Closing Bell - Closing Bell Overtime: Rare Earth Mining With MP Materials CEO; Bain’s Private Equity Head On Where He’s Investing Right Now 4/12/23

Episode Date: April 12, 2023

Stocks closed lower and near worst levels. DoubleLine’s Jeffrey Sherman and Cresset Capital’s Jack Ablin talk where to invest right now as earnings season begins. Former Dallas Fed President Richard Fisher discusses this morning’s CPI report that showed inflation cooled slightly more than expected in March. Bain Capital Global Head of Private Equity John Connaughton on where private equity is seeing opportunities around the globe. Meanwhile, MP Materials CEO James Litinsky talks the rare earths supply chain and how geopolitical tensions with China are impacting the global economy. Cowen’s Helane Becker gives her top picks in the airline industry after American Airlines’ worst day in nearly a year. Meanwhile, our Julia Boorstin talks her sit-down with Warner Bros. Discovery CEO David Zaslav and changes to his streaming service while Morgan Brennan breaks down what LVMH’s earnings mean for the high-end consumer and Jon Fortt spoke with cloud company Databricks. 

SESSION LOADS THERE FOR THE NASDAQ. THAT'S THE SCORE CARD ON WALL STREET. BUT WINNERS STAY LATE. WELC today's inflation print and the release of those Fed minutes when we're joined by former Dallas Fed President Richard Fisher. But now let's get right to the market action with our panel. Joining us is DoubleLine Capital Deputy CIO Jeffrey Sherman and Crescent Capital founding partner and CIO Jack Ablin. Guys, welcome. Jack, you from here, now that we've got the CPI print, we've got the commentary from the Fed, you say that earnings are important. So tell me about bank earnings, particularly regional banks. What are the most important signals to watch from here? Right. So, of course, it's deposit gathering. Are they able to gather deposits? Because if they're

not, they're going to have to reduce their loan book. We're seeing over the last two weeks, for example, commercial real estate loans among smaller regional banks down by 30 billion. So what we're watching is not only the banks, we're watching the blowback on credit. So, you know, kind of a couple of pieces at play here. OK. And Jeffrey, you have said the bond market got too negative in January. Now we've had a rate hike. Looks like the Fed isn't ruling out another one and a recession. So what should investors sell or buy here based on how the environment has shifted? Well, I think what's really shifted now is we've been exposed to this banking crisis that we had back in March. And as Warren Buffett was saying this morning, that we're not really out of the

woods yet. And so I think what you really need to think about when it comes to your fixed income portfolio is the quality of the credit that you own here. And so we've upgraded our quality of our credit, migrating up the spectrum in terms of rating over the last, you know, nine to 12 months. And I think that's still prudent to do today. And I just heard the last segment of the last show, too, they're talking about, you know, where the equity market is today. And some of the credit markets are in the same position. You have high yield kind of at the lower end of the spread range as well. And so to us, it's not the time to be adding to riskier positions. It's a time to be a little bit more defensive. And part of that defensive positioning includes owning things like treasuries and government guaranteed debt at this juncture, because really a lot of the risk markets aren't

really pricing in the semblance of a recession. So you have this problem that the Fed is likely to hike in three weeks time. But no one knows the path subsequent to that. There's a lot of data that has to come through. And I want to remind all of your viewers today that the data that we're looking at right now does not really include the fallout of what we've seen from this banking sector today. Yeah, it's a key point, Jeffrey. I mean, Treasury yields were kind of all over the place in general today. I mean, they dropped like a rock after CPI. You had that soft 10-year auction. You had the minutes that investors are digesting as well. But then you also had the Bank of Canada holding rates steady. You had very dovish commentary talking about the need to continue to be stimulative out of the new head of the Bank

of Japan as well. How are all of these different cross currents affecting what we are seeing in the bond market right now? Yeah, well, some of it's coming through the currency markets as well. We've seen the dollar really trade near the low of its ranges as well, once again. And so that's the repricing in general of the U.S. and thinking about maybe that the Fed is kind of done with the hiking regime after the hike that they're likely to deliver in three weeks time. But you also have the other side of the equation, too, where there's talk of the ECB being more hawkish and having to deliver on the other side. So I think that's really what's hitting some of these markets today. But the rates market has really sniffed out the end of this or

the peak in the inflation regime that we've been under from last year. And we saw that really in the peak in rates back in, let's call it early October of last year. And since then, now we're starting to think about the slowdown. And I think that's really what the rates market is showing you today. But there's been a lot of short positioning in the marketplace because, again, the Fed is going to deliver on these rate hikes. But also you have this neuroses in the market that we also have stress in the system. So it's going both ways. The bond market has been volatile for the last, let's call it 15 months or so. And unfortunately, it's probably not going to die down until we get more clarity on what this data looks like. Yeah. Jack, when you do have the Fed in their minutes today talking about a mild recession, are equity markets priced too high right now? And I ask that they're talking about this in the end of the last hour, too. But

I mean, the bursting of the tech bubble back in the early aughts, that, too, was a mild recession. But man, was it painful for stocks? Well, it was. But equities were certainly way overvalued. I think we had price to sales ratio at a rate in 2000 that we had never seen before. So I don't think that the valuations are quite as extended as they are now. I do think that, you know, this is probably one of the most widely anticipated recessions on record. Yes, okay, earnings, you know, this quarter or the last reported quarter down 6 point, call it 6.8 percent, something like that. Normally, a recession corresponds to 20 to 30 percent decline in earnings. But we will get an offset in the lower rates. We think that rates will likely in the 10-year be substantially lower. We run

a copper-gold study that's been very predictive of the direction of 10-year, and it's suggesting that the 10-year rate should be a fair amount lower. So I do think what we may lose in earnings growth, we could pick up in a wider multiple because of the lower P.E. But getting to the following up on what Jeff said, I agree. I mean, for us, it's quality, quality, quality across bonds and stocks. And we agree that we think that the high yield bond market is just really vulnerable now when you compare it to how the banks are tightening their lending standards. Bond investors are not. Jeffrey, to follow up on something else that you said about government backed debt in particular, how should people, particularly in higher tax brackets, Think about municipal bonds here. Yeah, well, municipals have been something where there's been a clamoring for that because of the tax policy out there. And municipal bonds actually do look a fair amount rich relative to treasuries

today. And so on a tax equivalent basis, ultimately, actually, the treasury market does offer a fair amount of better value, especially when you adjust for the credit quality today. So I know a lot of people look at the muni market for the reason that they don't want to go to the cumbersome nature as we approach tax day here of having to fill out all the tax forms for those investments. But ultimately, right now, I think the Treasury market does offer better value than high quality munis today. Okay. Jeffrey Sherman and Jack Ablin, thanks for kicking off the hour with us with all the major averages, finishing the day lower and fading the rally. The recent banking crisis could drive the economy into a recession later this year. That's according to minutes from the Fed's March meeting. These comments come after the inflation numbers that we got this morning, which showed CPI cooling in March down to 5%.

That was the headline number year over year. Earlier on Squawk in the Street, Richmond Fed President Thomas Barkin weighed in on the latest data. And it's cooling and I'm seeing that cool and I'm waiting for inflation to crack. And you're not seeing evidence of that yet? Not yet. All right. Well, joining us now is former Dallas Fed President Richard Fisher. Richard, great to have you on the show. Core inflation actually ticked up month over month. It was in line with street expectations and economists' expectations, but it's the first increase we've seen since September.

When you hear those comments from Barkin or we heard comments from Mary Daly today as well, does it seem like another hike is in the cards? It seems most likely. Again, they have to make sure that they have slayed the inflation dragon. Five percent is nowhere near their two percent target. The direction seems to be in that direction, but the speed with which it is approaching that desirable target, or at least the certainty that it's going to get there eventually, is still pretty slow. So I think there still is a reasonable probability they'll do another 25. I would be advocating for that if I were still sitting at the table. And I think the markets can take this. We have enormous risk right now, as was just articulated in that previous segment, in different sectors. The banks are clearly going

to be more severely audited, severely supervised, are going to be more conservative, particularly the regional banks and the community banks, where about a third of all credit goes towards commercial real estate. So we are going to see an impact of the reaction to Silicon Valley Bank. That's worth a few basis points. There's a debate here between apparently the chairman and the governor's staff, board of staff. But I still think we have a little bit more to go. We have to make sure that the inflation dragon has been slayed. The tightening of lending conditions, the cost of capital going up, we've been talking about it. There's this expectation that it's going to happen. Have you seen signs in the data that you watch on a regular basis that it is actually taking root yet? Yes, I think you see

signs. On the other hand, we don't have this extreme reaction some people thought. You need to look at the Fed's discount activity, the discount window, and the special facility that was just put up as a result of Silicon Valley Bank. But we know that there has been a nice flow in the government funds, that is money funds that are invested in treasuries, short-term treasuries out of the bank deposit world. That seems to have slowed down. So we're seeing some mitigation of the fear. But there's always the risk that one of these institutions somewhere who relied on free money for too long, venture capital, for example, is a great example here. It's just dried up.

Because when money is free, you can look out to infinite time horizons. Also, we're seeing in the tech world, we're seeing it in CRE, commercial real estate. There is still an adjustment, guys. Morgan and John, still taking place. And I don't think it's over. And the market's volatile and vulnerable. And that's what I'm hoping you can put into context for us is really what's that going to look like? Because there are so many shoes that seem like they're going to drop. We talk about the commercial real estate market and the debt that's about to come up pretty soon. Think about how tight the labor market is right now with the unemployment rate just having ticked down and what's going to have to happen in order for conditions to really loosen. I mean, that's going to take a while. What's that going to feel like?

Well, I think it will take a while. And here's the key thing. We have historically low unemployment. We still have a disconnect between those that want to hire and those that are available to hire. If you look at the NFIB data, which I look at, and I suggest everybody do so, the National Federation of Independent Business, these small and medium-sized businesses that are built by women and men who are the backbone of our economy, who historically have created almost 80% of the jobs in this country and hold about half at any one time, they're having

trouble finding employable and affordable labor. Well, if that's the case, that tells you that there's substantial room for the Fed to run a tight monetary policy before they tip the economy over. When I was at the Fed, we thought 6% was the magic number. That is, 6% unemployment, if we got below it, would create inflationary pressure. Well, in the intervening period here, we've had more technological advancement, et cetera, different work patterns. But we're nowhere near what I think is probably an acceptable rate of 5% for four and three quarters. And that gives comfort to somebody whose principal priority here is to make up for the mistake

of letting the inflation horse out of the barn, which is what the Fed did, and bringing it back, corralling it, bringing it back in and getting it in the right direction. We're still not there. Yeah, that horse is frisky at this point, still. And angry. Yes, thank you. All right. Up next, we're going to talk about the deal landscape in tech and beyond when we sit down for a rare interview with Bain Capital's co-managing partner, John Connaughton. And later, American Airlines losing serious altitude after a profit warning. Shares ending the day down 9 percent. We're going to talk to a top analyst about the read through for airline earnings with Delta slated to report tomorrow morning and of course what it means for the consumer. Overtime's back in two. Welcome back to Overtime. Time for a CNBC News Update with Bertha Coombs. Bertha?

Hey John, thanks very much. Here's what's happening at this hour. Memphis area officials just voted to reinstate Justin Pearson to the Tennessee legislature after Republicans expelled him last week for protesting gun violence on the chamber floor. The Pearson vote comes after his colleague Justin Jones was reinstated Monday by a Nashville council. Despite the reinstatements, a group of U.S. Senate Democrats is demanding the Justice Department investigate the recent expulsions of the two black Democratic legislators. The group of senators led by Majority Leader Chuck Schumer and Raphael Warnock of Georgia are asking the DOJ to determine whether there were any civil rights violations when the state House Republicans voted to expel the two members for breaking decorum rules. And Russian leader Vladimir Putin personally approved the arrest of a U.S. journalist. That, according to a Bloomberg report.

Wall Street Journal reporter Evan Gershkowitz was detained in late March on suspicion of espionage, charges that the U.S. government strongly denies, along with The Wall Street Journal. A Kremlin spokesman said it was not Putin's decision. A lot of denials there, guys. Morgan, back over to you. Bertha Coombs, thank you. The EPA proposing its toughest ever tailpipe emission limits today, which could require as many 67 percent, two thirds of new cars sold in the U.S. to be all electric by 2032. EV sales accounted for less than 6% of the 13.8 million vehicles sold in the country last year. That's an increase from 3.1% the year before. A key component needed for

EVs, though, rare earth magnets. MP Materials operates America's only scaled rare earth mine and processing facility located in California, and it's building the country's first magnet manufacturing facility in Texas with a deal to supply GM starting later this year. CEO Jim Latinsky joins us now. Jim, great to have you on the show. Thanks for being with us. Thanks, Morgan. Great to be here. So there's a lot to get to with you, but I do want to start with with these new rules being issued by these new restrictions being issued by the EPA, because when it comes to the electrification economy, rare earths are absolutely integral to that. So what does this mean for you potentially in terms of

future demand for MP materials? Well, Morgan, these new rules are just another data point. I think if we think of the last couple of years and whether it's hundreds of billions of dollars of commitments or states themselves mandating that we go fully electric by a certain year, we've continued to see lots of data points that are accelerating this electrification. And so certainly this is another one. And from our standpoint at MP, the way we think about it is this is happening. It's been decided around the world. It's been decided by our industry. And so, you know, events like today just really accelerate that. And then it's just a question of timing of, you know, how quickly we go from, you know, as you have approximately a 6 percent penetration to,

you know, ultimately 90 plus percent. Yeah. And of course, we talk about rare earth magnets. Yes. You can't not talk about geopolitics and specifically these ever increasing rising tensions between the U.S. and China. We know Commerce Department and other aspects of the Biden administration here are weighing rare earth supply chain and what that's going to mean in terms of trade flows with China. But China, too, we had reports just last week considering the possibility of an export ban for rare earth magnet technology. What does that mean for the supply chain, which is almost entirely in China or at least aspects of it? Well, first, Morgan, I don't think we should be particularly surprised or shocked by those kinds of news reports. And if that ultimately becomes the case, we're in an era of, at a very minimum, this is an era of very significant strategic competition between the U.S. and China, if that's

all it is. And so, as we all know, we've announced pretty strict controls on certain semiconductors. And so we are certainly going to utilize the strategic ways that we can utilize to leap ahead in this new era. And so I think we should fully expect that the Chinese are going to utilize the strategic ways that we can utilize to leap ahead in this new era. And so I think we should fully expect that the Chinese are going to do the same for industries that they dominate. And they have been very effective in taking control of the critical material supply chain, whether it's rare earths or a number of the other critical materials. Ultimately, when you think of the steps of the supply chain, it really all has to go

through China. And what that means is that as we put out these mandates to electrify, you know, ultimately, we're trading sort of that oil dependency on the Middle East for some kind of mineral dependency on China or adversaries. And I think it's important that we recognize that and that as we rightly so push the world forward to be electrified, that we are thinking about these areas. And that's what we've been focused at on MP. You know, one thing I would say is the, you know, the IRA and the CHIPS Act, we've certainly had a lot of nice starts from the government as far as pushing this forward. But the IRA in the 700 pages of that act didn't even mention rare earth magnets. And so I do think

we have a long way to go on the policy front, but private industry is going to do its part. Yeah. And the actual manufacturing of these magnets, the vast majority of it does happen in China. And we're talking about magnets that go into everything from EVs to iPhones to fighter jets and missile systems when we're talking about this technology. So I guess it raises the question, how quickly can you get this facility, this manufacturing, processing and manufacturing facility in Texas up and running if we were to see relations between the two countries deteriorate further? Yeah. Well, the good news on that front is we've been working, you know,

maniacally in parallel to get the refining online at Mountain Pass and the magnetics facility that you showed earlier online at Fort Worth. We broke ground on that facility last year and about a year ago today. And that facility is that the building is the shell is done. We're starting to put stuff on the inside. It'll take us a little bit of time to get ramped up. But we're very excited about that. We've been working quickly. We've built an incredible team out there.

And as you've stated, we have GM as a foundational customer and we'll have other customers in auto and other industries, whether it's drones, robotics, power tools, defense purposes. And so anyway, that facility will be online in the coming year or two. And then we'll have that capability, that full supply chain will have been restored in the United States of America. But of course, that will be just a fraction of the overall rare earth magnets that are needed for the electrification of the world. So we'll

continue to grow the supply chain in all levels. Yeah. The last time you and I spoke, you were in Japan. On the heels of that, you struck a deal with Sumitomo to supply into Japan. So how does that speak to how you're balancing future supplies into the U.S. versus allies? Well, the Japanese are as focused as we are. You know, they have a number of magnet makers. They certainly have the competition issues with China. And so you can imagine that Japanese industry is very focused on this supply chain. Their magnet makers are relying on China today. And so the Sumitomo deal is for us the ability to expand globally and satisfy some of that supply chain. And ultimately, we work for our shareholders, so we'll do the

right thing for our shareholders. But we need to grow the supply chain substantially. And so we need to get more supply online, but in all aspects of this, you know, from the mine all the way through magnet factories. And, you know, the great thing about Sumitomo is they can be a great partner throughout Asia to, you know, help us grow other aspects of the supply chain. So we're looking forward to, you know, other aspects of that relationship. Okay. Jim Latinsky, the CEO and chairman of MP Materials. Thanks for joining me. Thank you. As he's speaking, stock ticking higher in after hours trade. All right. And now after the break, we are talking streaming to the max. Warner Brothers Discovery just unveiling a refresh to its streaming service. We're going to hear what

CEO David Zaslav said about the strategic move next. And meanwhile, don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back to Overtime. Warner Brothers Discovery just unveiling its new streaming service called Max. Julia Borsten spoke with CEO David Zaslav in the last hour. She joins us with the highlights. Hi, Julia.

That's right, Morgan. David Zaslav announcing that Warner Brothers Discovery's combined service, it will launch May 23rd with three tiers. The main ad-free one will cost $16. Now, that's the same as HBO Max costs now, but Max, this new app, will have additional content from Discovery. Zaslav telling me that they aim to use all this additional content to reduce churn and also to expand the app's reach. We restructured our company. We made a lot of decisions. Some of them may turn out to be wrong, but that's in the past now.

Now we're off and running. It's not just with Max. We're on offense and we're a pure content company. And we have all these tools because we have all this content that people love. Zaslav also confirmed in our interview that they do plan to launch an ad-supported free version of the Max app. He also indicated that there are many more changes coming to integrate live news and sports. And he said about the upcoming NBA rights negotiations that they will hopefully have the NBA for the long term. So guys, we'll have to see how that plays in to the negotiations because the NBA rights are seen as essential for so many players right now. Well, I think I heard

Warren Buffett say on our air today that maybe the streaming business isn't such a good business. Anything Zaslav's doing here going to change that calculus? Well, I asked him about that exact comment from Warren Buffett and Zaslav said, look, it is not an easy business. It is a hard business, but they really believe that they have the right assortment of brands to really be a competitor in this space. And I think what's interesting here is they made a lot of commentary about having kids content, saying that HBO alone is really focused on adults. It's not seen as being an app really for every member of the family. But having that kids content, having the HGTV and the Food Network content that is seen as being really good to retain customers, that they have the balance of different types of shows to be able to compete in a world which he

acknowledged is really tough for streamers right now. He didn't want to disagree too much with the balance of different types of shows to be able to compete in a world which he acknowledged is really tough for streamers right now. He didn't want to disagree too much with Buffett. Julia, I mean, I realize this stock rallied dramatically to start the year before today. It was up something like 55 percent, but it did end the day down about 6 percent. Any sense as to why? It seems like there's been a lot of hay made about the dropping of the name HBO from the service. Yeah, there were a lot of questions here in the room from the journalists who were asking Zaslav about the color. They switched from purple to blue.

They dropped the name HBO. What Zaslav was saying and what some of the other executives here were talking about is the idea of trying to make this as broad a brand as possible, not just about the premium content that within the app, they would be elevating the HBO name. So people like me who are big fans of the show Succession will be able to find it no problem, but they want to make sure it's sort of a bigger tent, if you will. So I think it's going to be a marketing challenge for them to explain to current HBO Max subscribers that they could switch over to the same cost, more content. They could switch over to this new app, but then also to market this new brand and explain what this new brand means in a crowded streaming landscape. Yeah. From HBO Go to HBO Max to now just Max. Julia, helping us keep track of it all.

Yes. Julia Boor Borsten, thank you. American Airlines having its worst day since June after issuing weaker than expected Q1 earnings guidance. Up next, the top analyst on what that could mean for Delta when it reports results tomorrow morning. We are back. Welcome back to Overtime. American Airlines sinking to the bottom of the S&P 500 today after the company issued a lackluster outlook ahead of its earnings next week, turning in its worst session since June of last year. Tomorrow, we get results from Delta. Let's bring in Cowan Managing Director Helene Becker, who covers both companies.

Helene, it's been a good run for a lot of the travel industry. Is this signaling an end to it, or is this just something that American itself has to figure out? Hi, John. Thanks very much. Good to see you. I think it's a combination of both, actually. I think American hadn't updated guidance during the quarter. And in the end, it was actually a couple of cents better than what we were expecting. But I've noticed over the last two or three weeks, revenue estimates from my peer group had gotten significantly higher. And so there was a fair amount of disappointment. And then to your second point, there is concern that the consumer is tiring.

And while we think we're going to have a really strong second and third quarter, especially in international travel and record revenues, I think costs are up. So we're not 100 percent certain we're going to have record earnings. And we are definitely worried about the fourth quarter. So we just got the CPI report today and travel was really expensive in CPI. So is this in a way just a reflection of the airline labor costs being stubbornly high and in fuel costs, even though they're easing perhaps for many of us in general, not enough for airlines? Yes. So what you say is 100 percent accurate. In order to attract and retain, airlines are having to raise salaries across the board. And that's not just true for the

union groups like pilots and flight attendants and so on. They're also having to raise rates in corporate to attract people. So some of those people who are getting laid off in tech are finding jobs in other industries but maybe not at the wage rates that they had received prior. Then to your second point fuel costs are very volatile and are up a lot

and then you have high maintenance costs because of delivery delays and- the other thing that we've been talking about but it's starting to get some. Meaningful notice by others is is the lack of air traffic controllers in the New York area. And this does not bode well for the summer at all if you're traveling from the New York area airports because the government asked the airlines who serve the market, American Delta United and JetBlue, to cut capacity by 10%. Well, demand is up about 20% over where we were in 2019.

And capacity is down even before this 10%. So you have this huge mismatch between seats available and seats wanted. And that means only one thing. Fares are going up. And that's what you're seeing in the CPI. You saw, I think, year over year increase, but maybe a sequential deceleration. But in general, I think that's why we're forecasting really strong revenue growth for the summer. So, Helene, very quickly, very, very quickly, all of the airlines got hit so hard today. We have Delta earnings tomorrow morning. Is there a name you buy right now as we come into earnings season? Well, yes. So our top three picks are United, Delta and Copa, which is the

Panamanian based airline. And so, yes, I those are the three names I would buy for their strong international exposure. Remember, Morgan, really quickly, last year, the government did not eliminate testing to come back into the U.S. until June. So you had very strong domestic, but you didn't have strong international because everybody had already made their summer plans by the time the Biden administration removed those restrictions. So we think there's really strong international demand. And we think Delta and United will specifically talk about that this week and next. Great. Helene Becker, thanks for joining us. Thanks.

Well, LVMH's better than expected first quarter sales revealing a tale of two consumers in the luxury goods market. What that could mean for high-end spending when overtime returns. Welcome back to Overtime. Despite geopolitical and economic uncertainties, it's a strong start to the year for LVMH. Shares finished the day up 3.5%. Here's the story. The world's largest luxury company reported $21 billion dollars in sales for its first quarter earnings.

That represents a 17 percent increase organically year over year. Shares of Estee Lauder and Tapestry also having a good good day today. Those traded higher as well. But for LVMH, which owns brands like Louis Vuitton, Tiffany and Dom Perignon, the standout of the quarter was China. The company saw, quote, significant rebound thanks to the lifting of covid lockdowns in that country. But as the luxury consumer is making a comeback in China, concerns are brewing on the health of the high end consumer here. So LVMH is a CFO telling this Financial Times that sales growth in the U.S. has stalled. It is not growing as fast as two years ago. So LVMH's CFO telling the Financial Times that sales growth in the U.S. has stalled. It is not growing as fast as two years ago.

Credit card data from Barclays flags a pullback on goods spending, the sharpest decline coming from the high-end consumer, as it's the most affected by current economic headwinds. Bernstein is also anticipating slowing discretionary spending for, quote, nice to have categories, including fashion, apparel and entertainment. And particularly if a white collar recession, which we've been talking about, John, actually takes root. I think this is pretty telling because in times of economic uncertainty, you tend to see this bifurcation among the consumer and the higher end tends to do better. But maybe not this time. Maybe not. Maybe not. But, you know, Lamborghini is selling hybrids, so you never know.

Up next, the CEO of startup Databricks on why AI could soon be a big factor in the fight against inflation. We'll be right back. I spoke just a couple hours ago with Ali Godsi, the co-founder and CEO of Databricks, a data and AI mega startup that's raised $3.5 billion, was valued at $38 billion after its last round two years ago. Now, the company today released new AI resources that companies can use to train chatbots for commercial use. Ali said he believes AI, which has been driving customer adoption of Databricks, is going to be a deflationary force sooner than you might think. With AI, with large language models and the use cases that we are seeing our

customers doing, it's highly, highly deflationary. So the question is, how long is it going to take before this starts really affecting the job market? And I think it's going to be much faster than people think. I can't exactly, I don't know exactly what's time. I don't have a crystal ball. Is it a year? Is it two years? But people are going to be so much more productive, right? And that's going to put pressure on prices and prices are going to come down. So that's actually going to help us significantly with what's going on. So I actually think we might soon get into one of the most crazy productivity periods that mankind has ever seen because of this. It's kind of like the spinning, Jenny, you know, in the 18th century industrial revolution. That's about to happen.

Wow. Well, we'll see. We're going to get another take on this industry and data tomorrow. An exclusive interview with Snowflake CEO Frank Slootman. Which is going to be must watch TV. It is fascinating because when you think about when automation came to the auto manufacturing industry and those factory floors, it did actually increase productivity. So there are, and that's just one example, but there are these, there are these moments in time where technological capabilities that everybody was afraid was going to take jobs, kill jobs,

transform society did, but not the way that was anticipated. To get him right here, he is expecting it's going to take some jobs and in the process, you know, put some downward pressure on certain wages. But at the same time, it's going to just really turn things on their head. I think Kathy Wood would agree with him, by the way. Yes. Well, he and Kathy Wood are very different, though I bet you she would buy his stock if he were public, but she has not yet. We did talk about that, too, though. He's happy not to be public right now, but also eyeing the possibility in the future. Not right when the market opens

back up, but it sounds like maybe not far from then. Yeah. And of course, that is another we were talking about dealmaking and how frozen certain aspects of that are right now in the show earlier with Bain, with our guest from Bain, but the IPO pipeline has been so seized up as well. So it'll be interesting to see when that thaws. I also talked about deals with Olly Gutze. He said that they're doing more acquisitions now because a lot of the smaller startups that aren't as well capitalized as a Databricks or as a Stripe, the CEOs and CTOs are starting to have conversations about what if we got together. So that process, as John Connaughton said, it's rolling. All right. In the meantime, all the major averages did reverse course to end the day lower. We get PPI tomorrow. We also get Delta and Fastenal earnings. So that is going to do it for us here at Overtime. Fast Money starts now.