Closing Bell - Closing Bell Overtime: Starbucks Earnings, More DeepSeek Fallout, and Musk Power Dynamics Headline the Hour 1/28/25

Episode Date: January 28, 2025

We kick off with Paul Hickey of Bespoke Investment Group and Charles Schwab's Kevin Gordon analyzing key market movements and economic trends.Starbucks reports earnings as new CEO Brian Niccols changes come into sharper focus; Wedbush analyst Nick Setyan breaks down what's ahead. F5 CEO François Locoh-Donou on the latest quarter. Commvault CEO Sanjay Michandani on protecting AI data and the implications of DeepSeek. Josh Wolfe of Lux Capital joins to discuss U.S.-China competition, defense tech, and the future of critical investments.Walter Isaacson shares insights into Elon Musk’s evolving influence in politics and business, bringing his perspective as Musk’s biographer. 

That bell marks the end of regulation. Sky Harbor Group winning the closing bell at the New York Stock Exchange. Trinity Capital doing the honors at the NASDAQ. And I said to watch NVIDIA for the bounce at the end of yesterday's show. NVIDIA mounting a comeback after Monday's plunge, helping drive the tech and NASDAQ higher as the Fed meeting gets underway and a slew of mega cap companies set to report earnings in the coming days. That's the scorecard on Wall Street. But winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Well, coming up this hour, the latest read on

Starbucks and Brian Nichols' efforts to turn the company around. We're going to get results from the coffee chain in just a few moments. Plus, F5 is due out with earnings as well after a solid year of gains for that stock. We're going to hear from the company's CEO before he talks to analysts on the call. And we'll talk to Elon Musk biographer Walter Isaacson ahead of Tesla's earnings tomorrow as Musk balances his role at the automaker with his growing influence in Washington. Let's get straight to the market action now with Bespoke Investment Group co-founder Paul Hickey and Charles Schwab senior investment strategist Kevin Gordon. Guys, happy overtime.

Kevin, it is getting into the software section of earnings season. And today I think I saw my first real wobble from the strong dollar. Commvault had a solid beat, strong recurring revenue and constant currency when it reported this morning. The stock got slammed after the open. I think it was down as much as 11 percent. Analysts blamed currency adjustments. It rebounded, ended, I think, a percent higher. How closely do we have to watch the dollar's effect on these reports?

Are there opportunities? Yeah, I think the dollar becomes a pretty dominant factor. Maybe not as much in level terms, but sometimes from a stock price perspective, the change in the dollar and when it gets really rapid either to the upside or the downside, that's when you tend to see more of an effect and an impact for the stock price. In terms of earnings itself, there's always going to be currency adjustments at play anytime you get a relatively large shift up in the dollar like we have over the past several years. If you zoom out and you look at the dollar and look at maybe a five to seven year chart of the dollar, it's been pretty strong. So it's not as if this is a new story where we've had dollar strength. I think the key moving

forward is how much do we stay in a dollar strong era or does that start to shift? And I would think that if you look at the policy landscape that's been put out there, at least from a Washington, D.C. standpoint, there's probably not a lot that suggests material dollar weakness, especially from a tariff and immigration perspective. So I think that it's at least here to stay with us now. But I don't think that it's a, you know, it's this overall wet blanket on the market. I think that companies can continue to, you know, kind of move out of that maybe slump that's associated with it. It's very similar to what we saw in the 2022 period, where, yes, you did have a pretty stressful period from dollar strength, but eventually companies were able to move out of that. Okay. Paul, have we moved from a period where we're constantly talking about the Fed

and the impact of yields on the market to the deep seek and AI era and the impact of China on the markets? Yeah, I think the best news about this deep seek is that we're not talking about tomorrow's Fed meeting. And when it comes to the Fed, they're widely not expected to do anything tomorrow. And that's a good thing. The more, the less the Fed has to do, the better it is for the market in our view.

And so, you know, we constantly talk about, oh, maybe the Fed's not going to cut as much going forward. Well, if they don't need to cut, that's a good thing. And as far as the deep-seek news over the weekend, we've seen some major disruptions in the market over the last two days. But at the end of the day today, there really hasn't been that much of an impact on a market-wide basis. And what's really interesting is if you look at the market cap lost in Nvidia over the last two days, it's about equivalent to the market cap gained in Apple, Amazon, Meta, Microsoft, and Tesla, I believe,

and Amazon, those five. So it's been about equal. So it's about a shift of the advantage from one to the other. And I think overall, the the the cheaper AI trends that we're seeing are have been sped up. But that's a resounding positive for the economy as a whole. So rotation within the mega cap tech names. Kevin, want to get your thoughts on this? What's going to matter more here in the near term? Is it the Fed and the impact of that decision and commentary we get from Powell, et cetera, on the bond market? Or is

it going to be earnings, particularly some of these mega cap tech names that have driven the broader S&P? Well, the easy answer is yes. I think all of it probably. No, I mean, I think from a Fed perspective, now that they've started to introduce and do more scenario analysis as to what potential impacts there are from a policy perspective. I think that becomes important. And especially, you know, the last press conference when Powell started to talk more about tariffs and really allude to the fact that, you know, more members were starting to implement that into their analysis and how they think about the economy. I do think that's important. But from a broader, you know, macro standpoint for

the market, you know, Paul makes a really good point about how the theme around what is being pinpointed from the investor community in terms of whether it's what is cheap in market terms or what's cheap in AI terms and what's cheap in CapEx spend terms. That becomes really important. It's actually a shift, I think, that predated what has happened even yesterday or over the past couple of weeks, where even if you back it out six months, there has been a pretty clear shift in leadership out of tech, specifically tech, the sector, and maybe more towards communication services and consumer discretionary. So even within the big three that are typically considered that growth trio, you're seeing a pretty meaningful split there. And of course, tech has been weighed down a lot more by semiconductors, but that's a meaningful chunk of that sector. So I think that's going to be an important story and theme moving forward is within earnings season. If there is more of a, you know, of a spotlight being shown specifically on CapEx trends, then I think that's probably going to be a differentiator as to who really carries this next leg of the bull cycle.

OK, hang tight because we have Starbucks earnings. Those are out. Courtney Reagan has the numbers for us. Hi, Court. Hi, Morgan. Yep. So this is the fiscal first quarter for Starbucks. Remember, the first quarter of Brian Nicol as the CEO reporting earnings per share of 69 cents. That beats the street, which was expecting 67 cents, so two cents better. Starbucks revenues also stronger than expected, 9.4 billion. The street was expecting a little more than 9.3 billion dollars. Global same store sales down 4 percent. The street was expecting a little more than $9.3 billion. Global same-store sales down 4%. The street was looking for that number to actually come in worse, down 5.5%. So still down,

but better than expected and better than what we saw for that metric last quarter. Transactions down 6%. Average ticket up 3%. China, again, also weak. Same store sales there, down six percent. So down more in China than overall for that whole global number to be down four percent. You can see your shares, though, popping a little after hours. I think expectations a little low going into this print. And we know that Brian Nicol is just one quarter into the strategy that he's going to work through. We'll come through the release, see what else we have for you. Back over you. All right, Courtney, thank you. Shares are up three and a half percent right now. And Paul, it did seem like coming into this report, there was an expectation among investors that you could see another kitchen sink earnings result

here. So the fact that it was a little bit better than expected and global same store sales, well, down four percent were better than expected, tells us what? Yeah, I mean, I think, like you said, expectations are very low. Nickel is coming in. He's putting his stamp on the company. We saw some management changes this morning and, you know, bringing in people from Taco Bell. But I think the overall trend, they're going to improve the situation within the stores and the brand problems with Starbucks. The fact that same-store sales were down in every region of the world showed a brand problem with the company, and his job is to improve that going forward. And some of the steps that we've heard about,

while they sound small, should make the store seem more welcoming. Okay. Yeah. Paul, Kevin, thanks to you both. Thanks. In the meantime, F5 earnings are out, and that stock is spiking up about 14% right now in overtime. F5 reporting a fiscal Q1 that beat on the top and bottom lines, a Q2 guide that beats on the top. Companies raising full-year guidance on both the top and bottom lines. Revenue came in at $766 million versus $715 million expected.

Earnings per share, $3.84 versus $3.36 expected. Now, for Q2F5, guiding to a revenue range of $7.05 to $7.25 million with the full range above the $703 million consensus. Now, unadjusted EPS guiding to a range of $3.02 to $3.14 versus $3.21 expected. We are going to hear exclusively from F5's CEO, Francois Locodonu, on this quarter coming up on overtime before the analyst call. We have more earnings to bring you. Corvo results are out and that stock is jumping as well. Kate Rooney has the details. Kate.

Hey, Morgan. It was a beat across the board in the quarter for Corvo. It looks like that stock jump, more than 20% higher after hours, is due to a really strong adjusted EPS number. A beat in the quarter by 41 cents on EPS. That was on revenue of $916 million. And then guidance looking strong as well for their fiscal Q4. Also a margin story here.

Gross margins for the quarter coming in at 42.7%. But one of the headlines here, they also divested the silicon carbide business. They say that's going to support margins going forward. High 40% gross margins in what is typically a seasonally strong quarter of fiscal overall quarters overall fiscal year 2026. They say there will be additional gross margin improvement into fiscal year 2027. You can see the stock reacting strongly to that news, as I mentioned, up more than 20 percent now. Guys, back over to you. All right. Kate Rooney, thank you. Let's turn now to senior markets commentator Mike Santoli for a look at the ebb and flow of tech's leadership as the Nasdaq rebounds today by more than 2 percent. Mike.

Yeah, Morgan. So the overall market has remained in its uptrend, even with the recent wobbles, mostly by rotating around. And it's trying to prove that it can continue to make progress without the outright strong, consistent leadership of technology. This is the S&P excluding technology ETF. And you see it's actually now outperforming on a six-month basis, has opened up a little bit more of a lead than we've seen in many periods here. Now, of course, it's happened like that. Technology is about 30% of the S&P 500. Of course, software and services and semis are in there. Semiconductors really surrendered their leadership role going back to last summer, June or July.

And so the overall market is trying to show that it can kind of get by without the full, perhaps, leadership of tech. Of course, if it resumes that leadership, it's all the easier for the S&P to keep making new highs. It's now within about 1 percent of its old all-time high from Friday. Take a look here, too, though, at what might be an emerging group of outperformance from health care. And this is semis versus health care over a one-year period. Obviously, not a lot going on in health care last year, one of the weakest areas. But you have seen this upturn. Sometimes laggard sectors in the prior year do get a little bit of a bid to start a new year, though this is starting to flash along some technical signals that actually that downtrend's been broken.

So worth taking a look there to see whether there's some traction in this trend. Obviously, health care, a very diverse and sort of unwieldy sector. But as a collection, it's starting to perform better, Morgan. Yeah, and along those lines, the IHF having the best month since December of 2021. I mean, I hear health care and I hear health care outperformance, and I think it's defensive. It's a safe haven. And yet consumer staples continue to be one of the biggest market laggards. So what is fueling this move we are seeing in health care?

Yeah, I would say health care, it's a little bit of a chameleon type of a group because within it, you obviously have defense like old pharma is without a doubt defensive. And then, of course, a lot of stuff is policy influenced or dependent on government payments and things like that. But there's also growth tech, obviously biotech and medical devices tend to be growthier or at least even, if not cyclical, then they have longer-term trends they can capitalize on. So I don't necessarily see outperformance of health care so far this year as some kind of adverse signal for the overall economy.

Consumer cyclicals, industrials continue to suggest that there's not a lot of worry within the market about a faltering economy. Yeah, we'll keep an eye on health care, too. You've got the RFK Jr. confirmation hearings in the Senate kicking off tomorrow as well. Mike, we'll see you a little bit later in the hour. We've got much more after hours action on the way too. Up next, we'll talk to an analyst about the Starbucks results and what he wants to hear from CEO Brian Nicol on the call. Plus, access you'll only get on overtime. CEO of F5 gives us his first comments on those results that have the stock surging in overtime, up double digits. Overtime's back in two.

Welcome back. Starbucks shares are higher in overtime after reporting a beat on the top and bottom lines. Let's bring in Wedbush Securities Managing Director Nick Satyan. Nick, I want to get your thoughts on this print because we were talking about it just a few moments ago, but expectations certainly seem to be low going into it, and they exceeded those, and the stock is popping in response. Your thoughts, especially with Brian Nicol at the helm, and a lot baked into the strategy he's starting to lay out. Sure. You know, a lot of this beat came from the international segment, right? I mean,

the North America transactions were down 8 percent, which was more or less in line. Well, it's surprising to me that average check rose is 4%. And, you know, to me, you know, the only way to really drive transactions is for that average check to go up a little bit lower. You know, 4% average check growth is actually a bit concerning to me. Bottom line is they did beat on EPS. Again, Lowry's driven by that operating margin in international. And the North American margin was basically in line. So what I want to hear is really what he's planning to do around driving transactions in the U.S. and North America. Ultimately, that's what's going to drive

the stock and not so much international. I want to dig into what you just said a little bit more. You said it's concerning to see that transaction volume, the check size go up. Is that because it indicates that prices remain elevated and prices then in turn actually need to come down to see more activity and more foot traffic come to the stores, particularly in places like North America? Exactly. From my point of view, you know, one of the biggest issues that Starbucks faces is that prices have gone up too much. And the fact that prices were up 4 percent, average check was up 4 percent in the quarter, while transactions were down 8 percent again in the U.S., that's a big concern to me. I think one of the biggest drivers of transaction growth is going to be, you know, their ability to rein in price increases and overall average check growth a little bit more. Nick, when Brian Nickel was named CEO,

Starbucks stock was at around 75 bucks. Right now, it's close to 105 in overtime. You have a $95 price target. So how much, you know, Nickel magic is already priced into this stock, even at this level, even though he hasn't yet gotten started? If you're buying it here, again, above your price target, what are you betting on? And how long do you have to expect to Starbucks getting back to that sort of pre-disaster algorithm, growth algorithm of low to mid-teens annually PS growth. And one of the biggest growth engines, still a big question mark, which is China, right? And then two, unit growth in the US, to me is another big question mark.

Can you really sustain sort of low to mid-singular unit growth rate when your transactions are under pressure the way they are? And so really the main driver of transaction growth or revenue growth is gonna have to come down to, you know, North America comp. And so it's difficult for me to see a path toward sort of low to mid-teens annual EPS growth without China growth returning in a big way and without unit growth in the US

sustaining in that sort of low to mid-single digit rate. I think you may give them another sort of quarter or so. But, you know, starting in fiscal Q2, that's when the easy compare start. Right. So, you know, we need to start seeing some results within the next quarter or two. Otherwise, I think the stocks are going to come under pressure. Okay. Nick Setian, thanks for joining us. Thanks for having me. Let's turn back now to F5. Those shares are jumping right now in overtime, up about 12% after the company reported results and guidance that beat analysts' expectations. I spoke exclusively with CEO Francois Locodonu this afternoon about what drove the performance. A more stable IT spending environment was a factor in our quarter. We're seeing customers more willing to spend to their budget. But the most important factor is that we have fundamentally

reshaped F5 for the hybrid multi-cloud architectures of the AI era. We are unique in our ability to address the complexity of securing applications across multiple clouds, delivering applications across multiple environments. And the result of that is we are seeing large enterprise customers consolidate spend on F5. A good example of that, this quarter, we had a very significant expansion. It was an eight-figure deal with a large financial services organization that chose to consolidate multiple security solutions on F5. I also asked him about the potential impact of DeepSeek, that Chinese AI model that has investors reassessing the profit potential of AI infrastructure and language models? If there are more open source models that people can use to develop AI applications, that's phenomenal news for all of us. And if, in fact, training models is cheaper than we thought,

that is also going to be excellent news for the rapid proliferation of AI across enterprises. For F5, our opportunity in AI is growing because it turns out that building, training, and inferencing AI models requires massive movement of large amounts of data at speed and securely. And it so happens that ADCs, application delivery controllers, the technology category that F5 has pioneered and lead, are really, really well positioned to move large amounts of data and do so securely. And so we're seeing opportunities in AI specifically to move data between AI applications and data stores or move data between data stores and AI factories. That F5 earnings call set to get underway in about 10 minutes. Interesting that for F5, the pent up enterprise demand from customers who were delaying purchases is outweighing the currency impact with the strong dollar.

He did tell me demand was strong both inside and outside the U.S. Really interesting. Of course, the stock, as you mentioned, spiking right now. A number of cloud software and cybersecurity stocks that are getting a big bounce today as well after Monday's tech tumble. Up next, we're going to talk to the CEO of data protection firm Commvault about how a rethink of AI could benefit companies in his space. And a new chapter of U.S.-China competition. Venture capitalist Josh Wolf is going to join us to talk about the defense and national security implications of DeepSeek's emergence on the scene when we come back. Welcome back.

Chubb earnings are out. Contessa Brewer has the numbers. Hi, Contessa. Hey there, Morgan. Yeah, look, big headline is that this was Chubb's best performance, the best year ever in company history. For the quarter, they came out with earnings per share that beat expectations, $6.02 adjusted versus the $5.44 that the street was expecting. The revenue missed here slightly. The big news, too, we're getting our first estimate of wildfire damages.

Chubb says they anticipate $1.5 billion that these wildfires in California will cost them. That's pre-tax. And then for last quarter, we know that Hurricane Milton cost $607 million, pretty sizable catastrophe losses here, especially in California, where we know that Chubb had been working to reduce its exposure. But the wildfire is so extreme and certainly hit the surplus lines, those excess and surplus or high net worth individuals. So we'll keep our eye on this. The response from the CEO is that this is top of mind responding to the customers there in California. You can see the stock is up two tenths of a percent at this point, guys. Yeah. Tough financial toll there as well. Contessa, thank you. Well, the Nasdaq bouncing after yesterday's slide, led in part by software stocks like UiPath, GitLab, Zoom Video and Confluent.

Cybernames also up sharply. CrowdStrike was the top performer in the Nasdaq 100. Meantime, data protection company Commvault popped in the pre-market after strong third quarter numbers and guidance before giving up gains and then rallying again into the close. Joining us now for an exclusive interview is Commvault CEO Sanjay Merchandani. Sanjay, good to see you. Just talked about the roller coaster ride again for the stock, but tell me about what powered this quarter, particularly large enterprises, which we just heard a bit about from F5. Thanks for having me, John. Good to see you. It was a great quarter by all metrics. Whether you look at our top line revenue growth, you look at ARR, you look at subscription ARR, SaaS ARR, our numbers grew across the board.

And it was fueled by business across the board, across segments. So our large enterprise customers, we did really well with them. We did over 12 transactions, over a million dollars. And our mid-market also performed really well with our SaaS business growing 70 percent. So overall, you know, the threat of ransomware, the threat of cyber attacks is real. And our ability to really help our customers through that and be more resilient is working. It seems that DeepSeek went through a bit of a cyber attack itself. Give me your thoughts on this DeepSeek adjustment that the whole tech market is going through right now. The Chinese AI company potentially making the market focus more on

efficient models. That's potentially rough for infrastructure companies, good for applications. What does it mean for Commvault? So we, for us, AI, we look at AI in two ways. One is building AI into our technology so that what we do for our customers really comes through. Resilience, knowing where to recover from, threat scans, you know, the stuff that AI is really great at. And we build that right into our platform so customers can take advantage of it. On the other side, as AI apps start coming to the fore, as new data models come in, it's all about the data for us. And of course, compute power and all of that. But when we look at the data sets, that's not going to slow down and that's not going to be less. So we're working

fundamentally to make sure that we can not only protect all the elements of an AI app, but also the entire, you know, the provenance of an app as it gets built and deployed. So we're working on both of those. You know, so that's where we're at. The deep seek, you know, conversation is really about more choice. We just mentioned CrowdStrike, the fact that it had such a strong day today, trading at record highs. You partner with CrowdStrike.

I just want to dig a little bit deeper into that partnership and how it speaks to how this ecosystem continues to evolve. Absolutely, Morgan. So, you know, we've been saying for a while that the world of data security and data protection are coming together. And what we want to do is give our customers the ability to work with the technologies they choose. So in this case, a lot of our customers also use CrowdStrike. So what we've done is engineered together the ability to take feeds from CrowdStrike intelligence and bring it right into the CommWall platform. And then customers can invoke automation policies to say, if this happens and if this is a real threat, then do this. Whether it be, you know, quarantine the data or back up the data or not back up the data. So this way, the customers get a single pane of glass and

they can take the technologies that they like to work with and we meet them there. Francois Locodonu from F5 just telling us that some customers who had been sweating some of their enterprise infrastructure are now back in purchasing mode. When it comes to software and cyber, there was already demand playing out. Are you seeing any difference in spending the budget from your customers? I think, John, what we're seeing is that customers are looking, have been looking to consolidate on our platform and in cyber resilience. So this is a situation where having, you know, more is not necessarily better

or safer. Having one platform that goes across your workloads, goes across your enterprise is important and the right thing to do. And we've seen a lot of customers this quarter come through with their consolidation plans on us. And we're seeing a lot of that spend. All right. Sanjay Merchandani, the CEO of Commvault, thanks for being with us here on Overtime. Thank you. Well, it's time for a CNBC News update now with Julia Boorstin. Julia. John, the U.S. Embassy in the Democratic Republic of the Congo warning U.S. citizens there to shelter in place until they can safely leave. It comes as protesters attack several embassies along with the United Nations in the capital of Kinshasa over a rebel offensive

in the east. Protesters targeted nations they say are complicit in supporting the Rwandan-backed M23 rebels. The U.S. has transferred about 90 Patriot air missile systems from Israel this week to deliver them to Ukraine. That's according to an Axios report that says it's the most significant weapons delivery from Israel to Ukraine since the start of the Russian invasion. The Pentagon declined comment. And a major milestone in supersonic travel today. Boom Supersonic broke the sound barrier for the first time in a test flight over Mojave, California. The company's XB-1 plane has now completed 12 successful test flights.

Boom says it already has 130 orders and pre-orders from United American Airlines and Japan Airlines. Wondering how fast that all goes, John. Back to you, Morgan. I'll take it, Julia Borsten. It's also really fascinating because this is the first ever privately developed supersonic aircraft that has not used government funds. So a milestone in that sense, too. Well, companies with trillions of dollars in market cap are gearing up to report earnings tomorrow, including Meta, Microsoft, Tesla. We're going to talk with Elon Musk biographer Walter Isaacson about what's at stake for Musk as he balances his Tesla role with his work in Washington. And Apple shares are up 7% just this week ahead of earnings on Thursday. We'll dig into what that stealth move means next.

Welcome back. Starbucks moving higher in overtime after reporting results earlier in the hour. Let's get back to Mike Santoli with more on that name and other consumer-facing stocks. Mike? Yeah, John. Starbucks is one of a small group of, well, a trio of stocks I've often tracked together as these global great U.S. consumer brands that travel widely, always at a premium valuation. That includes Nike and Disney along with them.

And you see that Starbucks has just recently started to lift with Brian Nichols' arrival there out of it. Yeah, obviously, these companies post-pandemic had a little bit of a struggle kind of replicating the growth. They all had some kind of CEO turnover along the way. And here you see all three vastly have underperformed the S&P 500 on a five-year basis. So we'll see if there's some separation just less than a year ago. They were all pretty much in the same spot over this timescale. Now, framing things in a multi-year context also is good to change the subject a little bit. Take a look at Apple versus Netflix.

Last week, the question was, hey, what's wrong with Apple? It was in this pullback. It couldn't seem to get out of its own way. And then at the same time, it was, can anything get in the way of Netflix's dominance? Well, if you look at it on a five-year, you see this huge surge in Netflix was really just a catch-up move to what Apple was doing. And in the first quarter of this year, as has happened in the first quarter of almost every year after a great fourth quarter, Apple had a pretty stiff correction and went about 15 percent down. It's been up significantly the past couple of days to just sort of bounce off that level where it was meeting up with Netflix over the five years.

Morgan, of course, we get Apple's earnings on Thursday, so we'll continue to watch it through the rest of the week. Mike Santoli, thank you. Up next, venture capitalist Josh Wolf on how DeepSeek will impact investing in defense tech as AI competition between the U.S. and China heats up. And coming up on Fast Money, top investors and strategists weigh in on the AI trade and how the Trump administration is going to impact the market this year. It's all live from the iConnections Global Alts Conference in Miami, 5 p.m. Welcome back. Aerospace and defense stocks painting a mixed picture today after Boeing and RTX finished higher,

despite Boeing posting a nearly $12 billion annual loss. The CEO upbeat about turnaround progress. And RTX posted a quarterly beat, even though 2025 revenue guidance came in a bit light. Lockheed Martin was the sector's biggest loser. That fell 9 percent after a mixed outlook and a $1.7 billion charge, largely unplanned, slashed earnings by more than two thirds for the fourth quarter. Now, that sent shares of other defense primes, including Northrop Grumman and L3 Harris lower as well. But I spoke with Lockheed Martin's COO, Frank St. John, and I asked about deep seek and what Chinese advancement in AI could mean from a national security standpoint, given AI adoption on the battlefield. St. John telling

me, quote, the CCP has been very clear over the last several years in their intent to integrate their commercial tech in their military space. So we've been partnering for multiple years with companies like NVIDIA, Microsoft, Meta to responsibly integrate AI into not only our operations within the business, but also into our delivered capabilities that we're keenly aware of it and we are tracking it pretty closely. Well, someone else who has been watching AI and the role of technology through a geopolitical lens, Josh Wolf, co-founder and managing partner of venture firm Lux Capital, which touts Andral Industries, Hugging Face, Databricks, Icon Therapeutics, among its many investments. Josh, it's great to have you back to the show. Welcome.

Morgan, great to be with you. That's exactly where I want to start, because I've had multiple conversations with Alex Karp over at Palantir, and what he has said is that the U.S. dominance in the rollout of AI establishes a new era of deterrence. Given what we've seen with Deep Seek now, does that go away? And does that thus in turn make Marc Andreessen's comments about this being a Sputnik moment very true? Well, you know, you have one camp that thinks that Deep Seek means we're in deep, you know what. And you have another camp that think that deep-seeking means we're in deep you-know-what, and you have another camp that thinks that this is a wake-up call.

And I think it's the latter camp, that this is a wake-up call for American innovation to be relatively untethered. You go back to AI and the Biden administration, well-intentioned, trying to put some regulatory guardrails on top of this. And I think, you know, he was worried that we were going to drive off into a ditch. With the new Trump executive order, I think what you're seeing here is that AI and our innovators, both in defense, the neo-primes, people like Amdoril and Saildrone, are going to be relatively untethered. And we're going to have a speed pass to compete. And that is the most important thing. You're going to have a far more permissive Department of Justice and an FTC that instead of attacking big tech will exactly, as your prior

guest from Lockheed noted, be able to compete with this civil military fusion that China has been pioneering. You know, you've come on the show. We've talked about TikTok. We've debated the national security implications of it. We know that that is a situation that is, you know, going through its own policy process in Washington right now. But the terms of data and what happens to the data with something like DeepSeek perhaps put the national security implications of TikTok, they make them look minor. Your thoughts? Well, anybody that is using the DeepSeek app is an absolute fool. If you're using DeepSeek on one of companies like Together, Compute, one of Lux's companies, which can get rid of the China

CCP censorship, then it's probably OK. But remember, the open source movement is something we believe deeply in. Most great technologists and entrepreneurs and venture capitalists are on the side of open source. And the closed source models that have consumed tens of billions of dollars are the ones that are really going to be at risk. But when you look at Hugging Face, major repository, you look at Together Compute, you look at Runway ML, a lot of the lux companies here, they have been pioneers in open source. Now, why am I not worried about open source, even with the deep seek model? As long as you don't have the CCP censorship on it, the models with their open weights allow people to run on their proprietary data. So that means that people like pharma companies or defense companies that have their own siloed repository, their own proprietary data.

You think about Bloomberg with their proprietary and longitudinal data. You think about Meta with their longitudinal proprietary data, particularly all of our personal information. Those are the people that are going to have the edge even as open source really takes hold. So I'm not worried about open source being the problem. I'm worried about people overfunding things that are really closed models with no proprietary source, and a lot of capital is going to be burned there. And you're seeing that now with people worried about open AI in some aspects, people worried about anthropic, which if I had to speculate probably ends up in the hands of Amazon. But the open source movement is, if anything, given a huge tailwind because of this. Well, Josh, let's go back to TikTok.

I believe you've been critical of the Trump administration's approach to it at this point. Seems to seek a 50-50 stake, but maybe not address surveillance and influence from the platform. Can you expound on that? Yeah, if people have been listening to me on your show, especially, I appreciate the platform for it. We never gave, you know, Soviet-era Russia its own dedicated channel. We certainly didn't give Nazi Germany its own dedicated channel. The CCP has a dedicated channel where 18 to 34-year-olds get 30 percent or more of their news, or 30 percent of that demographic, rather, get their news from that

source. The ability to be addicted to dance and influence videos is one thing, but then to get information that the CCP is dialing up or dialing down, suppressing or muting the messages that they want is a really dangerous thing. So I think that people should be able to use TikTok, and they should be able to use Instagram and Meta and other things, but it should be free of state censorship. And so the key is, how do you get the algorithms that are right now in the grip of the CCP out of their hands? It isn't just about economic ownership. It really is about algorithmic ownership. And if we think that as Trump sort of dismissed, you know, these are just kids watching videos, that is a really dangerous position for national security. Josh Wolf,

always great to have you on. Thanks for joining us. Great to be with you. Up next, all the after hours earnings action that needs to be on your radar as we count down to Starbucks analyst call at the top of the hour. And as Tesla gets set to report earnings tomorrow, Walter Isaacson joins us to discuss Elon Musk and other tech innovators growing voice in Washington. We'll be right back. Welcome back. Let's check in on some movers, earnings movers. Shares of Lending Club are plunging after the company missed earnings expectations by a penny at eight cents per share. Meantime, supply chain software company Manhattan Associates also sharply lower on weak full year guidance. And Corvo is jumping higher after a solid bottom line beat. Those shares are now up about 11, 12 percent. Well, Tesla headlining a huge hour of earnings tomorrow on overtime. Up next, Walter Isaacson, the man who

literally wrote the book on Elon Musk on what's at stake for the EV maker's CEO. When the company reports results, be right back. Welcome back to Overtime. Tesla helping kick off MAG7 earnings season tomorrow on Overtime. Tesla helping kick off Mag7 earnings season tomorrow on Overtime. Stock is one of the top performers in the S&P 500 since the election, as Elon Musk's political influence has grown. Joining us now is Walter Isaacson. He's a Tulane history professor, Perala Weinberg advisory partner, and a CNBC contributor. He also wrote the authorized biography, Elon Musk, released in 2023. Walter,

good to see you. Good to see you, John. You've written biographies of Ben Franklin and Henry Kissinger and Steve Jobs and Elon Musk, political power brokers, innovation power brokers, like Einstein, who in a way straddled the two. What's the significance of this moment when we have the innovators not just dabbling but going full bore, in Elon's case, into politics? It's not just Elon Musk. It's a whole bunch of tech bros, as you know, John. You know them all well. And suddenly they are sitting in the row in front of the Commerce Secretary and the rest of the Cabinet as they come to Washington. Elon Musk is in Washington as we speak. Jeff Bezos has been there this week.

They all want to be in front of the president. And when you have major revolutions happening technologically, especially AI, but also autonomy, space travel, it's interesting because the Steve Bannons and the Republican Trump part of the party were very populist and anti-big corporations. But Trump seems to have sided with Elon Musk and the other tech bros that are now wielding a lot of power in Washington. There are a lot of Gilded Age comparisons being drawn. And if you think about the robber barons of that era and the influence that they necessarily had over government policy, is that a fair

parallel? Yeah, I think, John, you're right. I hadn't thought about it too much. But whether you look at J.P. Morgan or Harriman or others, especially in the 1890s to 1910, John D. Rockefeller, not only did they wield a lot of political power, but they made big corporations and, to some extent, monopolies. It was Teddy Roosevelt who comes in, a progressive Republican, and really helps stop the reign of the robber barons, especially with his trust-busting antitrust. So we do have Tesla earnings tomorrow, Walter. And we do know that Musk already was stretched across a number of companies, not just Tesla, before his political ambitions burst into the front, into the forefront. So

what does this mean in terms of resources and where he's dedicating his attention? Well, clearly he's dedicating his attention to Washington now, Morgan. It'll be kind of interesting to see, is he on the earnings call? He usually is, not always on such earnings calls. And I think maybe with all the questions about are you still tending to Tesla, it probably might be a smart idea to be on the earnings call. The big thing for Tesla, in my mind, is they have developed robo-taxi, self-driving car, autonomous vehicles that aren't quite ready, and they're not quite ready, especially in terms of regulations. But with Musk being in Washington, it might pave the way, no pun intended, for more autonomous vehicle, less regulation of it.

And whether or not he's going to do the $25,000 inexpensive car that Tesla has been talking about, which isn't a robo taxi, it does have a steering wheel and brakes. He's been resisting that because he wants to go all in for autonomy. Musk has some very smart, very innovative people around him across all of his companies. They don't always get the attention that he gets. Do you think that changes now? You know, I don't think any of them are going to be seeking a lot of attention. So many of them are in my book, whether it's Glenn Shotwell and Mark Ginkosa at SpaceX and all the people who've done amazing things at Tesla. But they've all kept a pretty low profile. And what Musk does, he told me it's a little bit like Napoleon on the battlefield.

I set the strategy and I go in and focus on certain little details, like Napoleon would go to a battlefield where the battle was getting bad, and they'll see me focusing on the details and the rest takes care of itself, whether that's a heat shield on a Raptor engine in the plane or a new upgrade to full self-driving in the Tesla. Walter, it seems like we might be at the height of dependence between big tech and government. Big tech on government policy, regulation around M&A, you know, AI, self-driving, etc. Government depending on big tech in areas like AI and its development to help America, including on the defense side.

Your thoughts? Yeah, I mean, I do think this is a sea change. You know, President Biden had put in guardrails and a lot of regulations on AI. Now I notice that Elon Musk and SpaceX are going to be working with Boeing to make sure Donald Trump gets an Air Force One more quickly because Boeing has had such trouble doing it. If you look at the great advances we've had recently, it's been private sector. It's been with SpaceX and others getting rockets to orbit, a new private supersonic jet. Certainly, AI has been driven not by government funding, but by private companies. And I think that's going to be the trend.

OK, Walter Isaacson, thanks for joining us. Thank you, Morgan. The Boeing-Musk mashup is one to watch. That's going to do it for us here at Overtime. Fast Money starts now.