Closing Bell - Closing Bell Overtime: Parsing Powell; S&P 500, Nasdaq Records; Exclusive Interview with Rubrik CEO Bipul Sinha 6/12/24

Episode Date: June 12, 2024

The S&P 500 and Nasdaq closed at record highs after Fed Chair Jerome Powell’s press conference and the decision to hold rates steady. Jefferies Chief Market Strategist David Zervos and Invesco’s Kristina Hooper break down the market reaction and where things could go from here. Rubrik stock tumbled 9% despite beating on both lines and providing strong guidance in its first report as a public company; CEO Bipul Sinha on the current cybersecurity landscape, winning market-share and AI. Earnings from Dave & Busters and Broadcom; Bernstein’s Stacy Rasgon breaks down numbers from the chipmaker. Citi Head of Investment Banking for NA John Chirico lays out the environment for M&A and IPOs and the Fed’s impact on both. 

It is another day of records as a cooler inflation print sent the S&P 500 and the Nasdaq to new highs. Though closing off the best levels as the Fed signals just one cut this year. And that's the scorecard on Wall Street. But winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. We will be all over the market and the Fed throughout the hour, but also ahead. We've got earnings from Broadcom as that stock sits at record highs of its own with an ai powered lift and later rubric pulling back even after topping estimates in its first report as a public company remember it was higher in overtime yesterday rubric ceo bippleson

is going to join us to break down the quarter and an update on the mega mega market cap horse race as Apple takes another leg higher following Monday's AI unveil. But so does Microsoft. I know, it's crazy. Mega cap tech continues to rule the roost here. How's it going to settle out? Who's ahead, Apple or Microsoft? We'll see. But first, let's get to today's action. The S&P 500 and the Nasdaq jumped to record highs, as did Apple, Alphabet and Microsoft, as the latest inflation report showed progress on prices. The Fed, though, signaling just one rate cut in 2024.

And joining us now is David Zervos, Jeffrey's chief market strategist, and now a CNBC contributor. And Christina Hooper, Invesco chief global market strategist. Welcome to you both. David, one cut this year, which shouldn't be a surprise, but admitting it, I thought that the market might take it differently once the Fed actually admitted this. The market seems at least initially to have taken it pretty well. Why is that? I think the market is taking all of the changes that we've seen in rate expectations pretty well all year. We had a point at the beginning of the year where we were forecasting six or seven rate cuts, and then we kept whittling them out, and we got down to now one, and the S&P just keeps going up because I

think they have confidence that the Fed is going to get to where they want to get to, which is ultimately their 2% inflation target. It may take a little longer, but the process of getting to an anchored inflation expectation outcome and the Fed doing what they set out to do is in it's in train. And I think that's what he told you today. He was very positive on today's inflation print. He was very positive on the progress that's been made. And he's just telling you it's going to take a little longer. The bond market has to readjust the curve a little bit. We saw a few of the front month contracts in the interest rate futures not trade as well as the back months. But that's just, you know, that's just a little bit of bologna slicing. It's nothing. It's nothing specific. The 10 year had a good a good response to the data and a decent response to Powell.

And I think in general, it was almost like what Mike Santoli said at the end in the lead into our segment. It's that the Fed can act if they need to. The Fed is there for you if you need it. And that's been a theme of ours all year. The Fed put structure is really back. They've accomplished what they've wanted to accomplish. It might take them a little bit longer. But if things get messy, John, then they're going to come in and they're going to do something and they're ready to act. And the equity market knows that. That's why it doesn't go down. So in a sense, then, Christina, is this a return of a reassertion, I should say, of the soft landing narrative, especially in the context of that cooler CPI print this morning,

that maybe this is all going to sort of work out and we don't have to freak out too much and equities can be OK. I think that's right. Now, one thing that was unusual about today's dot plot was the increase in expectations around core PCE. So if we look at the December 23 dot plot, it was at 2.4%, the end of 24. Then in the March dot plot, it moved up to 2.6%, and now core PCE is anticipated to be at 2.8%, which is where we are now.

So that suggests no progress on inflation for the rest of this year, but still penciling in one rate cut. So what that says to me is that the Fed could very well bump that up to two rate cuts if we do see some disinflationary progress. So I think that this is a very positive scenario. I think Jay Powell was very measured and thoughtful in the press conference. And so I think David's right that people walked away and felt very comfortable with where the Fed is and what could potentially happen. There's a there is a lot of optionality. Yeah. I mean, we had a

softer than expected. I mean, based on which, you know, what you're combing through. But we had we had a softer CPI print this morning, restoked the disinflation narrative. You take that, you couple it with a stronger jobs report on Friday, soft landing narrative, arguably still intact, back intact. The thing that got my attention perhaps the most as well with the Fed was the R-star, neutral rate, which we're going to start probably talking about even more now. And I guess I wonder how that speaks to this new environment, if this is a new environment that we're in. We compare rates to the last, call it, 14 years. But the last 14 years were not normal for interest rates, right? So should we be thinking about this as a new normal that harkens back to

pre-great financial crisis? So I will say it is unusual to see them move the long run rate. And when it's moved in the past, it's been pretty small, like a tenth. They moved it two tenths today. That's a lot. For a three month period, they've decided to move the neutral rate by two tenths of a percent. There's something underway here. There's some thinking, and I don't know what it is. There's a belief that the equilibrium rate structure is not going back to the 2019 level

where everything was flat on the yield curve at 2%. Remember, we had a 175 funds rate, a 2% two-year note, and a two and a quarter 10-year note. That world is getting pushed aside. And I think a lot of businesses and sectors that keyed off of very low rates, whether it's commercial real estate, unprofitable tech, some parts of private equity, they have to really rethink what this new world looks like, where we might be more like a 3% or 3.5% yield curve with a term premium. And that's a big difference. I mean, it's probably why a lot of private equity isn't coming with deals,

because they're going to have to revalue at higher rate structures. It's why anybody that you put on in the real estate market comes on and says, we need interest rate cuts now, because that's where they keyed off of. The rest of the economy is going to be fine with that. Like, anybody managing a long-dated liability loves that, an insurance company The rest of the economy is going to be fine with that. Like anybody managing a long-dated liability loves that, an insurance company or most of the financials. So I do think it's important. But Jay was really, it was interesting what he answered when he got asked about it. He said, you know what, that doesn't really change policy today. My movement in RSTAR

is kind of where I'm thinking we end up, but it doesn't change how I'm thinking about the September meeting or the December meeting. This is about what we're thinking about in the long run. It should change a little bit how you think about the 10-year note yield and long-dated discount rates, which matter a lot for tech companies, matter a lot for valuation, but it's not changing their decisions on what to do in September versus December. And certainly we saw those long dated note yields come down, I think lowest levels, the 10 year yields, for example, since April 1st, to your point. Christina, we've seen these secular growth stories playing out in the market. AI, of course, being the biggest one that helped

to fuel things today. We're talking about the mega cap tech names, the big run we've seen this week in Apple, but also Oracle on the back of earnings and more specifically AI commentary and deals around that part of their business as well. Today, for example, we're waiting for Broadcom earnings. How much are these secular growth stories still the places to be within this market? Well, certainly they are an important place to be within this market i do think we will see a broadening of the stock market we continue to get little spasms of broadening but i don't think we're going to truly get to a place of of real sustainable broadening until the fed starts cutting rates and i still think at that point we will have a strong secular growth set of stories that help power the stock market. So certainly something we don't want to ignore, still want to participate in.

David, I wonder, though, about what happens to smaller stocks. The Russell was up kind of a leading one point. We'll see where it ends up. I put it up on the screen, but it was up more than the S&P around close to 2 percent, but a little less when I last checked. But things were moving around a lot right there at the close. Does this mean this relatively higher rate environment? There you go. 1.6 percent. 1.6. Yeah, it came down quite a bit there at the end. Less patience with small caps, with early-stage companies. What are the implications for the IPO market here? Because a lot of smaller companies don't feel like this is a great market looking at the S&P.

They're rather looking at, you know, some of these smaller tech companies, for example, that are having a rough go in the early innings. 100%. companies, for example, that are having a rough go in the early innings? A hundred percent. And the higher for longer narrative, we've got to be a little more vigilant on inflation is not good news to that crowd. That's the crowd that is more levered to rates and is more levered to lower rates being beneficial. So that's going to that's not going to play particularly well. It's going to favor the mag sevens and the rest a lot more when you think about it on a relative basis. That said, we're splitting hairs a little bit, John. I mean, it's a quarter, maybe two quarters, where we're going to have to hang out a little longer than we thought.

I think that's the message. In fact, Jay said that in the press conference. They lowered the 2025 rate forecast a little bit. So they're still getting to the same place. They're still going to equilibrium. They're just taking a little longer to get there. I think the market's overall OK with that. But if there's people that are just kind of hanging on by a thread and they've got a refinancing coming up

and they may not make it because their five-year loan comes due this summer and they're like, man, we really wish it was coming due next summer after the rate cuts, that capital structure might not make it. So those that are on the precipice, this is not great news. And those are more of your weaker or more speculative names that are going to be in the smaller cap area. And, of course, that takes us back to real estate as well and the debate we've seen playing out there in slow motion now for several years.

David Zervos, Christina Hooper, thanks for joining us. S&P 500 finishing at a record high of 5421. It looks like first time we've had a close above 5400. So let's bring in senior markets commentator Mike Santoli with a closer look at the market's record setting push to new highs. This felt like it happened fast getting getting to 5,400, Mike. Yeah, exactly. I mean, we sort of chopped around for a while, and then it was sort of spring-loaded. We get above 5,400 and retained most of the morning gains at the index level.

You did have breath kind of soften out as the day went on, and rates sort of lifted back a little bit. So this is the S&P against its equal weighted version. You see, this is kind of the divergence that people keep complaining about. I've argued that the complaints are a little bit too loud based on really what's going on here. Yep, you got some outperformance by the huge stocks. That's driving the main index up. But the structure here of the equal weight is still fine.

On a year-to-date, one, two, and five-year basis, equal weight S&P is compounding at an 8% to 10% annual rate. That's not terrible, even if it's not keeping pace with the big ones. There are other interesting sort of intermarket relationships. Here's one. Now, one of the downsides to prices in a good way was auto insurance rates in the CPI report this morning. Progressive, been one of the strongest stocks and mostly because of pricing power in car insurance. You see that actually rolled over a little bit today, gave up more than two percent semis I have in here just to show that progressive has been

acting like this very strong secular growth play. So you see it sort of crossed under. And that'd be good news for the broader economy if, in fact, Progressive gives back some of that outperformance. And then you have financials where you had its massive defensive quality bid in J.P. Morgan. We were talking about it yesterday. So here's J.P. Morgan relative to regional banks. J.P. Morgan actually down today on a day when the regional bank ETF was up a couple of percent. So that shows people hide in there when they're not sure about the environment. It doesn't look like much, obviously, just a little bit of closing of the gap. But it does show you the role that J.P. Morgan plays. So when the market feels like it's going to be able to

relax because inflation is getting toward target and maybe the Fed sees clear to cut, you're going to see some of these kind of nettlesome divergences perhaps rectify themselves, guys. In some ways, this goes back to what Christina Hooper was just saying about the fact that you're not going to necessarily see a true, meaningful, sustained broadening out of this rally until you start to see rate cuts. Most likely, that's true. Yes. Now, that's the way the market's been acting anyway. So when you see rate cut probabilities go higher, it has been kind of green light for the broader list of stocks to do better. So we'll see. I feel like sometimes we get caught up too much in the details of what Powell said and what the questions we're getting at and sort of overinterpret the message. I think

the message is, you know, 15 out of 19 people on that committee said we're getting one or two cuts this year. The plurality said two. We don't really know how it's going. He didn't take September off the table. Inflation's been working in our favor. They can do as they please if, in fact, conditions merit and the economy's not crying out for help at the moment. So that's not the worst overall scenario to inhabit for a while. All right. Mike Santoli, we'll see you in a bit. Meantime, Dave and Buster's earnings are out. Some rough play in the stock in overtime. Contessa Brewer has the numbers. In fact, if this was an arcade game, what you would be seeing is your lives losing here.

We're seeing a miss on both the top and the bottom line. We're coming in with revenues of $5.88 million for Dave and Buster's. The street was expecting $621.3 million. And earnings per share adjusted $1.12. We don't know how that compares to the street estimate of $1.70, whether that's comparable. A couple highlights from the releases here. One is that comparable store sales decreased 5.6 percent year on year. The company says last year it's tough comps. And two, on most of the metrics,

we're seeing them lower year on year, whether it's revenue, adjusted EBITDA or these comp store sales. The other thing that we're seeing here is sale leasebacks for two Dave & Buster's property. That should bring in $45 million in proceeds. And they're saying there's about $11 million in costs here that won't be recurring, but they're trying to roll out new concept restaurants with this futuristic gameplay approach, totally overhauled menus, and that there are costs, both labor technology and others, that are associated with that. But look at the shares right now, down 10 percent. We'll be listening to the call at 5 p.m. to see whether they have more to say about how they're going to ramp up the earnings here with this new concept, whether that's going to be an investment that pays off, guys.

Yeah, real juxtaposition between that and Casey's General Stores where consumers are buying pizza and beverages. But here it would seem consumers tightening their belts, not so much playing skeeball so much. All right, Contessa Brewer, thank you. Broadcom earnings are out. We're going through those results right now. We're going to bring you those numbers momentarily. Up next, longtime chip analyst Stacey Raskin joins us with his first take on the print and the stock's push to record highs. And Apple also surging to new highs as excitement grows about Monday's AI announcements. And we'll give you an update on the horse race for America's most valuable public company between Apple, Microsoft, and Nvidia. Plus,

much more on the Fed. Citi's head of investment banking for North America weighs in on the wide-ranging impacts of Fed policy on the market and the deal environment. Over time, we'll be right back. Broadcom earnings are out. Initial moves higher by about 7%. Christina Parts Nevelis has the numbers. Christina. Well, I'd say it has to do with the beat on the top and bottom line, but it also has to do with the 10-for-1 stock split. Let's start with the earnings. EPS came in at $10.96, adjusted higher than the street anticipated on revenues of $12.49 billion, also higher than what the street was anticipating. The company announcing a 10 for 1 stock split as commencing July 15th of this year. So that's some new news. They also said

that they did have a record amount of AI revenue in the quarter at $3.1 billion driven by AI demand specifically for their custom chips and networking, as well as VMware. Keep in mind that they did acquire VMware recently, so that plays a big role. And the other factor in this report is their fiscal year 2024 guidance was $50 billion, and now it's $51 billion. So gone up by $1 billion. So the stock split, that improvement in guidance, and we'll say the quarter beat also helped shares go almost 9% higher. Guys? All right. Christina Parts-Nevelis, thank you. Thanks. Let's bring in Stacy Raskin of Bernstein Research

to discuss. Stacy, stocks shooting higher. It's up about 9%, 10% right now. It was already trading at a record. We got a beaten raise here

driven largely by AI, but also commentary about the strength of VMware. Your take? Yeah, look, it looks really solid, right? And this is for a stock

that's had a good run. But as Christina said, a nice solid beaten raise. They took up the margin guidance as well as the revenue guidance for the year. The AI numbers look really good. They said $3.1 billion in the quarter. Their prior guidance for the full year was $10 billion. So they're already on a run rate that suggests we're going to have upside to that number. The stock split, I think, is the icing on the cake. All the cool kids are doing that now. Looks really solid. Looks really solid. OK. I mean, we can talk about the core legacy business, but it doesn't seem to be the thing that's propelling this name, especially as AI takes up more of the revenue pie overall.

I guess, is that really where investors need to be focused? Is that really what's going to drive the story for Broadcom? Well, yes and no. So clearly the AI piece is driving the growth here. The core business is probably not that great. So we'll see if they'll give us some more commentary on the call. But last quarter, they had already implicitly guided the core business. So like storage and broadband and the non-AI networking. They'd already guided that down probably close to 30% year over year last quarter. That means two things. One is they've kind of reset it. And I'm not getting any impression here that it's getting worse. So it looks like they've hopefully bottomed that. It sets up the comparison to next year easier because they've already guided on this year you should be able to grow it next year. And their AI business has been

strong enough to bridge the gap. So even last quarter, they didn't have to take numbers down. There's a lot of companies out there right now that have AI narratives. Most of them have still been seeing issues with their overall businesses. Numbers have been coming down because the AI piece wasn't big enough to cover it. For Broadcom, the AI has been more than enough to cover any of that weakness. And like I said, it doesn't look like that weakness is getting worse. So I think things should look pretty good as we get into the back half and into next year. Well, certainly AI is the focus,

Stacey, but there's also this VMware piece that's now a part of Broadcom. And I've been hearing some, I don't want to call them concerns because really competitors like Nutanix are licking their chops thinking that they could take some share and will continue to take share from VMware. Are we seeing evidence in these numbers, in these results that VMware is able to hold its own under Broadcom? I think it's absolutely holding its own. And some of those other competitors, by the way, have been making some comments during conference season recently to suggest it's not quite as easy to take share as maybe they thought it might have been otherwise. But no, I think VMware here looks really good. Actually, the software numbers came in really

strong in the quarter. And, you know, it's funny if you sort of run the math out, they've given guidance last year for the full year for VMware. We'll see if they update that this quarter. But they'd said something like 12 billion for the full year and growing double digits sequentially as it goes through the year three months ago. If you run that math out, they'd be doing probably close to $4 billion in VMware exiting the year, which would put it at $16 billion next year, even if they didn't grow it at all. And I suspect they think they can grow it more than that. And if you sort of look at least where the consensus numbers have been for VMware next year, I don't think they've even been at 16 billion. So I actually do expect that there's upside,

that the street will begin to see upside in the numbers for VMware, especially as we get into next year. And maybe we're already seeing it. Like I said, the software number was pretty strong. All right, Stacey Rasgan, thank you. And of course, we're looking ahead to that Broadcom conference call.

Now, at the risk of putting too much emphasis on some very big numbers, let's zoom in on what, if it were a race, would be a close one. The total value of the three biggest stocks in this market, Apple, Microsoft and Nvidia, each at around three trillion dollars. After Apple's AI surge yesterday and today, today adding another three percent, it retook and then lost the lead here at about, you know, just shy of $3.3 trillion in market cap, all-time highs. Microsoft is neck and neck, maybe a little ahead at just shy of $3.3 trillion. NVIDIA's in the hunt post-split at 3.1. Now, just a week or two ago, the narrative was that NVIDIA had passed Apple for second place, and Apple was the sole mega cap to have missed out on an AI boost.

That story might be changing, but there's still plenty of running, Morgan, left to do. I mean, I just want to go back to the comment that one of our market panelists made last week, which is that we're talking about three stocks that are now worth more each individually in terms of market cap than the entire Russell 2000 put together. That's either a statement about how important AI is going to be to the economy going forward or how much a great value the Russell 2000 is going to be when we look back on it five years from now. Well, we'll have to see. Yeah. In the meantime, when we come back, Citi's head of investment banking for North America

weighs in on how the Fed is impacting everything from IPOs and deals to equity markets. And later, don't miss our exclusive interview with Rubrik CEO Bipul Sinha, fresh off the company's first quarterly report since going public in April as that stock finished lower by nearly 9 percent. We'll be right back. Welcome back to Overtime. The Fed held rates steady and indicated that one cut is coming later this year instead of the three that had been previously forecast. So how will a higher for longer rate environment impact M&A activity and IPOs? Joining us now is John Tirico. He's Citi's head of investment banking at North America. John, it's great to have you on the show. I'm going to start right there. Higher for longer. We actually kicked off the hour talking about this, this idea that you have a business environment, an investing environment that essentially represents a new normal. What are the

conversations you're having with clients right now? What does this mean in terms of some of these flows, whether it's into IPOs or M&A or otherwise? It's a pleasure to be here. Thank you very much. Yeah, I think when we think about corporates, you know, they tend to look at the 10-year as they plan out their planning horizon for business models, for M&A, and ultimately, when they look at what their performance will be if their new companies listing are coming public. If we look at the beginning of the year, five cuts expected. We were sub 4%. Now, we're sitting roughly at the 440 level from a 10-year perspective. There isn't an expectation that we're going to get material movement in

the rates that really impact them from a cost of financing perspective. There's modest improvement in front of us. But most models are really going to work just fine at that 4% to 4.5% all in treasury level. And anything that dips below that will be terrific. So I don't think these companies' performance is really keyed as much to rates as we might think as we drive forward. It's going to be more about earnings growth and their ability to generate cash flow. What we're noticing about investors is a real focus on profitability. So we want growth, but profitable growth. And we want profitable growth that ultimately ends in cash flow. So those are the models that I think are going to be particularly focused upon from an IPO

perspective. And when you look at M&A, there's going to be that real focus on how does this affect our cash flow and our cash flow growth as we move forward. Okay. I do wonder, though, if you are looking to raise capital, does this change the calculus on how you do it? I mean, you've got equity markets trading at record highs right now. And then, you know, debt markets that are more expensive than they were a couple of years ago. Yeah, I think more expensive than they were a couple of years ago. But I think that reset had taken place already. And there's been a significant amount of debt financing that's been driving our markets.

If you look at our investment banking wallet that all investment banks are competing for, it's been more debt capital markets focused and a bit less M&A and equity capital markets than we would have thought coming into the year. So I think folks have been taking advantage of where rates are already and building in a cap structure that really works as we move forward. The real key is productivity. I mean, we've talked about AI. We just saw Broadcom's results. So as you look at these companies moving forward, immediate beneficiaries are the folks who are providing solutions to corporates. But the broader impact is going to be those corporates themselves as they implement some of these solutions, AI

and other software solutions that are really going to drive productivity. And we're seeing that in forward earnings projections as we move forward. So we do think these companies are well positioned to perform. John, I wonder what the impact of this environment is going to be on IPOs and M&A. I mean, it's what feels to me like a rare environment where the overall indices are at record highs, but a lot of startups don't feel like it's that friendly to come public. And I wonder, does that make it more of an opportunistic environment for M&A with some of the smaller company valuations not necessarily seeing the same kind of boost that the mega caps have gotten? Yeah, and so entering into the year, our view at Citi was very much one of it would be a better year than the prior year, particularly around IPOs.

But this is going to be a steady build into 25. The folks that we're talking to, there is a significant amount of funnel activity that's getting ready for that 25 level. And again, that's not driven as much by rates as what they need to do to be ready to be public companies. I think if we look back at some of the mistakes that were made earlier at other IPO real rallies, were the companies ready to produce results and to do it in a way that they can be well-tracked public companies? I think folks have learned from that.

And there's a real focus here not on blitzitz growth, but instead profitable growth, cash flow growth. And that's going to push us towards certain types of companies initially. But we do see steady improvement throughout the remainder of the year and then a really strong 25 for the IPO market. Still unclear, though, at least from where I sit, what investors are looking for, because you mentioned there's an increased focus on growth versus profitability to garner investor interest and rubric, which is growing nicely, but isn't profitable. You know, it was up after results in overtime yesterday, but then down during the session today. What do investors want? Yeah, I think I think they definitely want to know that they've got transparency into growth. It's okay into profitability. They're okay if companies are

going forward and investing, using cash flow to ultimately generate growth and profitability in the future. But that transparency is going to be very important and a business model that they believe can ultimately deliver. This is one of the reasons why we very important and a business model that they believe can ultimately deliver. This is one of the reasons why we think software as a business model will be one, particularly in 25. These are models that have been proven. And so your ability to hit milestones once you're on that track will be particularly strong. And so we do think that's one of the end markets very broadly, whether AI driven or just the traditional software market where we expect to see a significant amount of activity. All right. John Chirico, thank you. Thank you.

Well, time now for a CNBC News update with Kate Rogers. Kate. Hey there, John. U.S. health care spending continues to set new records, growing an estimated 7.5 percent to nearly $4.8 trillion in 2023. And it's projected to outpace growth in GDP over the next decade. That's according to national projections from the Centers for Medicare and Medicaid Services. The report found the increased use of health services, along with a record high of Americans with health coverage at 93 percent, drove that rise in spending. A fleet of Russian warships arrived in Cuba today as it

conducts military exercises in the Caribbean. U.S. officials say the ships don't pose a threat but are widely seen as a Russian show of force as tensions rise in Ukraine. And after 62 years, the wreck of the last ship of famed British explorer Sir Ernest Shackleton has been found off the coast of Canada. A team led by the Royal Canadian Geographical Society used sonar to find the quest 1,280 feet under the frigid water where it sank in 1962. Historians consider Shackleton's death aboard the ship in 1922 the end of the heroic age of Antarctic exploration. Back over to you guys.

All right. I love that story. Kate Rogers, thank you. That's been one in the works for a long time. Well, check out shares of Virgin Galactic, now a very small cap company. They also just completed their last space flight for a while until their new spaceship comes online potentially next year. It's getting smaller right here in overtime with a new announcement. Shares are tumbling after the company said it would do a one for 20 reverse stock split. That's effective after Friday's close of trading. The stock now down about 70 percent this year. You could see it's down about 15 and a half percent right now in overtime. It's more than 90 percent from its 2021 peak.

Perhaps not surprising then that we are seeing this reverse stock split for Virgin Galactic. Up next, inflation appears to be heading in the right direction, but one Wall Street firm is out with a new warning on the economy. Mike Santoli is going to return. Explain why next. Welcome back. We have a news alert on OpenAI. Steve Kovach has the details. Hi, Steve. Hey there, Morgan. This is coming out of a report just published by the Information saying OpenAI's annual revenue is on pace for $3.4 billion. They're saying that would be double what it was last year. And just a little context behind here, they're saying most of this revenue is coming from the subscription product that costs 20 bucks a month to use the more advanced features of OpenAI. On top of that, as John knows pretty well, they do get a cut of Azure sales that Microsoft sells when they sell the OpenAI models as well. And they say that's on a $200 million run rate. And this report also saying

that would be double this entire, this $3.4 billion, what it was last year. So just massive growth happening there. We can see why there's been so much investor interest, guys. Yeah, that would make it a very healthy sized public software company with $3.5 billion in ARR. Steve Kovach, thank you. Thanks. Meantime, we might have gotten some good news on the inflation front this morning, but one Wall Street firm is growing wary on the economy. Why is that, Mike? Well, John, Wells Fargo in their second half 2024 outlook, I would say reiterates its wariness on the economy. Wells, like a lot of other firms, has been expecting more of a slowdown in the U.S. economy. Hasn't really shown up yet. And part of what they use to illustrate the potential for it is this idea that financial conditions sometimes will precede

a pronounced slowdown in the economy. Well, what we have here is a current cycle, which is the orange line here, which still shows persistently loose or unstressful financial conditions. This is an index of 100 plus market based indicators saying, you know, are conditions loose or tight in terms of financing, mortgage markets, things like that. Here is the average of the prior seven cycles. So what you see is this is the point where usually a downturn started, where a recession may have started. A cycle would have peaked. And you see that things normally have been getting more stressful as you went along. It's not happening right here. So you have to sort of believe other things are going to come along,

perhaps to just weaken demand or get somehow the economy to a point where demand has a shortfall or something else gets in the way. So it's sort of an interesting little contrast in, yeah, we still think things are going to slow down, but the markets are not really kind of ripe for that kind of a thing to happen. It's one of many ways that this cycle is not really conforming to a lot of folks' models, John. So many ways. Mike Santoli, thank you. Well, shares of data security software maker Rubrik under pressure. We've mentioned it, despite an earnings beat and strong guidance.

Up next, the company's CEO is going to break down those results in an exclusive interview. And check out shares of Oracle, the big winner in the S&P 500 today after strong guidance and announcing cloud deals with Google and with OpenAI. Shares finished up 13 percent. Welcome back to Overtime. Rubrik shares sliding almost 9% today after its first quarterly report as a public company, despite beating on the top and bottom lines and guiding stronger than consensus expectations. Closely watched annual recurring revenue up 46% year over year. Well, joining us now in an exclusive interview is Rubrics co-founder and CEO Bipol Sinha. Bipol, good to see you.

And we're talking on a day when the Toronto School District, Canada's largest, has reported a ransomware attack, which goes right to your narrative here. But tell me, how much more room is there on the cyber resilience and recovery area for growth here? Because it's not just about preventing these attacks, as you said again and again, it's being able to continue the business or the school day after they happen. Thanks, John, for this opportunity. Very exciting day for us. We completed a very strong quarter, as you said, 46% ARR growth, growth of our large customer, which is $100,000 plus ARR customers. It grew over 40% year over year. So very exciting day. If you look at the cybersecurity industry, there has been a lot of

investment in cyber attack prevention, whether it's network, cloud, or endpoint. But the cyber recovery has not been focused on as much. As a result, when businesses are breached, businesses are down for weeks, and we are seeing the news all around us. So this whole idea of making sure that the businesses can bounce back upon a cyber attack is now getting root and cyber resiliency is a board level topic. And we are seeing a lot of customers and partners and the whole ecosystem gearing up to make sure that the businesses are continuing operations. And that's where we see our growth. I look at the stock move today and I'm trying to figure out what is the investor concern. Maybe it's around the costs

and the path to profitability here. So talk to me about margins and operating leverage as you invest in R&D, try to get a bigger share of wallet in this ransomware recovery cybersecurity budget. How are your investments going to lead to that in a way that's going to make investors happy down the line? John, first and foremost, we want to be a profitable company and we are working on profitability. But at the same time, we are operating in a very large market with a very differentiated product around a problem that is top of mind for every business of any customer, of any application or data of any significance. And we want to maximize that opportunity. So we are focused on creating profitable growth and ensuring that we take advantage of the opportunity that is

in front of us. So we are investing in R&D, we are investing in our go-to-market strategy, but with a huge focus on efficiency and profitability. Bipul, it's Morgan. I just want to get your thoughts on the macro, because we've heard from a number of companies across the cybersecurity sector that the macro environment is challenging right now. Companies aren't spending as much or more discerning with the dollars that they are putting to work versus previously. And yet it seems like you are growing market share and you did show strong growth in the quarter. So just, are you growing in spite of challenging conditions

or are you not seeing them? I mean, look, no company is immune to macro. But having said that, what we deal with is an existential question for the customer. It's not a discretionary thing because the businesses have to be protected against ransomware and cyber attack and has to get back up and running. So within cyber category, we are top of the heap and we still see a strong demand for our products. Obviously, we as a new business, we are cautious.

We are looking at how the year is evolving. But we are very confident in our outlook, and we are very confident in our demand that we are seeing. Bipol, how deliver the kinds of answers that corporations are gonna be sort of automatically operating based on? Are there new kinds of threats that emerge when maybe you end up getting wrong answers because of your data being compromised?

Look, the adversaries are using AI to attack and cyber attacks have gone beyond human comprehension and you have to fight AI fire with fire because the defenders have to be right 100% of the time and attackers have to be right once. So applying AI for cyber teams productivity, applying AI to ensure that human comprehension is augmented with machine comprehension is where the future is. In fact, our Ruby product is built for, it's an AI agent, generative AI agent, is built for the cyber defenders because to understand the threat hunting, threat monitoring, making sure that deliver clean recovery in a way that is machine driven as opposed to human knowledge driven is critical.

And as the data actually expands beyond clouds and SaaS and goes into AI systems, new kinds of attacks are emerging. I mean, poisoning of the model, feeding wrong information and getting wrong results as an outcome. These are the new vectors that are evolving and we believe that ultimately AI security is data security and we believe that all the defenders have to apply AI technology to ensure that AI is intact. All right, well, we'll continue to track that

as we track your growth after this first benchmark, your first report as a public company. Bipol Sinha, CEO of Rubrik. Thank you. Thanks, John. Up next, all the overtime movers that need to be on your radar as we count down to Broadcom's analyst call at the top of the hour. And check out shares of Casey's General Stores. This is a big winner on Wall Street. The convenience store operator beating earnings estimates thanks to stronger than expected margins, same store sales and guidance. Pizza, one of the reasons. Stay with us. Welcome back to Overtime. We've got two stocks moving in opposite directions right now, both on earnings.

Shares of Broadcom shooting higher after beating on both lines, giving strong full-year revenue guidance and announcing a 10-for-1 stock split. Those shares are up 12% right now. Different story for Dave & Buster's, though. That's sinking after missing on revenues. Comparable store sales were down 5.6 percent year over year, and those shares were down 10 percent. Plus, another mover, Virgin Galactic, also sharply lower on news of a one for 20 reverse stock split. We should keep in mind, though, very small cap name that space stock these days. John? Indeed.

All right, up next, the earnings and economic data that could move the market tomorrow, including another key reading on inflation. We'll be right back. Welcome back to Overtime. Tomorrow's going to be another busy day on the earnings and economic front. On the earnings calendar, we're going to get results from Adobe, RH, and Signet Jewelers. Wall Street will also be closely watching the weekly jobless claims report and another key reading on inflation, the May producer price index.

That's expected to rise 0.1% year over year, excluding food and energy prices. The core PPI is seen increasing 0.3%. And of course, we know that like CPI funnels into PCE, which is the Fed's preferred inflation measure. Tesla will also be in focus as we get the official results of the vote on CEO Elon Musk's pay package. Although we could get an idea of how that's shaping up as soon as later tonight. So far, Barron Capital, Altimeter, and ARK Invest are among those supporting Musk, while CalSTRS, CalPERS, and ISS are against the package. The annual shareholder meeting officially starts at 4.30 p.m. Eastern,

so right here during overtime, lots of reasons to tune in. Also, former President Trump will make his reelection pitch to corporate leaders tomorrow in Washington, D.C. When he speaks with the Business Roundtable, Trump has been advocating for lower taxes and acting new tariffs. As part of his campaign, President Biden will also he was also invited to speak, but he is abroad for the G7 summit, which kicks off tomorrow as well. Plenty ahead. All right. Record closes for the S&P and the Nasdaq. The S&P finishing above 5,400. That's not right.

That is right. That's it. Yeah. Desert for us here at Overtime. Fast money starts now.