Closing Bell - Closing Bell Overtime: Qualcomm & Arm Earnings, Ford CEO Jim Farley, and MP Materials CEO On Export Controls 02/05/25

Episode Date: February 5, 2025

Jon Fortt and Morgan Brennan break down a big night for earnings with insights from Adam Crisafulli of Vital Knowledge and Scott Chronert of Citi Research. Ford CEO Jim Farley joins for an exclusive discussion on the automaker’s latest results. Plus, Ben Bajarin weighs in on Qualcomm and Arm earnings, and MP Materials CEO James Litinsky unpacks China’s dominance in rare earths market and how his company is working to bring the supply chain back to America.

That bell marks the end of regulation. Quantix Building Products ringing the closing bell at the New York Stock Exchange. Huntington Bank Shares doing the honors at the NASDAQ. And wow, stocks staging a comeback earlier in the session as the major averages close right about, yeah, right at the highs of the day for the S&P. Certainly, that's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan.

Well, nearly every sector is in the green today, although communication services is sharply lower, thanks in part to a sell-off in shares of Alphabet. That's following a sales miss and massive AI spending plan. But investors now awaiting a trio of big earnings, Qualcomm, Arm Holdings and Ford. We will have instant analysis of all of those numbers as soon as they are out. And Ford's CEO will join us for a first on CNBC interview before he discusses the results with analysts on the call. Well, I'm just going to interrupt right here. Qualcomm numbers are out already. So why wait? Let's get straight to Christina Parks and Evelis with those. Christina. Yeah, it's another strong quarter for Qualcomm. Gap EPS

earnings per share at $3.41 on revenues of $11.67 billion. That's the biggest revenue beat since November 2020. Beats driven by their handset, their IoT, as well as their auto business. For Q2, the outlook, the midpoints that they're providing is $2.80 EPS on revenues of $10.6 billion, I should say, both also higher than what the street was anticipating. John and I were just on a call with the CEO and CFO just moments ago, and they said end customer demand in China for premium tier continues to expand, and that the increase in sales was because of demand and not because of pull-through, because of tariffs, something that we heard from Intel and their reasoning as to why they saw a sales bump. So maybe a dig at them.

And then lastly, when asked about potential auto tariffs, Qualcomm CFO said they have a strong presence globally and they aren't really relying on one market, but it's still early days. Because shares bumping, you know, pretty much flat right now. Back to you. Bumping around. Very interesting. Also, Cristiano noting that they now have 100 percent share in Samsung's Galaxy X S25 at the premium tier. So that's helping them as well, you know, in an environment where the premium tier, especially in China, but looked like it might be a bit weaker. Christina, thanks. I also want to mention that later on we got the CEO of Rare Earth Miner MP Materials. We'll talk about the trade war with China, all of that in this context.

Well, right now, let's bring in Vital Knowledge founder Adam Crisafulli and Citi Research head of U.S. equity strategy Scott Cronert to talk about the market day. Adam, look at some of the biggest stocks in the market. Apple was lower. Microsoft, yeah, just about flattish. Amazon, you know, Alphabet lower. Meta about flat. Tesla lower. I mean, only NVIDIA was really higher. It's kind of unusual to have a strong S&P or NASDAQ day with names like that not doing much? No, absolutely. And you've been kind of seeing this trend play out now for a few weeks of this broadening of the rally, where you have a lot more participation than was the case, you know, over the last several months, where it's really dominated and concentrated in those handful of stocks. So you're seeing it broaden. And even within tech, you saw a broad rally,

excluding those stocks you mentioned. The underlying pattern in tech today was actually quite strong. You saw a lot of green in tech aside from those mega caps. So this has kind of been the theme all year. I think it will continue this broadening of the rally, which is healthy and puts things on a more sustainable, stable footing. But you definitely have seen some underperformance in those mega caps. OK, stay right there, gentlemen. We have another earnings report. Arm Holdings results are out, and Christina Parts Nevels has those numbers.

Hi, Christina. Hi again. Posting a Q3 earnings and revenue beat EPS, earnings per share of 39 cents on revenues of $983 million. The company makes money by licensing its chip designs to smartphone semiconductor companies like Apple, Qualcomm. Management saying in the release they saw a surge in royalty revenue driven by the adoption of their latest architecture.

Think of it like a blueprint V9, which is at a higher price point. The company sees Q4 revenues and earnings also in line with estimates. And that in line part might be the reason why you're seeing the stock trending in the red right now. All right. Christina Parts Neveless, thank you. Scott Croner, I want to get over to you. You've gotten overweight on semis. Want to get your thoughts on that, especially as we do game out the impact of not only tariffs, but it's also retaliatory tariffs and other retaliatory policy measures that could be taken in the midst of this trade landscape. Yeah, Morgan. So, yeah, so we're overweight semis going into Q1.

And I think we feel good about that call on an ongoing basis. No doubt when you look at S&P 500 semis, you have to consider NVIDIA, which is over half of the sector weight. But the broader semi space, in our view, is in really good shape. In terms of fundamentals, we think the ongoing earnings trajectory remains higher and margin improvement also continues to be unfolding. Now, in terms of the tariff action, you know, when we look at semis, we say, look, this is one sector where we've been navigating tariff concerns for several years. So while we don't dismiss it as an issue, we do think that in this particular case, the market has been more willing to adjust its expectations and right size

for, let's call it that second order retaliatory tariff effect. So all told here, we're going to go with ongoing visibility fundamentals that kind of keeps us constructive on this sector. So, Scott, how are you reading the market overall, particularly reading these earnings results that have been coming in? I mean, overall, the market's been pretty expensive. The major indices have seemed to hold up in the face of some headline shocks with geopolitical tensions. And probably investors are wondering, you know, are things getting riskier? Is it worth continuing to bet on fundamentals here? Or do we need to worry about some of the external issues that might come to bear? Well, I think it is getting riskier, and the tariff and policy discussions kind of fold into that.

But, you know, John, going into the reporting period, what do we expect? We expected another solid positive surprise dynamic. If going into Q4, the S&P was going to show 241 of consensus earnings, our view is that we would probably end up closer to 245. Now, at the same time, while we've been looking for a solid positive surprise dynamic, we've also been looking for full year 25 consensus to start migrating down. We're starting to see that as well. So good news now, underlying fundamental trajectories in a pretty good place, lots of macro support.

We're going to have to navigate a lot of the policy aspects around tariffs in relation to that. But all told, the starting point is fundamentals in pretty good stead for the S&P 5. All right. We've got Ford earnings out. We're going to get to those. Phil LeBeau has the numbers. Phil. Morgan, this is a beat on the top and the bottom line in the fourth quarter for Ford, earning 39 cents a share, six cents better than what the street was expecting. Automotive revenue coming in at 44.96 billion. The street was expecting just over 43 billion. Free cash flow of 700 million in the fourth quarter.

An adjusted EBIT margin of 4.4%. And then when you look at the three divisions from Ford, you've got a profit for the ICE, the internal combustion engine business. That division posted a profit of $1.58 billion. Another quarterly loss for the electric vehicle business. That was a $1.38 billion loss, about $37,000 per EV sold in the quarter. Commercial vehicles turned a profit of $1.62 billion. And then there's the guidance for 2025. Ford's guidance, a little light of what many people might be expecting,

expecting an EBIT guide, a profit of between $7 and $8.5 billion in 2025, with free cash flow coming in between $3.5 and $4.5 billion. They still expect to lose money when it comes to electric vehicles, between $5 and $5. billion dollars. No mention in the guidance about the potential impact of tariffs, but you can bet we're going to be talking with Ford CEO Jim Farley about that. He's going to be up with us in just a few minutes, guys, to discuss not only the results, the guidance, but again, what the potential impact of tariffs might be. Guys, I'll send it back to you. All right, Philip. Oh, thank you. Shares of Ford under pressure right now. We'll be getting to that interview in just a moment here. Adam, I want to get your reaction to the earnings we've just got, whether it is

Ford, whether it is Arm or Qualcomm. Qualcomm seems to have turned higher here, but the other two names are down. They're under quite a bit of pressure. Yeah, I think just on the semis, the big issue between Arm and Qualcomm is really it comes down to the multiple. I mean, Arm has an extremely high PE. Qualcomm trains at a much more reasonable multiple. And I really think that's kind of driving the discrepancy in the trading. You're seeing both companies are performing well fundamentally. Arm really had nothing bad to say about what they're kind of seeing in the environment. So I feel like it's kind of more a multiple valuation issue.

On Ford, you know, the auto companies have not had great results. So Tesla's core auto business underperformed. GM saw a steep decline after its report. And now Ford posted, provided underwhelming guidance. And that's before the industry deals with tariffs. And autos are probably more exposed than any single other industry to a potential trade war. So it's a very tough space. They have some of the cheapest multiples in the entire market. So it's not like you're paying up for the group, but there's a lot of noise and anxiety in the autos right now. And that's kind of driving some of the price action.

All right. A very active start to the hour. Adam Christofouli, Scott Cronert, thank you. And right now we got some C-suite changes at Salesforce. Seema Modi joins us with that. Seema. Hi, sales. Hello, John. We have some news here on Salesforce announcing that Robin Washington will become president and chief operating and financial officer. She's a seasoned executive in the software world. She's also been on the board of Salesforce. She will succeed Brian Milham, who has been with the company for over 25 years.

These changes take effect on March 21st. We're watching Salesforce unchanged at this hour, but we will be watching this company very closely, especially in light of recent news about its leaning into AI agents and also recent changes in the reduction of its workforce. Guys, back to you. Same emoti. Thank you. Now let's turn to Senior Markets Commentator Mike Santoli for a look at whether markets are rethinking the current economic growth path. Yeah, Morgan, very resilient action in the market. We continue to rotate towards safety. The volatility index is back under 16. So everything seems to be lining up, but it's not really a clear message of risk on cyclical expectations rising or anything like that. Take a look here. Gold,

obviously, had a great start to the year. And essentially, long-term treasuries also neck and neck with the S&P 500 on a year-to-date basis. So essentially, all these assets are higher. It's not really suggesting to me that the market is positioning for economic acceleration. It's kind of agnostic about the next little bit of economic growth. Now, take a look at the Russell 2000. This would be an area if people really thought that the economy was going to start to pick up a lot of momentum, it probably would start to perform better. Russell 2000 is actually back to where it was basically the day after the presidential election. It's in that gap that it made in the huge pop on November 6th. So you can

kind of trace it on back there. Now, if you take a look, too, at industrial stocks relative to the S&P 500, they've also unwound a lot of their advantages. Naturally, tariff talk is probably a part of this. Many factors here. It also had been an outperformer. But this is the relative trade there. And it's actually looking like it's getting back toward first half last year levels if it erodes more from here. So it doesn't mean that the market has it right and the economy is going to be in trouble. It's much more about go to the sidelines, stay invested because some stocks are working enough to keep the market supported. But I do think it's interesting, especially with Treasury yields declining here as to whether the market is a little bit questioning that sort of acceleration thesis, Morgan.

Yeah, what we're seeing in the industrials is particularly fascinating. And, of course, when we're talking about something like industrials in the S&P 500, you're talking about a lot of global manufacturers. So I would have to think you're right. It's trade and tariff dynamics playing at least some sort of role here. But I've spoken to a number of industrial sector CEOs in the last, call it, two weeks, who've all said they're starting to see signs that manufacturing activity, industrial activity is inflecting higher. We've started to see it in some of the macro data, too. So I wonder how that factors in. For sure. I mean, ISM Manufacturing just a couple of days ago popped back in positive territory. So it is interesting that industrial stocks massively outperformed manufacturing activity over the last couple of years. Now, a lot of it is these are high quality companies. There's some non-cyclical stuff in there. The aerospace cycle for things like GE

have been good. That's the biggest stock in the sector still in the ETF anyway. I do think that it's worth keeping in mind that it seems like you have a little bit of kind of buyers backing off toward the sidelines in this group. All right. Mike Santoli, thank you. We'll see you again in just a little bit. Now we've got a news alert on Google. Deirdre Bosa has that. Deirdre. So Google is eliminating its goal of hiring more employees from historically underrepresented groups, and it's also reviewing some of its DEI programs. In a statement, the company says, we're committed to creating a workplace where all our employees can succeed

and have equal opportunities. And over the last year, we've been reviewing our programs designed to help us get there. We've updated our 10K language to reflect this. And as a federal contractor, our teams are also evaluating changes required following recent court decisions and executive orders on this topic. Now, here Google joins other tech giants like Meta and Amazon that are also rethinking their approach to DEI. This is particularly interesting, though, coming from Google because it's historically seen as the most value-driven of the mega caps.

And it comes just a day after they dropped their promise to not use AI for weapons, suggesting that Google's culture here is changing. And at least part of it has to do with the new Trump administration stance on DEI. Back to you. Deirdre Bosa, thank you. Well, Ford shares falling despite an earnings beat just moments ago. Up next, Ford CEO Jim Farley is going to break down those numbers with us. Now, first on CNBC interview before he dials into the analyst call. Plus, we'll dig deeper into earnings from Qualcomm and Arm and discuss how potential trade war with China could impact the semiconductor industry. Got a lot more show straight ahead. Overtime's back in two.

Welcome back. Let's get a check on Ford. Those shares are falling right now after posting fourth quarter results down about four and a half, almost five percent. Joining us now is CNBC's Philip Boe, along with Ford CEO Jim Farley. Any first on CNBC interview, Phil. Thank you, Morgan. Jim, you beat on the top of the bottom line in the fourth quarter. But your guidance for 2025, that may be where the pressure is coming from. You're forecasting a drop in the full year profit as well as free cash flow and within your divisions. Why the guidance there that is a little cautionary?

We think it's prudent. There's a lot of external factors, as you know, Phil. But our future is really in our hands. We have this cost opportunity at the company that we've talked to you about, and that's really where our focus is. When you look at what's happening with the potential for tariffs, I mean, you guys dodged a bullet with the Canadian and the Mexican tariffs being at least postponed for 30 days. But have you conveyed to President Trump personally how much this would hurt Ford and relative to foreign automakers in this country. Well, look, Phil, as you said, if this persists, this tariff persisted with Mexico and Canada, it would mean billions of losses for the domestic car industry, huge impact for jobs in the U.S.

And the administration knows that as well as congressional leaders. They know that Ford is the most American car company, we produce the most, and they have committed to us to strengthen our industry and not weaken it. So we expect them to work through these policy ins and outs. As far as tariffs are concerned, you know, we want a comprehensive policy, not just towards Mexico and Canada. We understand all the pressures on the border and with drugs. But the reality is, you know, Hyundai, Kia and Toyota can import millions of vehicles through South Korea and Japan without these tariffs. We need a comprehensive look at such a tariff change.

Jim, it's Morgan. It's great to have you on the show. It's not just Mexico and Canada either. It is rising trade tensions between the U.S. and China. You have a China business for China, but also export out of there as well. You've also talked about the quote unquote existential threat of Chinese EVs on the global stage. How are you gaming out business in China and those trade dynamics where that country is concerned? Well, first of all, thank you for the question here. We were profitable in China. We decided a couple of years ago we saw this price war coming in China and we went to a low capital strategy with export into some of our international markets. We now made almost a billion dollars in

China. And actually, the leader of that business is now going to be leading our whole international group. Look, those are very fit companies, BYD, et cetera. They're in a price war now in their home market, but that fitness is going to show up on our doorstep quickly here around the globe. And it's on us to be fully competitive with the Chinese on costs. You know, they get a lot of subsidies from the government,

so we have to work with our government to make sure it's a fair playing field. We're confident that we can do that with the new administration and congressional leaders, but this is a competitive threat we have never seen in the auto industry. Jim, it's John Fort. I want to ask you more specifically about costs. You just got through these negotiations with the United Auto Workers. There's some more labor costs there. Certainly there's the potential of some really uncertain costs in the supply chain with tariffs. How does that affect your cost reduction strategy? Where do you think the Trump administration can help you on the cost line? Well, that's a great point. First of all, our future's in our hands, as I said.

So there are a lot of costs coming into the business, but we still have lots of levers to pull. Where the administration can help us is matching kind of the CO2 requirements for our fleet versus what customers are willing to buy. Right now, the price warrant EVs is largely led because OEMs are selling these EVs and they're reducing the price to cover the volume so they don't have to buy credits for CO2 so they can sell the profitable vehicles like our F-150. And we're getting a lot of artificial pressure on the market on pricing because of the EVs. So how the administration can really help us is have a good policy tariff, a policy around tariffs, as well as really smooth transition for what we're going to do on tax around EVs. But most of all, it's going to be that CO2 policy for the EPA, as well as the ZEV states in California. You talk about EVs, Jim, you guys lost another, what, $1.6 billion in the quarter,

about $37,000 per EV in terms of a loss. You're forecasting another loss of $5 to $5.5 billion next year. When do you finally turn the corner in terms of, okay, we think we have really made moves in terms of eliminating losses with the EVs. Well, we've been, as you know, Phil, we've been number two to Tesla in the U.S. market in EV sales for three years now. We know a lot about the market. So we took a pause and we really invested in new types of EVs that will be coming out in a couple of years. We don't want to continue to escalate, come out with Me Too products in the next couple years and increase our EV sales in the U.S. just to do it. We want it to be profitable growth. So what we're doing is developing a whole new generation of EVs that will be coming out in a couple years and our EV losses at that point

will start to turn around when those vehicles come out. I'm really excited to show everyone what those new vehicles look like, and they're going to be good for our business. We don't want to grow just to grow. We want to grow profitably. All right. Thank you, Jim Farley and our very own Phil LeBeau. Well, from cars to braces, Align Technology earnings are out. Our Seema Modi has those numbers.

Seema. John, this is a medical device company that specializes in orthodontics. Earnings for the quarter came in line with expectations, but its first quarter guidance, weaker than expected, primarily due to currency headwinds. We know the stronger dollar has been a pain point for several companies. Align, which does specialize in those clear retainers, does manufacture in Mexico. And on tariffs, executives are saying here, assuming there is a 25% tariff on goods originating in Mexico, it's still more economical for them to ship clear

aligners to the U.S. from Mexico due to a variety of factors, including the incremental additional freight costs incurred if they were to ship out of their facility in Poland. So interested to see how companies are responding already to the prospect of tariffs, with the line now down about 7.4 percent in overtime, Morgan. All right, Seema Modi, thank you. Up next, a top analyst on the key takeaways from Qualcomm and arms earnings, and when we could see the potential fallout of tariffs on the chip industry. Plus, rare earth miner MP Materials giving back about half of yesterday's gains following China's move to expand mineral export controls.

The company's CEO on what that could do to prices for those key materials a little bit later on Overtime. Shares of Qualcomm and Arm both moving lower here in Overtime. Here's the Qualcomm and Arm both moving lower here in Overtime. Qualcomm just took a leg lower for some reason after they both reported results moments ago. Let's bring in Creative Strategy CEO Ben Beharin. Ben, good to see you. Head scratcher here on Qualcomm in particular because not only did they have beats on the top and bottom line, they also had a strong guide and some particularly strong commentary out of China and the premium tier. I'm wondering what you think particularly of that premium tier performance from Qualcomm

in China, where some people have been continuing to be worried about the consumer. Yeah, I mean, I think they're addressing these concerns about when the China market will actually recover. I mean, I think it's interesting commentary coming from the strength of their premium tier when it looks like some of that did impact Apple when you looked at Apple's quarters last year, particularly to China. I think it's a really good sign that you're seeing momentum there. It also feels like they're guiding and continuing to see that momentum into the March corner. And I think it shows the Chinese consumer is, again, investing in Chinese brands, willing to spend more. And I think there's a real interesting dynamic coming to China where

you're actually seeing the market start to subsidize smartphones. That's happened in January. So even with their bullish guide for coming into the next corner is not really looking at those subsidies as a part of it. I think the subsidies create a nice upside, but just shows they're gaining in China. The China smartphone consumer is definitely returning, but again, with a preference to local brands in the premium tier. Those local brands in China have been first movers in AI application. Not sure how much of that is driving their share gains versus Apple, but Apple hasn't really launched Apple intelligence in China yet. So I have to wonder how durable that share is at the premium tier. Also, what you make of this

post deep seek argument from companies, including Qualcomm, that, hey, actually, that means that these models are small enough to run at the edge. And that means there's going to be demand for our chips. Yeah, I mean, I think that definitely opens up a lot of opportunities. I think having these reasoning models being shown they can run at the edge, which have particularly been compute constrained, is a positive. I think the key now is what do developers do with that, right? I think we're on the cusp of a developer frontier to start to develop these apps, which is going to, again, benefit everybody. You know, the names we're talking about, obviously, here, qualcomm and arm will benefit from that as well handset oems like we do anticipate that to happen but it's still we're still yet to see the concrete example so i think that's still a wait and see but i'm confident the shape of that market

will be more positive when we see more of this ai at the edge but definitely deep seek's going to help create more of that demand for that compute at the edge ben what do you make of the results we just got from arm especially as the company talked about AI demand continuing to drive strong momentum for the ARM ecosystem? Yeah, I mean, I think there's a couple things to point to, right? I think people are sensitive to, and they've been modeling ARM based on V9 royalties, and I think that staying flat was a little bit of a concern. But I think the point that now they're starting to see CSS revenues start to come into play is important. CSS revenues for V9 are actually higher than normal V9.

MediaTek uses that in their new chip. Their MediaTek is also seeing from the same dynamics that Qualcomm has. So I think that's a positive. That's a positive that's going to continue to carryly being tied to the AI trade because their IP seems central to so many of the hyperscalers as they start to make their own ARM CPUs, which includes those ARMv9 and those CSS licenses. And I think the expectation is there. We'll continue to see that grow on a continued upramp through as those chips ship both to their data center and to customers over the course of this year. All right. Ben Beharin, thank you. Good to see you. Well, yeah, good to see you on this Qualcomm move. Maybe a little puzzling after these results, but for more on that, don't miss my exclusive interview with Qualcomm's CEO, Cristiano Amon. That's coming up 5 p.m. on Fast Money.

I will note here on this dip, the stock is up about 14.5 percent year to date. So perhaps some profit taking. Well, we have a news alert on bank stress tests as well. And Leslie Picker has those details for us. Hi, Leslie. Hey, Morgan. The Fed just releasing its hypothetical scenarios for the Fed's annual stress test. These, of course, are the tests that the Fed does every year. Usually those results come out in June that assess really the health of the banking system, make sure they can withstand some hypothetical scenario shocks.

What's interesting about this year's test, I found, is they have this additional exploratory analysis that encompasses what some sort of shock to the non-bank financial sector, things like private credit, some fintech, what that would mean for to the non-bank financial sector, things like private credit, some fintech, what that would mean for the health of the traditional banking sector. And the Fed says that U.S. bank exposures to non-bank financial institutions have grown rapidly over the past five years, and their credit commitments to this sector reached about $2.1 trillion in the third quarter of 2024. So they're adding kind of this layer of analysis where they'll be exploring what a shock to that sector would mean for the health of the banking system as well. They're also doing an exploratory market shock exercise, which assesses if there's some

sort of massive stress in five hedge funds, five hypothetical hedge funds, what that would mean for the banking sector. That was something that they did last year. As for the specific hypothetical scenario that accounts for how much capital these banks need to hold as a buffer, that includes a U.S. unemployment rate that rises nearly 5.9 percentage points to a peak 10 percent, a 33 percent decline in housing prices, and a 30 percent decline in commercial real estate prices, among other things. And then the Fed also said it plans to take steps soon to reduce the volatility of stress test results and begin to improve model transparency in the 2025 stress tests. And then it intends to have that public comment process that was all part of the litigation that was intended by some of the bank lobbying groups that were taking issue with these stress test guys. All right. Leslie Picker breaking it all down for us. Thank you.

It's time now for a CNBC News Update with Kate Rooney. Kate. Hey there, Morgan. Multiple outlets now reporting President Trump has revoked security detail for former Defense Secretary Mark Esper. Esper is the latest former senior U.S. official to have his protection removed since Trump returned to office. Most of them, including John Bolton and Mike Pompeo, had the detail because of ongoing threats from Iran. Earlier today, a parked Delta Airlines plane was struck by a Japan Airlines aircraft that was taxiing at Seattle Tacoma International Airport. In a post on X, the airport said no injuries were reported after the Japan Airlines plane appeared to hit the tail of that Delta jet. The FAA says it's going to be investigating that incident.

And FireAid now estimates fundraising for Los Angeles will top $100 million as a result of last week's benefit concert. said the one-night event headlined by stars including Billie Eilish, Lady Gaga, and Stevie Nicks brought in over 50 million viewers across various streaming platforms and that a committee will put those funds towards short-term relief efforts and long-term preventative measures. Guys, back over to you. All right, Kate Rooney, thank you. Up next, Mike Santoli looks at whether investors may be overreacting to the massive spending plans from Alphabet and other major tech companies. And weight loss remaining very profitable for Novo Nordisk thanks to strong WeGoV sales.

Up next, find out why there may be even more good news in the pipeline for investors. Be right back. Welcome back to Overtime. Alphabet closed lower as investors worried about the company's capital expense hike. But one person isn't worried, and that's Mike Santoli. Mike? Well, John, I'm certainly not worried in terms of whether Alphabet can afford it, whether, in fact, they're going to get a proper return on that investment,

whether this is going to have to keep ramping higher in future years. Those are legitimate questions I think investors are asking. But what this chart shows is that S&P 500 big tech companies in aggregate can absolutely afford to pay out these massive tens of billions of dollars per year in CapEx and research and development out of their cash holdings or operating cash flow. This shows that metric, this CapEx relative to operating cash flow, and then if you add in R&D, that's the upper line today versus back in the late 90s. Back then, it was between 100 and 120 percent of operating cash flow.

That's the build out of the Internet and broadband networks and things were happening at that kind of financial risk. Obviously, you had to raise more equity in debt capital to finance that out of they couldn't do it with with their income right now. Pretty manageable. I do think you have to keep an eye on the buyback rates. Microsoft, for one, has really slowed its share repurchases in the last year or so. Obviously, it's got a lot of obligations. But, you know, this at least means systemically there's not a ton of financial risk and leverage in this entire theme. All right. They appear to be good for it. Mike Santoli, thank you. Exactly. Well, Qualcomm's analyst call set to start in less than 10 minutes from now. We're going to bring you any headlines as soon as they cross. Plus, well, China's expanded export controls on rare earth materials lead to a boom in demand for companies like U.S.

miner MP Materials. We're going to ask the CEO when Overtime returns. Welcome back to Overtime. Rare earth miner MP Materials falling over 3% today, but that's following a 10% gain yesterday after the Ukrainian president said he would be open to a deal with President Trump exchanging American military support for rare earth minerals, potentially among other things. But joining us now in an exclusive interview is James Latinsky,

founder, chairman, and CEO of MP Materials. The company just began production of a rare earth metal and magnets at its new facility in Fort Worth, Texas. Jim, it's great to have you on. And before I start getting into possible deals with Ukraine, actually, the fact that we had China not just slap 10 percent tariffs on U.S. crude and LNG and coal, but also basically continue to curb its exports of strategic minerals to the U.S. seems on China for not only the rare earth minerals themselves, but for things like magnets, which you're now making here in the U.S. Break it down for me. Sure. Well, thanks, Morgan. It's great to be here. And as you said, at the end of January, we announced, we had a pretty big announcement at MP, that we are making metal at scale and magnet, auto-grade magnets in our Fort Worth facility that we built. And that's a pretty big deal for those who want to check it out. There's a fun video on X for those who follow us. But we could have all the rare earths in the world, but if we don't

actually make the downstream product, the magnets, then we're still reliant on the Chinese supply chain, sole source supply chain. And what's amazing, as you know, we've been public for four years. We've been at this for quite some time. We brought back mining. We brought back refining. We're now making metal at scale in Fort Worth and auto-grade magnets. And later this year, we'll be delivering magnets to GM, which is our big foundational customer. So we've really, you know, done our part to lead the way in freeing the American supply chain from this risk. We have a ways to go, but it's very exciting. The refining piece of this has been considered

a very dirty piece of this. It's part of the reason why so much of this supply chain, so much of this process has happened in China and nowhere else in the world. So how are you able to do it here on U.S. soil? Well, you know, it's a great question, but that's not necessarily true. We operate in the state of California. Ninety five percent of the water we utilize is recycled. We have an extraordinary site and we've been at it for quite some time, making it a very environmentally friendly site from dry tailings and some of the other things that make it pretty spectacular. So we can do this. That's you know, we're pretty proud of the fact that we've shown that we can actually lead the way in this supply chain if we're sort of given the time and the runway and the support to do so. Jim, what should investors know about the capital cycles

here? You talk about how rare it is to be able to do this without relying on China in the supply chain. What's it going to take for you to be able to continue to expand? What kind of capital requirements is that going to take? How close to you are to capacity in the facilities you have now? Sure. Hey, John, great question. Well, right now, the facility that we've built can only take a small percentage of our material. And so that's the key thing is we've built can only take a small percentage of our material. And so that's the key thing is we've got to figure out a way to really accelerate this supply chain. We're doing our part. But I'll tell you, you know, the challenge that we face and I don't the rare earth magnetics industry isn't alone. But I think it's a it's a key focal point is, you know, the Chinese effectively sell at a loss in a variety of aspects of the supply chain. And so we are a low-cost producer to the world in rare earths, and we've been able to move downstream effectively.

But when we think about, you know, in this past month, we've seen whether it's Jensen Wong or Elon Musk talking about physical AI, robotics, right? I think, you know, you were just in the last segment talking about Google CapEx and all of the money that's being spent in AI. And, you know, a lot of the insiders, if they're one twentieth right about what we're going to see in the next three to five years in physical AI, we need a lot more rare earth magnets. And north of 90 percent of those today, John, are made in China. And they're competing, too. They want those downstream businesses. And so as we see these headlines overnight about potential export controls or outright cutoffs, there's no question that trillions of dollars of downstream enterprise

value are at risk if we can't continue to grow at MP and others like us. So we had a CHIPS Act. Do we need a MAGNETS Act? Well, you know, there's a lot of ways to get there. I think certainly we've seen some great dialogue out of the Trump administration. We're really excited for the golden age of American manufacturing. I believe them when they say it. And I think we're, you know, I don't know where and how it's going to come, whether it's tariffs, whether it's specific tax credits, but we just want a level playing field. You know, we view China as a competitor and we want to compete against them. And there's no question that they're going to be a ferocious competitor.

But right now we don't have a level playing field. There's a VAT in China. There are a number of things that make it so that we just don't have that. We're at a significant disadvantage. And so what we're trying to say to government stakeholders is if, you know, if the if on the other side of the world, there's going to be significant roadblocks against us. Do what you can to level the playing field and we'll do the rest. So what do you think about President Trump's efforts to perhaps strike some sort of deal for Greenland, which we know is sitting on quite a lot of rare earth reserves. What do you think of the possibility of striking a deal with Ukraine to continue weapons support in return for rare earths? How does that compare to what we in the U.S. are already sitting on in terms of the materials themselves? Sure, Morgan. So great question. When it comes to Greenland and Ukraine,

first and foremost, I hope it's pretty obvious that if there's going to be some kind of activity there, certainly MP Materials will be the most reliable, effective group. We're really the only ones who've shown that we can do this at scale, the full stream of it. This is really hard to do. And so I think we will gladly do our part if the president calls on us to help out in Greenland or Ukraine. But I want to caution you when it comes to critical minerals, rare earths are a segment of that. And when we think about rare earths, it's really important to understand that the ore body matters, the infrastructure matters. And whether it's Greenland or Ukraine, I think the cost of production there is going to be significantly higher, if not multiples higher, what we're already achieving in California. And so the most obvious next step is to work with us, hopefully the state and federal government, to work with us to significantly expand what we're doing in California.

Because I think we can do that at a much lower cost than those regions, although if we're called upon, we'll do our part in those regions as well. But again, this all goes back to whether it's higher cost rare earth production around the world or what we're doing in California. If we can't solve the equation on the Chinese mercantilism issue, on the fact that they have significant government support, that they're willing to sell at a loss. If the you know, if this administration is not able to achieve a level playing field, then none of that matters. And so we're just hoping for that. And then again, we'll be able to work in all those areas to expand the supply. Okay. Jim Latinsky of MP Materials, great to have you on. Great. Thank you so much. Up next, a look at some of the under-the-radar overtime earnings movers you need to know about as we await the analyst calls from Arm and Ford. And later, Novo Nordisk reporting strong earnings thanks to surging sales in its weight loss drug Wegovi. Coming up, Novo's CEO weighs in on whether there are enough supplies of that

drug to meet demand and remain competitive with rival Lilly. Welcome back. Shares of Allstate are moving higher here in overtime after beating earnings estimates, but missing on revenue. The insurer also noting it expects $1.1 billion in losses related to the California wildfires. Skyworks shares under pressure. The semiconductor company posting revenue in line with expectations and beating earnings estimates, but the guidance was a bit weaker than analysts were anticipating. The company also announcing Philip Brace has been appointed president and CEO of the company, effective February 17th. It's a big move there. OZempic maker Novo Nordisk popping after better

than expected earnings, and the stock may have another tailwind heading its way. That's coming up next. Welcome back to Overtime. Strong demand for weight loss drug Wegovy, fueling an earnings beat for Novo Nordisk. Angelica Peebles is here and she has the details for us. Yeah, Morgan, it's been a rocky few months for Novo between the doubts about demand for obesity drugs and some disappointing clinical data. But today, Novo quieting some of that uncertainty with fourth quarter results that came ahead of estimates in 2025 sales growth guidance coming in line with expectations. Novo CEO touting 200,000 weekly scripts written for Rigobi in the U.S. this January, and that compares to only 100,000 this time last year, brushing off concerns that Rigobi is losing ground to Lily Zepbound.

We are quite confident that as we move into the year and we'll be supplying more and more of our starter doses, we can see a nice step up in our volume and serving more and more patients. And the guidance we have given for this year also, you can say, testifies to an underlying significant ramp in our business. So you heard him talk about supply. And of course, that's been a problem for Novo. And the company does expect supply to keep getting better this year. The FDA already lists all doses of Wagobe as available. And the company today is saying that it's in active discussions with the FDA about getting Wagobe off the shortage list. So, of course, the question is, how does this set us up for Lilly earnings tomorrow, especially since we know Zetbound has perhaps even better efficacy, but Novo Nordisk was first to market with its products?

So we did hear from Lilly a few weeks ago at the J.P. Morgan Healthcare Conference. They pre-announced those results, and they faced a lot of questions about demand. Is it slowing? You know, do we see this drop off in demand? And they showed a really interesting chart to make their point that there was a little bit of a blip last year, but demand is still going up, up and to the right. And they made the point at that time to say that it might be a little bit bumpy, but it's still going up. And again, you heard that from Novo today, making this point that people are looking so closely at every little detail, but

overall, this is still early in the market. All right. Angelica Peebles, thank you. Thank you. Yeah. And what an earnings hour it was. A little bit of a surprise, I think, the difference between Qualcomm and Arms results in the semiconductor space, but in a way, the lack of difference in the stock reaction. Really, for more on that, don't miss my exclusive interview with Qualcomm's CEO. That's coming up in just a few minutes on Fast Money. It'll be really interesting to hear what he has to say. We also get Amazon earnings, Affirm earnings, quite a few more companies reporting in this hour, this time tomorrow. In the meantime, major averages finish the day at session highs and yields the lowest since December.

Yeah, and on Affirm in particular, credit and the consumer are going to stand out as a big issue. All right, well, that does it for us here at Overtime.