Closing Bell - Closing Bell Overtime: Stocks rise to start the week, earnings from Palantir, Paramount, Chegg and more 8/7/23

Episode Date: August 7, 2023

Stocks started the week on strong footing, with the Dow finishing the day higher by more than 400 points. Adam Crisafulli from Vital Knowledge and Brian Levitt from Invesco break down the action and discuss earnings from Palantir, Chegg, Lucid, and more. Early Palantir employee turned venture capital partner Trae Stephens gives his thoughts on Palantir’s results and other opportunities in defense and AI. The CEO of Coreweave talks about what the artificial intelligence boom means for his company. Plus a preview of what to expect from UPS results. 

And we'll see you in just a moment, Mike. Meantime, a solid rally on Wall Street to start the week, even as market heavyweights Apple and Tesla pulled back. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford is off today. The earnings parade rolls on this hour with more key names gearing up to report results, including Palantir, Paramount, Lucid Motors, Skyworks and Chegg. We'll bring you all the numbers and we'll talk to an early Palantir employee turned venture capitalist, Trey Stephens, who is now a partner at Peter Thiel's Founders

Fund. But first, let's get to our market panel. Joining us now is Invesco Global Market Strategist Brian Levitt and Vital Knowledge founder Adam Crisafulli. Good afternoon to you both. Adam, I'll start with you. We had a rally here to kick off the week. The S&P 4518 is where we finished off and the Dow up 408 points. Where do we go from here? Yeah, so I think we're kind of in this sideways price action for the time being where you have valuation constraints on the upside and that's preventing the type of close above a 4550 or 4600. But on the downside, it's really difficult to kind of sustain a sell off just given that you still have pretty favorable news flow. So today it was a combination of disinflationary economic numbers with the Mannheim used car index. You had relatively dovish comments from New York Fed President Williams and New York Times interview. And then on earnings, you know, Berkshire Hathaway probably has more exposure to the U.S. economy, more parts of the U.S. economy than any large company.

You had very solid numbers Saturday morning. And that's like at all time high today. So, you know, you continue to have terrible news flow, which is preventing a slump. But you also have valuation constraints, which is kind of preventing a real upside break. And so we're in this sideways price action that we've seen for a few weeks, and I suspect that's going to continue. Brian, do you agree? And I'll just I'll throw in the fact as we do await some more reports here, the fact that given we're mostly through this earning season and so far it's been better than expected. How much is that contributing to the narrative here? Well, it is. And the market is broadening out. So the valuation constraints tend to be in the largest names, the real mega cap quality names that did well in the regional bank scare,

March, April, May. And so what you're seeing now is a healthier market, a market that's broadening out days where you see the Dow Jones Industrial Average outperforming the Nasdaq. market that's broadening out days where you see the Dow Jones industrial average outperforming the Nasdaq. And that's that's a good sign. So my expectation and what the market is telling us is that this is an economy that's stronger than people thought. There's no recession in twenty twenty four. The Fed's twenty twenty three. The Fed's getting closer to being done, if not already done. That suggests a market that moves higher from here. I would think it's a FOMO rally between here and the end of the year. A lot of investors have missed it, a lot of money on the sideline. And I would expect more of that to find its way into the market.

So for those investors who might be tuning in at home, Brian, where should they put money to work now to not miss it? Yeah, it's a recovery, Trey. I mean, the market is excited about improving economic activity. And so that's a shift away in the near term from mega cap growth businesses towards smaller cap value oriented international and emerging markets. So you want to be cyclical. You want to be risk on. And we would expect that to play out between now and the end of the year. We could talk about 2024 at some point and concerns of

the economy rolling over. But for here, it's a market where cyclicals should outperform defensives and value stocks should outperform growth stocks. Yeah. Adam, I mean, this disinflation theme that has gripped the market and you mentioned Mannheim this morning. We get CPI reading on Thursday as well. Even as the economy seems to be re-accelerating, at least right now, is this something that's going to continue to be a tailwind for stocks or is this something that's going to be a double-edged sword? Case in point, some of the recent earnings we've gotten, I'm going to use the example maybe of Tyson today. Yeah. No. So I think the disinflationary pattern is going to become a double-edged sword, probably coinciding with the Q3 earnings reporting season. So a couple more months around the October timeframe. We saw in Q2, so to your example on Tyson,

we saw some of the airlines, other consumers table companies talk about how... Adam, hold on one second. We've got our first earnings report. Skyworks. Those results are out. Seema Modi has the numbers. Seema. Hey, Morgan, a three cent beat for Skyworks Solutions, $1.73 adjusted versus the estimate of $1.70. Revenue came in line with expectations. The company is increasing its dividend by 10 percent and its fourth quarter guidance basically in line with estimates. You're seeing the stock move just a bit lower here in extended trade, the overtime. Back to you, Morgan. All right, Seema. Thank you. Adam, I'll go back to you. You can finish your thought. And then I want to get your reaction to Skyworks because it does seem like the bar has been very high. It's not enough for many of these companies to just meet expectations or even beat expectations because so much is baked into

this market. Case in point, Skyworks. Yeah, so on disinflation, I was just going to say quickly that I do think come the Q3 season in a couple of months that more companies are going to start to talk about how their inability to increase prices like they have been over the preceding few quarters is starting to become a headwind for their business. You know, price hikes have been a huge driver of earnings for a lot of companies. And as that fades, it's a macro positive, but it's going to become more of a micro negative for certain industries. You know, on Skyworks, I think we saw from Apple and Qualcomm last week that the overall

smartphone market is relatively tepid right now. We're going to have the new iPhone launch. It sounds like there'll be an Apple product event in the middle of September. But overall, unit sales have, you know, are relatively tepid right now. launch. It sounds like there'll be an Apple product event in the middle of September. But overall, unit sales are relatively tepid right now. And I think people are kind of just waiting to see if new product launches at the end of the year, towards the end of the year, reignite sales. Okay. Well, Paramount Global's earnings are out. Julia Borson has the numbers. Hi, Julia. Hey, Morgan. Paramount beating on the top and bottom lines, reporting adjusted

earnings per share of 10 cents. The earnings were expected to be pretty much flat. I'm sorry, neither lost nor beat, but expected to be down just less than 1%. So that is a big beat of about 10 cents there in terms of earnings per share. Revenue is also beating estimates coming in at 7.62 billion versus the 7.43 billion that was anticipated. Now, I also want to hit another piece of news here about Paramount. The company has agreed to sell its Simon & Schuster publishing division to KKR for $1.62 billion in an all-cash transaction. CEO Bob Backish saying in the release here,

they're pleased to reach this agreement on a transaction that delivers excellent value to Paramount shareholders, while also positioning Simon & Schuster for its next phase of growth, saying the proceeds will give Paramount additional financial flexibility and greater ability to create long-term value for shareholders, while also de-levering our balance sheet. So you now see Paramount shares are up about 4.5%. Morgan?

All right. Julia, thank you. Palantir earnings are out as well. This has been a high flyer. Frank Holland has the numbers. Frank. Yeah, Morgan, we have the numbers right now. Palantir shares falling by 8% after reporting revenues in line with estimates and EPS in line with estimates. The profit for this quarter makes it a third consecutive profitable quarter. I spoke with COX Alex Karp, who says he's actually pushing to get the big data company on the S&P 500. Palantir also raises full year guidance above estimates and announced a $1 billion share buyback.

So highlights from the report includes outsized growth in areas of focus for Palantir. That includes working with companies in the U.S. and governments outside of the U.S. So U.S. commercial revenue grew by 20 percent compared to overall commercial revenue growth of 10%. International government revenue grew by 31% compared to 15% government revenue growth overall. So in my conversation with Alex Karp, he added, Palantir has signed contracts with dozens of other industries this quarter saying in part about demand, it's broad really any industry that believes they can transform the profit and margin characteristics of their business with AI and want to do that safely, effectively and now.

He said about companies reaching out about Palantir services. We also discussed Palantir's business with the U.S. government and military following Russian and Chinese warships being spotted off the coast of Alaska. I asked him if these geopolitical tensions are a long term tailwind. He said, in part, we built these products that are useful and in times of war, very important for the U.S. and our allies. For tough times involving real conflict with adversaries, we are seeing America and our allies engaging more seriously with our product offerings. So, again, looking at shares of Palantir right now, down 5.5%, well off their lows. They dropped double digits shortly after the report. Reported revenues and EPS in line, full year guidance above estimates. Palantir also announcing

a $1 billion share buyback plan. Morgan, back over to you. All right. Frank, thank you. I want to go back to our panel here. Adam, get your reaction to that, especially when we've seen AI be such a tailwind to the market. It's a secular growth story. And for better or worse, Palantir has been one of those companies that has more than doubled in the last couple of months on expectations that it could be a beneficiary here. No, to your point about expectations being very elevated for tech stocks, you know, I think Palantir is front and center for that. This has, the name has really embedded itself within the AI conversation in the market. It's certainly, you know, incorporated into that conversation alongside NVIDIA. SAC has had a parabolic move. You know, so the fact it's only

off 3% on this report, despite expectations being very elevated, is probably a pretty big victory. You know, I'll have to see if they say anything incremental on the call, but, you know, to be only off this amount after the magnitude of the rally, like I said, it's probably a relief for people who own it. OK. Lucid's results are out. Phil LeBeau has those numbers. Hi, Phil. Morgan, take a look at shares of Lucid moving a tick lower after the company reported weaker than expected results for the second quarter. Earnings per share, a loss of 40 cents. The street was estimating a loss of 33 cents a share. Not entirely comparable, but that is weaker than what the street was expecting. Revenue also coming in below expectations at 151 million.

The street was expecting Lucid to bring in at least 175 million. Two pieces of news, and this could be why the stock is not moving a whole lot at this point. First of all, guidance for the full year. It's been that they would at least produce 10,000 vehicles this year. They are reaffirming that guidance. So they are not lowering their guidance any further. And also their liquidity on hand stands at 6.25 billion. They believe that they have enough liquidity at this point. So there's no capital actions that have been announced today, Morgan. Nonetheless, you take a look at shares of Lucid now ticking a little bit higher,

these are weaker than expected results for the second quarter. Morgan, back to you. All right, Phil LeBeau, thank you. Chegg's earnings are out. Remember, that stock got crushed last quarter when it warned about ChatGPT's impact on its business. Let's get to see Modi with the results now.

Hi, Zima. And Morgan, now the stock is coming back on new comments from the CEO, Dan Rosenweig, who says, we've gained greater insights into students' use and perceptions of artificial intelligence and how it relates to Chegg. Our surveys show that students see ChatGPT and Chegg as complementary with very different use cases. The latest survey results, they say that Gen Z students are using AI to improve their education. They are not comfortable with the exact information ChatGPT puts out. So it seems like in the last couple of months, they've gained greater insight on their customer.

And these comments certainly positive. And it follows mixed earnings results from the company. A penny miss on its bottom line, but revenue did come in higher than expected at 183 million dollars. The stock recouping some of those losses made in May now up about 16 percent in overtime. Interesting talker here, Morgan and John. Yeah, it definitely seems to. The commentary has changed here. Seema Modi, thank you. I want to get back to our panel. Brian, I'm not going to ask you specifics about any of these names that reported, but I am going to ask your thoughts on AI and investing in it in stocks right now,

given some of the moves we've seen. You've seen valuations get ahead of what the current fundamentals look like. And so if you're a long-term investor looking for structural opportunities and you want to think about the businesses that are going to enable AI or going to make use of AI or going to regulate AI or watch over it, then there's definitely long-term opportunities. But from a valuation perspective, we've gotten a bit extended. It's been a big driver of markets this year. And that was largely in a period where growth was below trend and relatively weak in the U.S. and other parts of the world.

What the market is telling us now is that growth is picking up here and the rest of the year is likely to be more favorable. And so investors that have made money in a I may want to shift to, you know, things that are a little bit less structural or take advantage of some cyclical moves in the market. Again, more more value oriented than than the higher multiple mega cap growth names. Yeah. For example, maybe a paramount, which is up seven percent right now after those earnings. And as that company looks to deleverage, Adam and Brian, thanks for kicking off the hour with me. Thank you. Let's get over to CNBC Senior Markets Commentator Michael Santoli. He's at the New York Stock Exchange.

Mike, what are you focusing on? Yeah, Morgan, looking at the path of the S&P 500 here as we kind of nose back above the 4,500 level. The last two years at the highs of a couple of weeks ago, we got to within 5% or 6% of the record highs there from early 2022. But what I found interesting for a while here is that we're tracking the path that was taken exactly two years back. So if you see from the spring into about September 1st of 2020 2021, you had the same index levels falling. You were scaling up toward the mid-4,000s. And it started a little bit earlier this year. And so maybe it's kind of reached its crest a little bit earlier as well. But I just find it interesting that we've been kind of tracking this two-year echo type of boom. It doesn't mean it goes back where we got to at the peak right there after that little pullback we got in September.

But it does show you that we've remained tethered to that period. Now, if you look back five and 10 years, we're doing 12 percent annualized total returns on the S&P. The market doesn't owe you much, but kind of flattish over two years suggests that even with this strong rally since October, we haven't really entered a new orbit for the index. Now, in terms of risk appetite tells and some of the more aggressive parts of the market, I always like when they link up right along the same time period since 1231 of 2020. Tesla and Bitcoin, it's a similar looking chart. Obviously, Bitcoin's got a little more amplitude to it, but they've come to a pretty similar point over this period of time. the S&P is up like 19, 20 percent.

So it shows you that they had most of their move in the latter half of 2020 before kind of settling and chopping around this area, Morgan. So this chart to me is particularly interesting. And what I wonder, because Tesla, I know they've sold out some of their stake. But if I recall correctly, they still have some Bitcoin on their balance sheet. How much of this is one related to the other versus the fact that you have the same sort of trading activity and maybe the same sort of investors or day traders in both of these names? I think it's the latter almost entirely. I mean, whatever they might still own in terms of Bitcoin is nothing compared to the $700 billion-plus in market cap at this point. So I think it's more about a very similar energy source in terms of the types of traders

and what they're looking for on a given day. All right. Mike, we'll see you a little bit later this hour. Thanks. Beyond Meat earnings are out. Kate Rogers has those numbers. Kate. Hey, Morgan, and that stock is falling here. A mixed quarter for Beyond for Q2. EPS an 83-cent loss. That's better than the estimated loss of 86 cents. Revenue amiss, though, 102 million versus the analyst estimate of 108.4 million. A guidance update here for the full year.

A bit lower than expected on net revenues. Expected to now be in the range of approximately 360 to 380 million. That's versus the estimates of 388 million. The company's CEO, Ethan Brown, said in a statement, we expect a modest return to year over year top line growth in the third and fourth quarters of 2023. And relative to the first half of 2023, a meaningful reduction in cash consumption and an increase in gross margins. Also adding an update for the company's timeline of being cash flow positive, saying with respect to the company's previously stated target of achieving cash flow positive operations within the second half of 2023 in light of greater than expected

consumer and category headwinds and their anticipated impact on net revenues, the company now believes this is unlikely to be met in the stated time frame. As you can see, the stock down around 7% right now. Guys, the conference call is at 5. We'll bring you updates as we get them. Back over to you. All right, Kate Rogers, thank you. We talk a lot about disinflation, but food prices has been one area where it's tended to be stickier lately.

Okay, well, after the break, we're going to talk to Trey Stevens. He's an early Palantir employee. He's a venture capitalist. He's also the co-founder of Andral. Speaking of defense tech, we're going to talk to him about Palantir employee. He's a venture capitalist. He's also the co-founder of Andral. Speaking of defense tech, we're going to talk to him about Palantir's results and the most exciting companies that he's watching in AI and in defense. Overtime's back in two. Welcome back to Overtime. Palantir shares are in the red, down about 5% right now after reporting results that were in line with estimates.

Full year guidance was above estimates. The company also announcing a billion-dollar share buyback plan. But joining us now is Founders Fund partner and an early Palantir employee, Trey Stevens. Trey, it's great to have you on the show. Good to see you, Morgan. How's it going? Great. So much to talk to you about, but let's start with Palantir here, because it really seems like the bright spots last quarter were U.S. commercial and also international government in terms of

revenue growth. But this is really a company that's just posted a third consecutive quarter of profitability. And perhaps the biggest story here is the artificial intelligence platform, which speaks to all the generative AI discussions and investments and opportunities that we've been talking about day in, day out on CNBC. But where Palantir is concerned, you're talking about it in real time with sensitive data and government contracts. That's right. Yeah. AIP is Palantir's fourth platform. Obviously, the original product was called Gotham, and then they added Foundry and Apollo to that, the artificial intelligence platform being the most recent. You know, it's really important to address the core problems of large enterprises, which is really enabling these large language models that have grown in popularity to run on private networks, on private data. The safe handoff between existing legacy systems that are already used by the enterprise, as well as the enterprise-grade governance that's required to make that stuff

work in a secure way, is something that Palantir is really uniquely suited to provide and has been kind of the MO of what they've been working on since they were originally founded. Yeah. I mean, Palantir is publicly traded, but you're also the co-founder and chairman of Andral, which is private, at least for now, but is another name that's been growing very strongly, has a strong valuation in the private markets. I mean, is defense tech having its moment right now, given some of these AI applications, but also given the geopolitical landscape? Well, you know, I think Andral is in a unique position that we kind of got to ride on the shoulders of giants. You know, we learned so much from the experiences at SpaceX and at Palantir that we were kind of in a pole position to run really fast with those lessons. I think since 2017, when we originally started Anduril, there's certainly been a lot of additional

momentum piling into the defense tech industry. Some of that is related to the government being a kind of recession resilient customer in the midst of a minor economic situation as we're all tracking, but also the geopolitical realization with the war in Russia between Russia and Ukraine, as well as increased tensions with China.

So I think there's an opportunity that a lot of people are seizing on that they believe that there's something really real that might be worth checking out. But, you know, I'm consciously optimistic, given that this all relies on the government having a behavioral change around the way that they treat the transition of pilots and prototypes, research and development projects and production, which is still kind of lagging the market on the private side. Yeah. And what you just said is really key here, because when we're talking about some of these companies that are, quote unquote, dual use technology, I think investors, at least in the

public markets, can understand commercial applications when a Palantir says that it's growing by double digits, for example, last quarter. But the defense piece of it, it's that you hear about it in defense circles a lot, the valley of death. Is policy building that bridge to get over the valley of death for some of these startups right now that are winning some of these early contracts or some of these early development awards, but then still need to grow and still need to see those revenues in a more sustainable way? You know, policy is maybe not the exact part of it. It's not the exact problem. There are a lot of ways that you could change law,

that you can move things around to make the transition easier. Most of this is going to be behavioral and cultural, though. You know, decision-making to get new entrants into the market. We shouldn't forget that it took a long time for Palantir and SpaceX to finally hit their stride into production. Obviously, things are going really well now. And really, those are two companies that went government first and then transitioned into commercial.

And that's a really unique motion. I'm not surprised by Palantir's continued dominance on the commercial side of things, you know, showing over 20% growth, closer to like 40% growth if you take the SPAC side of the things out of it. So they've really been crushing on that front. And I think a lot of that is from building a real enterprise-grade product, working with the government over the last, you know, decade plus. And so this is kind of the experience that we expect to see at Anduril, that we're looking to see from our other portfolio companies that are working in the defense sector, like figuring out how you can go in, have a real impact on a production level, and shift the culture of the government towards

the new entrants that have the ability to build the capabilities that will be required for the future. So let's expand this out a little bit. I guess, how would you assess the startup landscape right now more broadly and the funding ecosystem? Is it still bifurcated? We've been hearing it's AI and kind of nothing else. Is that the case? That's not too far off. Yeah, I think things are still pretty slow in the private markets. You know, the AI hype cycle continues to generate momentum. We should keep in mind that, you know, AI, unlike prior tech epics, is probably more centralized, almost definitionally, than a lot of these other movements because of the requirements behind compute, the requirements behind money that you can spend on developing the models

and running the models on these compute clusters. And so there is a bit of an advantage that's ceded to organizations like Microsoft plus OpenAI, obviously, or Google or even NVIDIA on the hardware side of things. And so it might not kind of play out in the same way that you would expect to see things from the internet boom or anything like that. But saying that you're investing in AI today is really a lot like saying that you're investing in the internet in the early 2000s. The question is less about the core technology. It's really more about what the application is that you're building and how that's relevant and

why these larger players are not going to be making a run at that space. As you know, with Founders Fund, our goal is to try to avoid these hype cycles to the extent possible and focus on the core applications that are going to move the needle. So, you know, there's some discipline that's required as that hype cycle continues to build speed. All right. Trey Stephens, always great to get your insights. Thanks for joining me. Thanks, Morgan. Take care. Up next, we'll talk to Morgan Stanley's global head of macro strategy about the outlook for inflation ahead of consumer prices this week and what it could mean for the Fed's rate timeline. And take a look at Chegg post earnings. It's surging higher. It's now up about 28 percent. It was a different story last

quarter when AI fears hit that stock. But CEO Dan Rosenzweig said this afternoon that the company is building its own AI model trained specifically for education. Stay with us. Welcome back to Overtime. Let's get back to Mike Santoli for a look at the correlation between stocks and bonds. Mike. Yes, Morgan, that correlation has been more negative recently than it has in the last six or seven years, which means as yields have gone up on a given day, stocks are more likely to be going down and vice versa. You see

how extremely low that negative correlation has been. It shows you the stock market sensitivity to this latest move higher in bond yields above 4% on the 10-year. Another thing to take away from this is you see this period before the pandemic. They spent most of their time up here, which means positively correlated. When yields were going up and it was not an inflationary environment, we weren't too worried about the federal inflation. It meant that economic growth was better and stocks outperformed. Since then, it spent more time in a negative correlation, which goes back to like the pre-global financial crisis dynamic. And what it basically shows is, of course, the main worry point is the persistence of inflation, what the Fed's going to have to do. It also, though, means if yields back off a little bit,

you probably do have the makings in the short term for a further relief rally in equities. All right. Mike Santoli, thank you. It's a great chart. Let's stick with treasuries as Wall Street awaits July's CPI report out on Thursday. It's a key metric for the Fed. And we got some mixed signals from Fed officials over the weekend. Fed Governor Michelle Bowman suggesting interest rates could rise again, while New York Fed's John Williams told The New York Times in a pretty extensive interview that monetary policy was in a good place. Joining me now is Matthew Hornbach, Morgan Stanley, global head of macro strategy research. Great to have you on. I do want to get your thoughts about the pretty

extraordinary move we saw in treasuries last week, specifically in long dated treasury yields. And I realize they've come off a little bit since then, but a lot of talk about a bear steepener. I want to get your thoughts. Yeah, thanks for having me on, Morgan. I think the bear steepening of the curve, which means that long term interest rates are rising faster than shorter term interest rates, ultimately comes down to several factors, but probably the most prominent of which was the U.S. Treasury's quarterly refunding announcement, where the Treasury announced slightly higher coupon bond sizes than the market was anticipating. But that, of course, came right on the heels of Fitch's downgrade of long-term government debt. So I think the

combination of those two factors brought a lot lot of tourists into the market thinking that the government had a debt problem. But of course, that's been with us for some time now. So I do think a bit of an overreaction in the marketplace. So then is it a head fake, this de-inverting of the yield curve that we've seen over the past week plus? And if so, how do you, I guess, how do you invest for it? Yeah, well, Morgan, I do think that the curve steepening trend is a trend. I do think ultimately the curve will begin to steepen out from here. But our view is that it was going to be more of a bull steepening move where short-term interest rates end up moving lower at a faster pace than longer-term interest rates. So the curve steepening is probably the right idea, but it's just the way in which it displays itself in

the market is maybe where we differ from what's happened more recently. Yeah. I do want to get your thoughts on the fact that we've seen resilient for the most part. I realize the economy is slowing, but the data has been largely resilient. You've even had some talk of a reacceleration of economic growth here, even as disinflation seems to be taking root. Look no further than the Mannheim used vehicle index this morning. Is it sustainable, especially given the voracious pace of rate hikes that we are coming off of right now? Or is there another shoe to drop here? Well, you know, speaking of real growth and of debt, you know, I do think that the economy has probably benefited quite a lot from the recent increase in the federal government's

budget deficit. You know, it's doubled over the course of the past year. That doesn't get talked about enough, I think. But what's going to happen over the next 12 months, if you believe the Congressional Budget Office's numbers, is that it's going to fall quite dramatically, in fact. So even though the deficit will remain large for some time, if you look at the deficit on a rate of change basis, which is what I think is appropriate to do for investment analysts like ourselves, we do see the deficit coming down quite a bit over the next six to 12 months. And we think that that will ultimately likely weigh on economic activity. Okay. I'm going to channel John Fort,

my colleague John Fort here, and I'm going to say for the folks playing at home, how do you invest for this? How do you position yourself for this? What would you suggest? So we really like the U.S. Treasury market here, especially when you look at real interest rates in the longer end of the curve. The 30-year real interest rate, which is essentially the return that investors would get adjusting for know, adjusting for inflation is very attractive, very close to 2 percent. 30-year real yields at 2 percent, we think, are very attractive to be long. So we are telling investors to be buying 30-year treasury inflation protected securities. And then we also like five-year Treasury bonds just outright. So the nominal U.S. Treasury security that gets issued every month, we think investors should be buying those bonds today.

Matthew Hornbach, great to have you on. Thanks for joining me. Thank you. Still to come, we'll tell you about three under-the-radar stocks that are getting caught up in the latest round of meme mania. And take a look, another look, at today's after-hours movers as we head to break. Palantir are climbing back from an initial drop, actually trading higher, more than 1%. Right now, Paramount, Lucid, and Chegg, all also higher. We'll be right back. Welcome back.

It's time now for a CNBC News Update with Contessa Brewer. Hi, Contessa. Hi there, Morgan. The Red Cross is implementing new FDA guidelines and changing a decades-old restriction on who can give blood. The new policy will no longer single out a donor's sexual orientation or gender, allowing more gay and bisexual men to donate. The nonprofit said it's working to make the process more inclusive by using screening guidelines that apply to all donors based on individual risk assessment. The U.S. has paused aid programs to Niger

that are valued at more than $100 million because of a coup that displaced the country's democratically elected leaders. The State Department said hundreds of millions in funding for development, security, and law enforcement ultimately are at stake unless the country's junta reinstates the elected government. And William Friedkin, the director of The French Connection and The Exorcist, has died. He was known for helping revolutionize 1970s Hollywood by adding energy and edge to familiar genres. He won the Best Director Oscar

for The French Connection. His wife, the former studio chief Sherry Lansing, confirmed his death. He was 87 years old. Morgan? The Exorcist. One of the most incredible and terrifying movies. Yeah, that's a loss. May you rest in peace. Contessa, thank you. Sure. Up next, we will discuss how surging demand for AI is impacting the cloud computing industry when we are joined by the CEO of CoreWeave and take a look at PayPal as we head to break. Closing higher today after becoming the first major U.S. financial institution to launch a U.S. dollar-backed stablecoin. Companies calling it PayPal USD.

Shares finished up 2.5%. Stay with us. Welcome back. Chipmaker NVIDIA has been one of the most interesting stock stories of the year, surging more than 200% on the AI boom. And it's a mega-cap tech name that made that move. NVIDIA also participating in a Series B round for CoreWeave, valuing that company at $2 billion. So what is CoreWeave? Well,

as an investor put it to TechCrunch, if you think of AI as the new electricity, CoreWeave is building the grid for the new economy. CoreWeave recently raised $2.3 billion in debt. It was collateralized by, get this, NVIDIA chips. Joining us now, CoreWeave co-founder and CEO Mike Entrader. Mike, great to have you on the show. We just sort of broke it down a little bit, but the hyperscalers have been making big moves and big investments into all of this generative AI and these new applications. Why is there room for CoreWeave and how do you compete? Morgan, thanks for having me on. I appreciate that. The question you asked is a pretty common question for us. We get it whenever we speak to any investors. At the end of the day,

the way that we view the space is that three grad students out of Stanford could come out of their computer science program and set up a company and within a matter of months become one of the largest consumers of compute on the planet. And because that dynamic exists, the need to be able to serve compute to those type of clients that are using the cloud in an entirely new way, at an entirely new scale, leaves room for companies like CoreWeave to step up and to provide a different type of infrastructure, a specialized infrastructure that directly addresses the needs of those type of clients, those type of customers. So if NVIDIA is making chips that are the quote-unquote picks

and shovels, and then it's extending out and building off of that with a software layer and those offerings as well. That's where you fit in. that NVIDIA is selling and the AI companies, the media and entertainment companies, the basic science companies are looking to buy in order to drive their businesses at scale. So I'm looking through my notes and it says here that you're seeing parabolic growth. Walk me through that, where it's coming from. It sounds like you touched on a few industries right there,

but how quickly is this being adopted across different industries? Yeah, so you've got a situation where there are a number of different industries that are really coming into their own, coming into existence and coming into the scale. With the launch of ChatGPT, you saw it in the AI space, right? It kind of happened for all intents and purposes overnight. And so when we built our company, when we built the infrastructure that we're able to deliver compute with, we really built it to be able to scale up and support customers that were going through that type of growth. Now, I don't think anyone really understood how powerful the move was going to be on the back of CHAT-GPT, but the positioning of our company and the infrastructure that we built has allowed us to be able to grow and support that type of growth extremely well, providing excellent quality, scale, and technology to our clients. Yeah. We mentioned it in the intro, but the fact that you raised $2.3 billion from Blackstone and

Magnetar and a number of other tier one investors in what is an asset-backed loan, which we know those types of loans have been growing in popularity in recent years, but the fact that it's tied to NVIDIA chips, chips that you have access to that the rest of the market is scrambling to get right now. I guess just walk me through how that deal came together and whether this marks a milestone in and of itself. Yeah, so great opportunity for us to kind of talk about the syndicate and what a fantastic group of lenders we brought together. So the syndicate was led by Magnet Farm Blackstone, as you said. We had a couple of strategics, Code 2 and Digital Bridge, join the syndicate.

And then finally, the syndicate was rounded out by BlackRock, PIMCO, and Carlyle. And so real quality was coming through, we really worked with them to understand the demand for the NVIDIA GPUs, specifically the H100 GPU, which is going to define the leading edge or the bleeding edge of what AI is going to be trained on for the next several years. And, you know, with a great deal of work, we were able to get this across the finish line and work with some really great lenders to put this together. And I do think that this is a structure that you will see again as we move forward through time. Okay. Mike and Trader, thanks for joining me. Great to have you on the show. CEO and co-founder of CoreWeave.

Thank you very much. I appreciate the opportunity. An AI startup valued at about $2 billion. Well, this wild hour of earnings rolls on. Next, when we look at some of the other big after-hours movers that absolutely need to be on your radar. Stay with us. Welcome back to Overtime. Here's a check on some of the biggest earnings movers this hour. Palantir making a big comeback, initially falling but now higher. The company reporting in-line earnings and announcing a billion-dollar stock buyback. Those shares are up almost 2%.

Paramount also moving higher, beating on both lines and announcing that KKR will acquire its Simon & Schuster business for 1.6 billion dollars. Those shares are up 4 percent. Chegg screaming higher on some positive updates surrounding AI. Call Center, we can see they're up about 25 percent. Call Center company Five9 is falling on soft guidance. That's down about 7%. And Kindrel, this is the IBM spinoff. It's surging double digits on solid results and a rosy outlook. Those shares are up about 13% right now.

Meantime, UPS headlining another huge day of earnings coming up tomorrow. Up next, a top analyst on what he is watching from the delivery giant after a tumultuous quarter of labor negotiations. Welcome back. The meme trade has been red hot recently when it comes to distressed companies. Rite Aid, Tupperware, Yellow. Kate Rooney looks at what's driving the momentum in these highly shorted stocks. Hi, Kate. Hey, Morgan. So those speculative pockets of the market are rallying in a way that really feels like the meme stock moment of 2021. It coincides with retail inflows hitting the highest level since February. That's according to VandaTrack. And there's been concentration and more concentrated

interest in micro cap stocks. You mentioned Rite Aid, Tupperware and Yellow. Tupperware's one month gains now at around 600 percent. Right Aid was up 65 percent last week with sharp gains. Yellow dropped about 30 percent today, but last week, despite shutting down operations, the trucking company was up 400 percent. These are all brand name consumer stocks with fundamental problems, making them classic target for short sellers. There are also micro cap stocks. They're also micro-cap stocks. They have about 20% of the available shares sold short. That's about four times what the average stock usually sees, setting them up for a potential short squeeze.

Social media can also attract those individual investors. There's also hedge funds now monitoring forums like Reddit and piling in as well. Third point's Dan Loeb highlighting this dynamic in a letter to investors last week saying, fundamental analysis is increasingly taking a backseat to monitoring daily options and Reddit message board. He says Third Point will reduce single name short exposure as a result. Back to you. All right, Kate Rooney, thank you. Let's talk a little bit more about Yellow, which is now officially filed for bankruptcy after failed negotiations with the teamsters that news comes as ups which also just struck a tentative labor

deal with the teamsters gears up for earnings tomorrow before the bell let's bring in brought in capital managing partner donald broughton donald's want to get your thoughts on both of these topics but let's start with ups because we get earnings tomorrow morning. And the big question swirling out there is what prospective increased labor costs are going to mean, not only for the company's bottom line, but for shipping rates for all of those different customers that use UPS. Well, let's start with the easily or easily more easily quantified. You know, the consensus estimates for the quarter that they're about to report have already fallen from just a little over 280 a share to 250 a share. Now, that's versus 329 last year. So the consensus is already looking for a 25% decline in earnings, one. Two, if you look at their model, basically, not to oversimplify, but about half of their costs are the network,

and the other half of their costs are what it takes to run that network, the labor. And so you've had two things. One, I think, we think they caved in their negotiations with the Teamsters because they saw how much market share they were losing every day. And when you do that, what happens is less and less volume gets spread over that one half, the cost of the network. And so the decremental margins are just extraordinarily high. And then when you're facing higher costs on the other side of that, how much the labor costs, it gets pretty seriously negative pretty quickly. OK, so so if they've been losing market share, which we'll get confirmation of those details in some form or fashion tomorrow, if they've been losing market share, how quickly can they regain that?

Well, if if five years ago we had a similar thing happen, although they didn't lose as much market share then as we think they have now. And they really never regained it. They gained it as the overall market continued to grow, but FedEx continued to actually keep those market share gains. So only time will tell, but this release will give us some really good clues. And then September 20th, FedEx releases its earnings because they have a slightly different quarter, slightly different fiscal year. And then we'll know for sure. But we're pretty sure that FedEx gained a significant amount of market share more than they did last time when this was happening. OK, so Donald's final question for you. This bankruptcy and liquidation of yellow, which is one of the largest less than truckload

carriers in the market. What does it do to capacity? What does it do to freight rates? Well, capacity will be handled by the others, FedEx Freight, XPO, SDs. You know, the other big carriers will pick up that business and they'll do so in relative. They already have been doing it. Okay. But, you know, unless they've changed the way debits and credits work since I was studying for my undergraduate degree in accounting, there is no value in the common shares of yellow. I don't know what happens with memes.

I don't understand. All I know is that the amount, even after they sell every last paperclip they own, they won't have enough money to pay the creditors. There won't be anything left over for the common. Donald Broughton, thank you. That's going to do it for us here at Overtime. Fast money begins right now.