and to people all over the world. So although it's the early days, and unfortunately, that lack of clarity, we saw some bad actors, to take advantage of the situation. This industry remains very strong and it's just going to get better over

time as we see things like layer two solutions, adding scalability into crypto. We see ETF applications out there to launch. So I'm very optimistic on next year. Now that we've turned the page here on some of these regulatory issues, we can get back to building. Brian, it's great to get your reaction and your perspective on all of this. As you mentioned, key differences in what's going on with Binance and Coinbase, but it's really great to get your thoughts on this. Morgan, we will send it back over to you in the studio. All right, Kate Rooney, our thanks to you and thanks to Brian Armstrong of Coinbase. Certainly sounds like the message there, perhaps the start of a new chapter of cryptocurrency

as things potentially get cleaned up or at least regulated. Yeah. You wonder, though, if if the masses really are as interested in crypto as they were before. We will see after the break. Many on Wall Street had been banking on rising yields, doing the same job as further Fed hikes. But what happens is yields start to come down? Mike Santoli takes a look at that relationship next. Welcome back to Overtime. Mike Santoli returns with a look at the relationship between the drop in yields and the Fed's next move. Mike.

Yeah, Morgan, or I guess as the case may be, the Fed's next non-move. You see financial conditions here measured by the Goldman Sachs Financial Conditions Index. They've come off the boils, meaning they're less restrictive. When this is going up, it means tighter conditions. Coming down is looser. So you see this recent decline to around neutral levels. So it's not really accommodative. But with the decline in long term treasury yields, a decline in the dollar, the bid we got in equities, you have seen conditions become less restrictive. Now, this comes at a time when the Fed is saying, look, we want to hold policy in a restrictive stance, restrain economic growth, restrain credit creation because we've got to get inflation down. My take is this is OK for now, and it doesn't necessarily contradict the Fed's current plan, mainly because, again, it's not all that easy. But also we're at a point here where rates are well above

the rate of inflation, the rate of economic growth. It seems as if they feel like they have the luxury of trends going in their direction. They don't have to necessarily talk the markets in a different path at this point anyway. We'll see where it goes from here. We'll see. Mike Santoli, thank you. Coming up, we're going to have a lot more reaction to Nvidia's earnings. That stock is well off the lows, down about 1% at the moment. The conference call kicks off at the top of the hour. We'll be right back. Welcome back. Today I sat down with General Laura Richardson, commander of the U.S. Military Southern Command, or SOUTHCOM,

to discuss the geopolitical landscape and, as she puts it, the fact that economic security is national security. SOUTHCOM provides command and control of U.S. military forces throughout Latin America, excluding Mexico. And I asked her about the national security risks associated with China's burgeoning investments in the Western Hemisphere, at Latin America, excluding Mexico. And I asked her about the national security risks associated with China's burgeoning investments in the Western Hemisphere, as 22 countries now have signed on to China's Belt and Road Initiative and a growing list moved to normalize trade agreements with China. I look at that as the ushering in of strategic competition between authoritarianism and

democracy in the region through the Belt and Road Initiative. It's a veneer of looking like a development model when really it's an authoritarian model. And it's really under the guise of looking to invest, but it's all in critical infrastructure. And I would say that due to the debt trap loans that we have seen, the cost overruns, the design

flaws, labor standards, environmental standard violations and things like that that have occurred with all of these projects, not all of the projects, but several of them in the region and not just in this hemisphere, not just in the western hemisphere, but globally. We have to be concerned about that, but it's in a lot of the critical infrastructure, deep water ports, space, telecommunications, energy. Near shoring, it's been a trend. We've been hearing about it, this change in supply chains coming out of the pandemic and amid security concerns.

What are you seeing on the ground right now across the region? I would say that the U.S. is investing, that U.S. quality investment, and we are investing in the hemisphere. The problem is that leaders don't see it. The presidents of the countries don't see it. We have over 800 U.S. companies in Colombia, over 250 U.S. companies in Panama, over 200 in Honduras. Who knew?

We don't talk about it. We don't talk about it. We don't brag. We don't talk about the great things that quality U.S. investment bring. Transparency, labor rights, environmental standards. We hire local workers with the People's Republic of China and the Belt and Road Initiative. They bring in their own Chinese laborers. All of those things to contribute to the economies of countries. We've got to talk about it. And then we also have to have our U.S. companies competing on the contracts for critical infrastructure.

We're not competing on those for deepwater ports, for space, for telecommunications and energy. And we need to do that. It's a matter of national security. Now, I also asked General Richardson about the military's role as it relates to the movement of goods and people, whether it's the trafficking of illegal drugs or the migration of people, especially as Southcom works with countries to counter activities by cartels or, as the military refers to it, transnational criminal organizations. In terms of, I'll go back to the economic security and economic insecurity in this

region is fueling irregular migration. And so poverty, lack of health care, food insecurity, lack of jobs. You know, how do we bring that to the hemisphere? About 10 years ago we talked about Central America and South America being able to feed and fuel the world. We need to talk about that more. All of the resources that this region has, over 60% of the world's lithium is in this region.

They already produce over 50% of the soybean for the globe. Sugar, meat, corn, over 30 percent that is provided for the globe. You have gold, copper. You have light sweet crude that was discovered off Guyana. You're going to have the fastest-growing economy in Guyana for the next five years, as anticipated. LISA DESJARDINS I also asked General Richardson whether the Israel-Hamas war has changed the threat profile within this hemisphere closer to home. They are looking for any indicators and

warnings, but for the most part, she said, it has not changed. But, John, it's going to be very interesting to see now how the China dynamics evolve, especially as just from this weekend with the elections, Argentina's brand new president-elect, Javier Millay, has been very sharply critical of China on the campaign trail. And, of course, Argentina is the second largest economy in South America. Yeah. Interesting criticism of China's investment in Latin America. Well, you can catch the entire interview with General Laura Richardson, the Army's second ever four-star general. You can find that at CNBC.com. All right. Coming up, a top analyst tells us what he wants to hear from NVIDIA investors,

sorry, executives on that company's earnings call coming up in just a few minutes. Check out shares of HP as we head to break. Pulling back after reporting a mixed quarter, you see it down a little more than three and a half percent at the moment. EPS exactly in line at.90 per share adjusted. Revenues came in light. We'll be right back. Welcome back to a busy overtime session. A number of retail earnings hitting the tape this hour. Let's get to Courtney Reagan for more on Nordstrom and Urban Outfitters. Court. Yeah, let's go through these quickly here. I know it's a busy time. Nordstrom earnings actually beating the street 25 cents adjusted compared to 13 cents estimates. Revenues, though, coming in a little light. Net sales in total down about 7 percent.

The main Nordstrom line stores, those were down 9.4 percent for net sales. Nordstrom racked down just 1.8 percent. Lower markdowns, though, did help gross margins expand year over year. But Eric Nordstrom does point out continued uncertainty in softening consumer spend, key as we are going into this Black Friday week here. Weaker than expected, fourth quarter earnings are implied. You can see the shares are down just a bit, but they've bounced around here after that result. And then Urban Outfitters also out. They did beat on earnings and on revenues as well as same-store sales up a total 5.6%. They also noted gross margins beat here too. Again, higher initial merchandise markups and lower merchandise markdowns.

No guidance here on this one, but we are waiting for more details from that. And these shares, again, bouncing around too, but higher now by about three quarters percent. Morgan and John, back to you. Court, thanks. We're also waiting for NVIDIA's earnings call just moments away. Stocks down about a percent. Joining us now, Dan Flax, analyst from Neuberger Berman. What do we need to hear, Dan, for investors to decide which way the stock is going to move from here? We need to hear a little bit more in terms of the supply outlook and how that's going to unfold. And we also want to hear more about the dynamics in China, where the geopolitical and the trade tension are going to remain a factor over the coming years. I think, though, when we step back,

the story here is around continued execution and broadening of the growth drivers in the data center. The company is innovating and executing incredibly well. And the other critical piece to the investment, as we think about the next couple of years, is really the power of the ecosystem. You have millions of developers on the NVIDIA platform continuing to leverage the company's software, their application frameworks as they tackle really difficult problems in areas like drug discovery, climate change, fraud detection. So we see a lot to like here, and certainly there will be near-term dynamics, but we continue to like the name.

Arguably, NVIDIA is the mega-cap hardware AI stock of the year, Microsoft the mega-cap hardware AI stock of the year. Microsoft, the mega cap software AI stock of the year. I want to ask your opinion on that company. You hear Satya Nadella on CNBC yesterday talking about this open AI situation and how it affects Microsoft or not. I feel that we have all the technology and capability to keep innovating on the products you saw at our Ignite conference last week, up and down the stack from silicon to co-pilots, and committed to OpenAI and SAM. And that's, you know, with respect to what configuration, you know, obviously, we want Sam and Greg to have a fantastic home if they're not going to be in OpenAI and all the colleagues

at Microsoft. But, you know, I am exactly where I was on Friday morning. Are you where you were on Friday morning, Dan, when it comes to the AI value potentially in this stock? I am where I was on Friday morning. The key here really is that Microsoft and the men and women at OpenAI, whether they stay at OpenAI or they join Microsoft, the key is really the ability to push forward on the product roadmaps and, from Microsoft's standpoint, the ability to continue infusing AI across its platforms.

I think we're seeing it with Copilot where it remains early, but I think there's a lot of good value to customers and, over time time that will create additional value for shareholders. And the other piece is I think AI will continue to be an important driver for the Azure Cloud. And so stepping back, I think Microsoft remains very well positioned even as the situation with open AI remains fluid. Okay. Going back to NVIDIA for a second,

it's not just a growth story, it's an earning story as well. How sustainable is that piece of the puzzle? I think it is sustainable. The seasonality product cycles, clearly cyclical headwinds, I think will remain a factor from one quarter to the next. But I think the bigger story as we look out over the next two or three years is that as you get the the growth drivers coming through in the data center gaming another important business remains vibrant so when you pull all of that together and think about the free cash flow generation uh for the company over the next two to three years i think there is substantial growth ahead and so when we look at that we think the shares remain attractive and and we think the company is continuing to create value for its customers and will continue to create additional value for its shareholders.

Dan Flax, thanks for joining us. Shares of NVIDIA are now down 1 percent. What are you going to be watching on the call? On the call? I don't think I'm going to be watching this one that closely unless I see the stock do something crazy after hours from here. More broadly, this week and into next, I'm wondering how much do consumers need to see discounts to keep spending through the entire holiday season? It's going to be key. Also worth noting that we have a very strong, even though the day was lower for stocks, a strong rally afoot for the month. That's going to do it for us here at Overtime. Fast Money starts now.