Closing Bell - Closing Bell Overtime: Twilio CEO on Earnings, Nvidia’s 13F Moves, & What RFJ Jr. Means For Vaccine Stocks 02/14/25

Episode Date: February 14, 2025

Jefferies Chief Market Strategist David Zervos and RBC Capital Markets Head of US Equity Strategy Lori Calvasina join to break down the market landscape after a wild week. Our Kristina Partsinevelos digs into Nvidia’s latest 13F filing and its shifting investments. Twilio CEO Khozema Shipchandler discusses the company’s earnings results and what kind of AI return the company is seeing in an exclusive interview. Jefferies' Michael Yee weighs in on Moderna, biotech, and the potential RFK impact on markets. Plus, John San Marco previews Walmart’s earnings and the retail outlook amid tariff concerns.

That bell marks the end of regulation. MVVOR ringing the closing bell at the New York Stock Exchange. GCL Global Holdings doing the honors at the NASDAQ and the S&P 500 slurting with record closing levels. But it looks like we probably ended up a little lower as stocks finish out a strong week of gains and Meta closes higher for a stunning 20th session in a row. 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 on today's show, the next catalyst for your money, David Zervos from Jefferies and Lori Calvisina from RBC, will break down what's likely to move the markets in the coming weeks as stocks do sit near these

record highs. Plus, the CEO of Twilio will join us exclusively as that stock takes a leg lower following last night's results. And we're tracking the moves of some of the country's biggest money managers all hour long as 13F reports get released. Let's get a market panel today with Jeffrey's chief market strategist and CNBC contributor David Zervos and RBC Capital Markets head of U.S. equity strategy, Lori Calvacina. Happy Friday to both of you. David, I know you're inclined to think this Trump presidency is going to be very good for the economy and by extension markets. We've got to read on what Jay Powell would or wouldn't say about the Trump administration's early days and impacts on the economy. What's your sense of how the Fed is navigating with the administration so far?

My sense is very carefully is the way that Jay approached anything with the word Trump in it when he was questioned for two days up on the Hill in the House and Senate. The same way he approached the press conference at the last FOMC meeting. He's holding his cards close to his chest. He's not telling you how he thinks about tariffs or fiscal or DREG or immigration. He's waiting to see how those policies progress. And then I think when we see the actual policies get implemented, he will inform us how the Fed's thinking about that feedback into inflation, growth and unemployment and ultimately the Fed's reaction function. So

I thought he was very, very much in the same spirit as he's been in the past, which is trying to say as little as possible with regards to the new policies. Now, Laurie, you still feel like the S&P is going to end higher by about, I think, 8 percent from where we closed today, even though maybe the Fed's done cutting for the year? We do. I mean, we think that our 6600 number, it's really driven by the idea of earnings growth supporting this market as opposed to valuation expansion. You know, if we were looking for a big decline in interest rates, say, or inflation from here, and those are not really on the table in our modeling right now, that might give some support for the idea of multiple expansion. But we don't think you're going to get that.

I think that, you know, though, our 6,600, it is the path we see higher. We do think it is potentially a rocky path higher. So we still have been warning people we anticipate a 5 to 10 percent drawdown at some point. We think our target can absorb that. And I do, frankly, John, think that we're a little bit overdue for that. David, I want to get your thoughts on the fact that we've seen the 10-year Treasury yield actually fall on the week. Now we're back below 4.5. We know Bessent, the Treasury secretary, basically said that this administration is not focused on the federal funds rate and not nearly as focused on what Powell and the Fed do, at least in the interim, that they're focused on bringing that 10-year yield down. So how does

that happen? And what matters more to the market here? Is it commentary from the Fed or is it commentary and policy out of the administration? I think the tenure this week, Morgan, was maybe a little bit more technical than other weeks. We saw a lot of people reacting to maybe the deregulatory comments allowing banks to probably hold more Treasury securities in the future. That was kind of intimated again in Jay's testimony. We saw a very big move in swap spreads. We've seen that. So it's treasuries are moving lower more than swaps as they've kind of underperformed for a while. So I think there's a dereg component to that move. But by and large, I just think if you were in the inflation's coming back, the Fed's going to have to hike, everything's going wrong,

Jay's going to lose his credibility camp, it was not a good week for you. You had a pretty hot CPI and the market shrugged it right off. And then, of course, retail sales a little softer. The 10-year took that and ran with it. So I'm still very convinced that we're going to have both a good year in stocks and bonds. We like our risk parity bets a lot. And I think the fact that the administration is putting that emphasis on the 10-year means they will be looking at policies, either regulatory policies or other supply-driven policies with the Treasury market, to try to drive those longer-term interest rates lower and get mortgage rates lower, which I think is going to become a bigger and bigger part of the story. You saw in the testimony, Morgan, a lot of people in Congress focused on housing and

housing affordability. I think that is going to become, this mortgage rate is going to become a much more important focal or fulcrum point for Scott and the rest of the administration. So watch that space. But I'm optimistic that they can keep pushing the 10-year yields lower, not higher. OK. Lori, I want to get your thoughts on what we've seen out of this earnings season and how much this drives stocks from here, especially if you do have something like stickier inflation per the data we saw this week, because inflation

is not always bad for corporate America and for stocks, especially if those companies can realize pricing power out to consumers and consumers are willing to pay. Well, that's a great point, Morgan. And, you know, one of the things that we see in our S&P 500 earnings modeling is that there's a direct positive correlation between CPIs and S&P revenues, right? So if the companies get the pricing power, that does usually to some extent, at least, of course usually to some extent, at least, of course, there are offsets, but have that positive impact. We are hearing in the tariff discussion loud and clear from companies that they will use any tariffs that come through as an opportunity to pass on through price. Now, ostensibly, that's just a recap, the outlay. But you do have to wonder to what extent are companies going to try to add a little bit on

as well. That's something that's just going to have to be monitored. I do think as we go back, you know, I haven't seen so much of it this reporting season, Morgan. But if I go back in past reporting seasons and kind of coming into this one, companies were continuing to complain about their own input costs. So they've been feeling that inflationary pressure from the boots on the ground perspective. I think the biggest takeaway, though, Morgan, that I have from this reporting season so far, and the dial has really turned or the pendulum has swung as we've gone week by week in reporting season, we started out back when all the financials

reporting hearing optimism, optimism, optimism, and there's a little bit of uncertainty driven by policy in there. As we've gone deeper and deeper into this reporting season, we're hearing more and more about the uncertainty, uncertainty, uncertainty, and it is starting to eclipse the optimism. And it's not to say the optimism is gone, but we said it in our weekly this week, the optimism has taken a dent on the basis of this uncertainty. We are going to have to see how that translates into spending, how that translates into other activities. People keep asking me if companies are pulling back on CapEx because of that. We don't have a clear answer on that yet. But I think we're going to be exiting this reporting season with a lot of questions. As we always have. Lori, David,

thanks to you both. We've got a news alert on Elon Musk and the Department of Government Efficiency. Megan Casella has that. Megan? John, another legal setback for President Trump and Elon Musk, at least a temporary one. A federal judge in Manhattan this afternoon ruling to extend a temporary block on Doge's access to the Treasury Department's payment systems. These are systems that are responsible for trillions of dollars in funding, and 19 states have been arguing that it's a major cybersecurity risk to allow Doge to access those systems. The federal judge today saying she's not yet ready to decide on whether to issue a longer lasting preliminary injunction for now just extending this pause that blocks Doge from accessing the payment systems for now. So more to watch on this front, John. But for now, we know

they cannot access those payment systems, John. Okay. Megan Casella, thank you. Well, today marks the deadline for 13Fs. And as we wait for updates on hedge fund holdings, there's one filing that's already moved a number of stocks today. It's from NVIDIA. Christina Partsenevelis has details. Christina? Well, NVIDIA's investment arm has been reshuffling its portfolio. The company's latest filing show it cut its stake in arm holdings by 44% to 1.1 million shares. Arm shares are down about 3.5% today and NVIDIA completely exited positions in Nano X Imaging,

Serve Robotics, and SoundHound. SoundHound fell about 29% today on the news and marks the end of a seven-year investment when NVIDIA first participated in a $75 million funding round to help SoundHound grow internationally. So it is a shift. But NVIDIA is also placing some new bets, acquiring 1.2 million shares in AI infrastructure firm Nebius Group and 1.7 million shares in self-driving Chinese tech company WeRide. So WeRide shares initially opened 100% higher, about 81% today. The robo taxi firm operates a range of autonomous vehicles like robo vans, robo road sweepers as well across seven countries. It's launching a

pilot in Switzerland and a partnership with Uber to offer robo taxis in Abu Dhabi. NVIDIA is no stranger to this industry, providing AI computing infrastructure for driverless cars. Its Drive platform, that's the name of it, helps robo-taxis process sensor data in real time. As for NVIDIA's other investments, the 13F reveals NVIDIA still owns stakes in Applied Digital, as well as Recurgen Pharmaceuticals as of the filing date,

which we know doesn't reflect investments in current time, 2025. But it's helping all of those names move higher today. Yeah, personally, I was just listening to this whole report, but I'm perhaps most curious about the Parts Neveless investment because it sounded like there was a baby behind you, and I'm all for that. But if I stick with this. There's a baby right next to me. Love it. But if I stick with NVIDIA, I am just curious because as we see companies like NVIDIA get bigger and bigger,

the ability to do more and more M&A, at least in the past couple of years, has been perhaps stifled. And so I wonder if we continue to see more of these types investments, these types of strategic partnerships, et cetera, from companies that are flush with cash above and beyond Silicon Valley and above and beyond hedge funds. You could say definitely that's the case for NVIDIA and its shareholders. And I say that because the stock and share price has been range bound for quite some time. You know, around the 200 day moving average of 125 bucks to just passing the 50 day moving average of 135. I bring that up because investors want more. So when you have the arm investing in various companies like

the WeRide, for example, it shows that NVIDIA is putting its money to work and possibly in future M&A activity, which would bring back some return to shareholders. Because right now, it really takes a lot to impress NVIDIA shareholders. It's the stocks up dramatically over the last year, but year to date, pretty flat. OK. Christina Parts Nevelis, thank you. Well, another high flyer, Meta closing higher for the 20th day in a row, posting its 17th straight record close. Let's bring in senior markets compensator Mike Santoli for a look at Meta's wild run. Mike. Yeah, Morgan, quite a sprint here. And what's interesting is Meta is feeding off of some relative weakness in some of its direct

counterparts. This is a six month look at Meta relative to Alphabet. A couple of things to point out here. So Meta here in blue. This right here was Mark Zuckerberg goes to Mar-a-Lago, has dinner with then President-elect Trump. You had a little bit of a lift there. Everything did well in NASDAQ 100 land during the remainder of the year in the fourth quarter. And then you had a little bit of a disappointing guide from Alphabet, all the CapEx plans. That's when Alphabet pulls back and it helps Meta to be a beneficiary of this rotation. Meta also starting off with a pretty undemanding valuation when all this got started back, you know, right before the presidential election. It was trading right at a market multiple,

so no premium attached. Now it's racing up toward 30 times forward earnings. Not quite there yet. Take a look here at the market cap shift that's happened yeah I mean it's obviously not dollar for dollar but uh Tesla to the downside at the end of this chart meta going vertical almost similar amounts to uh peak to trough about 250 to 300 billion dollars added to meta taken from uh from uh Tesla obviously uh Tesla had had an amazing run before that so to me it's much more about just this becoming the anointed name. It's very easy for investors to own and tell themselves why the fundamentals make sense. On top of it, you have the price momentum and all the rest. And I've seen RSI stats that are high

and sort of the argument out there this week in particular that maybe Meta is overbought here. But one of the stats that gets my attention perhaps the most is that Amazon, Alphabet, Microsoft, and Meta all together, collectively, as we've learned through this earnings season, plan to spend a combined $325 billion in capital expenditures over calendar 2025. And at $63 billion, estimated $60 to $65, Meta is being seen as a name that is spending less than rivals. What does that say about this AI ecosystem? It's spending a bit less proportionally, but also I think they give Meta credit for being a little more of a direct beneficiary of a lot of just what's happening in AI in general. So there's a little more confidence, a little more trust that this is actually going to have a pretty linear payoff. I think, you know, right or wrong, the market still has suspicion

that Alphabet is going to get its money's worth in that, you know, kind of immediate investment horizon. All right. Mike Santoli, we'll see you again in just a little bit. Meantime, we just got the 13F filing from Berkshire Hathaway. Leslie Picker, what's in it? Yeah, quite a bit of news this quarter, John. Berkshire Hathaway holding onto its Apple position during the fourth quarter, which stood at $75 billion as of the end of 2024. This is noteworthy because the firm had sold about two-thirds of its stake during the first three months of last year, so it seems like they kind of stopped the selling at the end of Q4. We'll see if that continues, of course. In terms of the bank positions, it appears that Berkshire Hathaway did continue to sell Bank of America after going below that

10% threshold during Q4. Now, that was the level by which Berkshire no longer needed to continue disclosing each sale. So we're learning more about its stake. And during the fourth quarter, Warren Buffett's firm pared back 15%, roughly 15% of its B of A stake to hold about $29.9 billion in Bank of America. You can see those shares slightly lower on this revelation. The firm also sold down 73% of its stake in Citigroup to hold about a billion dollars worth of that name. Those shares also a little bit lower in after hours trading and sold 18% of Capital One to hold about $1.3 billion at year end. So quite a decent amount of selling in

the banking industry by Berkshire Hathaway. Also during the quarter, Berkshire took a new stake in Constellation Brands worth more than a billion dollars. That stock reacting on the news currently up about 6.5% there, and it did bump up its exposure to dominoes by 87% in the quarter as well. So held on to Apple, sold a bunch of banks, took new stakes in some consumer-facing companies. That is the Berkshire Hathaway 13F filing. As of the end of Q4, those positions may have shifted in the six weeks since, John. And some market moves to go with it.

Leslie, thank you. Pizza and beer. Valentine's date night, baby. Of a kind. Depends what you're into. Well, after the break, the CEO of Twilio, one of the market's biggest laggards today, is going to join us exclusively to talk about the guidance that rattled Wall Street. And later, a check in on the consumer.

We're going to break down what's behind today's weak retail sales report and how persistent inflation, booming tariffs are impacting American spending power. Overtime is back in two. Welcome back to Overtime. We brought you Twilio earnings here yesterday. The stock sold off today despite a sales beat. Investors keying in on some soft guidance for the current quarter. Twilio did reiterate its full year 2025 targets, however. Shares had been up nearly 30% heading into this print since the company's investor day,

which we also brought you here. That 2025 investor day guidance was first provided. Joining us now for an exclusive interview is Kazemaship Chandler, Twilio's CEO. Good to see you. So today's market move in reaction to earnings took back a little bit more than half of the move post-Investor Day. So tell me about the spending and the EPS picture for Twilio as you continue this turnaround and how it fits in the context of the targets that you just set at Investor Day a couple weeks ago. Sure. Thanks for having me.

First of all, I mean, I think we've had a really good run this year. And, you know, obviously today, like, we don't necessarily manage the company for day-to-day movements in the stock. But instead, what I'd really focus on is Q3, Q4 last year, two significant quarters for us, double-digit growth in both. And I think we also crossed a really important milestone for the company. It was our first quarter in Q4 of gap profitability for the company. And as you referenced, just three weeks back, we put out what I think is a really exciting framework for investors. So really durable growth over a three-year period and $3 billion of cash flow to go with it, plus a $2 billion announcement around a share buyback. So I think there's a lot in front of us, John.

You are the former chief financial officer there and have emphasized kind of efficient running of the company. Well, you also at Investor Day talked about investing in innovation to drive growth going forward. And you also gave a little color on the number of AI companies, young companies that are using your technology. How much of that is going to drive the growth in the nearer term, or is the AI growth, and you talked about this a little bit three weeks ago, more a 26, 27 picture? Yeah, I think the AI phenomenon, I mean, it's like one of the most incredibly exciting events of our lifetime, but I think as it relates to revenue and the way that it shows up,

it's probably more medium term, 25 or 26, 27, as you alluded to. I will say that in many of my conversations with customers, they're incredibly excited about the prospects for deploying it. I think for Twilio specifically, AI is really an activation for contextual data. I think contextual data is really at the heart of the story. And it speaks to our vision of combining communications, contextual data, and AI to be able to drive superior ROI for our customer base. Co-host Morgan, I am curious because I don't think you've been on since we saw that deep seek shakeout. What your thoughts are on that, especially if you do see falling costs, falling prices associated with more competition in the market, what it's going to mean for Twilio and what it's going to mean for this ecosystem? Yeah, I think for us, it's a

pretty limited factor, actually. I mean, none of the conversations that I've had with customers really contemplate cost per GPU or something of that nature. We're obviously not making CapEx investments of our own. I think instead what customers tend to be really keyed on is what's the ROI that I can extract from the products and services that you offer. I think if the price of all this stuff comes down, I think that around you know, around the margins, that'll provide some tailwind. But it's not really something that we spend a lot of time thinking about and our customers don't ask us about it. So what effect is the adoption of AI more vertically into industries, you think, going to have for Twilio as you kind of bridge that communication gap and an AI gap, some might argue, with their customers? I think it's going to be completely transformative for our customers.

I think what it's going to allow for each of us as individuals is fundamentally much more engaging conversations between ourselves as consumers and the brands that we care about. And the way that we think about it is, is that every one of these communications between a company and their customers requires a communication. It gets enriched by having deep contextual data, which we have, that's powered by our segment asset. And then you use AI as an ongoing learning mechanism. It drives the use of that data in those interactions to make them better. And I think that this is going to be super transformative for the consumer. And I think we'll all benefit. All right. We'll keep tracking the story with you. Koshyap Chandler, Tulio CEO, thanks for being with us. Thanks, guys. Up next, we'll talk to an analyst about Moderna's whippy price action today on the back of earnings and why RFK Jr.'s potential impact on the vaccine makers might be overblown.

And later, we are getting set for one of the most important earnings reports next week. That's Walmart, as that stock sits right at record highs. Over time, we'll be right back. Welcome back. Moderna shares are higher today after reporting mixed Q4 earnings results this morning, highlighting a continued decline in demand for COVID vaccines. And that report comes as questions swirl about how new HHS secretary, RFK Jr., could impact the pharma industry at large. Well, let's bring in Jeffrey's senior analyst, Michael Yee. Michael, it's great to have you on. Let's start with Moderna and what that report tells us about the state of the vaccine

market, especially when you are talking about some of these newer cutting edge technologies like MRNA. Well, I mean, I think the first thing to recall is that the stock is down massively over the last couple of years, as obviously as COVID vaccinations and jabs and the whole idea of COVID over the next few years becomes more concerning. Add in the uncertainty of RFK, who has a long and checkered past about vaccines, and that's going to cause a lot of uncertainty. So I think the concern on Moderna is right.

We downgraded that stock about six months ago, talking about serious cash burn and definitely a lot of concern around Moderna is right. We downgraded that stock about six months ago, talking about serious cash burn and definitely a lot of concern around Moderna in the next year or so. It's interesting because going through the anticipation that even the confirmation process for RFK Jr., these stocks would sell off as he would move forward. And then yesterday, when he was finally officially confirmed, we actually saw some of these stocks, Moderna included, rally on that. And I wonder if you think the concerns have been overblown or it's just already priced into the stock, how you see policy continuing to affect pharma, particularly the vaccine makers. Absolutely. So let's, you know, separate the

idea of headlines that RFK is a concern with the Wall Street concept. Obviously, that a lot of this has been priced in. Moderna stock is down significantly since the fourth quarter. The XBI has done nothing but go down since November and Trump's election. Meanwhile, the market's gone to new highs. We believe that a lot of this has been priced in. In fact, we've termed it the RFK rally, which is certainly possible because there's probably more bark than bite around what he legitimately is going to do. I'll point out next week is speculation that many of the big pharma guys will be meeting with Trump and RFK at the White House. Let's see what comes out of that. Possible that stocks rally on that because we just want to get a good deal together and work together.

Mike, I'm actually more curious about the potential impact of the Department of Government Efficiency. One of the twists here in some of its early moves cutting off USAID is there were some farmers in red states who were saying, boy, our food was being purchased through USAID to be sent overseas. We'd like that to continue because now those purchases aren't happening. Are there any drug makers you think that are exposed to any kind of similar effect that might come downstream from Department of Government Efficiency moves? Well, I'll tell you that there's definitely concern about NIH and CDC budget cuts. That could certainly have some downstream effect towards R&D spend, more for the instruments and more for the R&D budget spend. There's some concern also around

tariffs, around how that concerns some countries' shipments of drugs or API into the U.S. I would say that a company like Gilead, which has 40% of their exposure to Medicare and Medicaid, has been a little bit of a concern there. But it's more about research budget-type spending rather than any sort of direct drug pharmaceutical spending. So there hasn't been a lot of concern there, and we feel okay about that. All right. Michael Yee, thank you. Great to see you. Well, we've got some news on OpenAI, the board of that, well,

whether to call it a nonprofit or a company, officially rejecting Elon Musk's offer for the nonprofit piece of it. Chairman Brett Taylor saying in a statement, OpenAI is not for sale, and the board has unanimously rejected Mr. Musk's latest attempt to disrupt his competition. Any potential reorganization of OpenAI will strengthen our non-profit and its mission to ensure AGI benefits all of humanity. Elon Musk was part of a group of investors offering $97.4 billion for OpenAI's non-profit arm. Well, time for a CNBC News update with Bertha Coombs. Bertha. John, the confinement structure that prevents radioactive substances from seeping out of the Chernobyl nuclear plant was damaged by a drone attack, according to the plant's chief engineer,

who says the protective structure can no longer function as designed. Ukraine has blamed the attack on Russia, but the Kremlin has denied any involvement. The IRS is getting ready to lay off thousands of its probationary workers as part of the Trump administration push to reduce the size of the federal workforce. Sources tell the New York Times the cuts could come as soon as next week and could well impact the agency's work processing the tax returns of millions of Americans. And the crew of the Army Black Hawk helicopter that collided midair with an American Airlines plane near Ronald Reagan National Airport late last month may not have heard key instructions from the air traffic control tower. The NTSB said the crew may not have heard the controller telling them to pass

behind the passenger jet. Investigators added that the Blackhawk pilots were believed to be wearing night vision goggles. John, back over to you. Bertha, thank you. After the break, what a recent surge in retail investors' social media chatter could tell us about the health of the bull market. And check out some of the stocks hitting record highs in today's session, including Netflix, Live Nation, JP Morgan, Palantir, and T-Mobile. We'll be right back. Welcome back to Overtime. Mike Santoli's back with a look at the strength in retail investing, what it says about the market. Mike? Yeah, John, for weeks been noting the small trader flows into this market have been very strong, very consistent,

really animating a lot of sort of speculative subsectors of this market. For a while, it was the quantum computing stocks, obviously all these third derivative AI plays, EV, helicopters, you name it. Well, what we're seeing here is quantified. JP Morgan's equity trading desk shows the flows coming from traders, retail traders, as a percentile of the recent trend. In other words, up here, it's like 99th percentile. And then social media posts tracking along with it. A couple of things I would note is right here when both flows and the social media chatter about stocks went vertical. That was the early part of 2021. That was when the pandemic kind of meme trading frenzy really crescendoed. It was not the peak of the stock market as a whole at that point. A lot of those lower quality stocks crashed thereafter and the overall market continued higher until the end of 2021 when the fed started tightening in early 2022 so it's not to say that this is some kind of a contrary indicator right away but it can be more erratic action it can be uh maybe a sign that's you're going to get some overshoots in some part of this

market the other piece of it too you'll notice a general uptrend. So it's not as if this has some correct level that it needs to return to. But it is interesting how before the pandemic, it was just sideways in this very narrow range. History question for you, Mike. Yeah. Have we ever seen a sustained market downturn when retail investors have been using the kind of leverage and options that they are today? Well, eventually, yes. What you'll see is when there's been this buildup of, you know, essentially speculative exposures in that way, and it becomes kind of shorter and shorter term time horizons piling up on itself, that makes the indexes unstable.

Obviously, the peak in the year 2000, we're almost at the 25th anniversary. That came after maybe a year and a half of really wild one way upside momentum speculation. I don't see something of a similar magnitude at this point or even a similar character. We don't have a lot of IPOs of of kind of insubstantial companies that are being bid up on day one. That was happening all year in 1999. But I think, yes, it can get to a point where they're going to stop when the stock prices crack, not in advance of when the market peaks. All right. Mike Santoli, thank you. Yeah. Up next, a look at one defense tech company that could be a big winner from President Trump's suggestion that the U.S. could slash defense spending in half. And retail earnings kick into high gear next week with Walmart's report.

Could today's disappointing retail sales number be a red flag about what to expect? Well, that's coming up on Overtime. Well, it's been a big week for defense sector news. From steel and aluminum tariffs to possible F-35 fighter jet sales to India, which would be a major policy shift, to reports that some military services have already crafted draft lists to give to Doge of programs to cut. But perhaps the most stunning headlines came with the president's offer to cut defense spending by as much as 50 percent if, and as T.D. Cowan puts it, a, quote,

massive and unlikely if China and Russia were to do the same. Now, that sent traditional defense stocks lower, with a flurry of Wall Street analysts voicing caution and uncertainty about buying into the group. The dynamic also, though, highlights investor excitement for new defense tech players, with business models in many cases focused on dual-use technology. Take Fortera. This is a startup that has developed self-driving capabilities for defense and industrial customers, including recently announced production contract with the U.S. Marines to help make Oshkosh's rogue fires vehicle autonomous. Now, CEO Josh Araujo says it's all about a new approach.

When we look at, you know, DOD customers and defense customers, they're also going to be under budget pressures. How do we do more with less? And I think when we look at, you know, autonomy, self-driving, you know, interconnected deployed systems, you know, there's actually opportunity to take costs out of those systems, do more cheaply, more effectively, bring more firepower and force to bear at a much lower price point. And so what we bring working with those prime partners is kind of a different view. We have this entire commercial market. We've developed a system to be, you know, we've thought about it from a product perspective in how do we address multiple markets.

I think when you look at the most effective cases of deploying technology to warfighters has been in technologies that have real dual-use applications at scale. So the tech itself could also mean fewer humans will be needed, which could ultimately drive personnel costs lower. Chief Growth Officer Scott Sanders gives an example of a test mission that was conducted just last week using Forterra's tech. This was a mission that normally would have taken four or five people to complete. This one was done with one. They were able to deploy several vehicles with either zero or one people tasking them. And when you start to expand that scale, when you think about robotic fires platforms, if you want to mass fires and you need

humans to do it, you need to scale a lot of humans with those missiles and those sensors. And the minute you can go and have one person do that and task 10 or 15 platforms, you no longer need to have a military to match man for man our competitors, which we just can't do. And so it really changes our ability to project power at a lower cost and take people out of those positions where they are actually going to be targets in the battlefield. But here's a critical and currently overlooked factor in all of this, particularly by investors. The legacy, so-called legacy defense primes are in some cases and increasingly so partnering with the defense tech startups, case in point for Terra with Oshkosh, to bring

these new technologies at lower costs to the military more quickly. The lines are blurring. So for more, check out my podcast, Manifest Space. We're going to have this entire interview up early next week and so much more on this topic and more. John. Okay. Yeah. Well, many happy returns. Up next, the CEO of one software maker who's helping other companies figure out whether the return on investment for their AI spending is really worth it.

And Roku shares, they are rocking today. Pivotal Research upgrading stock from hold to buy and Needham's Laura Martin hiking her price target from $100 a share to $120 following the streaming platform's better than expected fourth quarter results. We'll be right back. Welcome back. What's the return on investment in AI? Well, today, John takes time out with a CEO whose software aims to answer that question. Well, Benjamin Harvey is the founder and CEO of AI Squared. It's a company that helps customers understand how to make use of AI in their business processes and measure its effectiveness. Harvey was chief of operations data science at the NSA, the National Security Agency, and held data science positions at Databricks and Maxar before he started AI Squared. It wasn't an easy road for him. Harvey grew up in a poor community in

Jacksonville. Watching his older brother, he saw a path to success. He played basketball at the University of Miami, and he ended up taking up the degree of computer engineering. So, you know, his path through to college was sports. And when he got there, he ended up taking up computer engineering. And when he started down that path of computer engineering, I was still a younger guy. And I was probably, you know, still in middle school at the time when he started at University of Miami. And there was a spark for me. As business use of AI accelerates, Harvey has AI Squared. It's a startup focused on helping customers measure the productivity benefit. Companies are looking to move beyond experimenting with the technology toward building it into their systems, but they

need to justify the expense. So really what AI Squared is doing is for the first time, we're simplifying and accelerating how AI insights are being integrated into the workflows of the business. And then we provide a feedback loop. And that feedback loop helps the organizations understand from those users the impact and the value that these AI technologies are having, ultimately helping us provide the business with the ability to increase the experience, increase the accuracy and the performance and the overall quality of the models. And therefore being able to grab metrics like, you know, what's the productivity gain before and after the AI was integrated? The timeout takeaway measured gains. As the features and costs associated with AI keep changing, companies need ways to measure not only whether AI is improving results, but also whether it's improving them enough to justify the cost. And that means a new

class of analytics software features and providers to offer those answers, perhaps a new investable category. We will see. Up next, new burger Berman's John San Marco on how President Trump's tariff threats could impact retail stocks and what he's expecting from Walmart's earnings next week. And also next week, don't miss our exclusive interview on overtime. So right here with Pfizer chairman and CEO Albert Borla with his outlook on pharma and the impact of Washington policy. That's Tuesday, 4 p.m. Eastern. We'll be right back. Welcome back. Today's retail sales report showed consumers pulled back on spending last month.

This comes as Wall Street gets ready for retail earnings next week, including Walmart. Joining us now is John San Marco from Neuberger Berman. And it's great to have you back on the show. And that's exactly where I'm going to start, because we did get a weaker than expected retail sales number today. We also know autos played a big role there. So how does it speak to, if it does, the state of the consumer as we do look to more earnings? Great to see you again. Thanks for having me on. I think January is always a volatile month.

It's particularly vulnerable to weather, and that was definitely an issue this January, as were the fires in California. I think if we take a step back and kind of see the bigger picture, the holiday season shaped up pretty strong and finished really strong in December. So there was also some giveback from, you know, that elevated level of consumption. So, you know, I don't think that January is particularly concerning. I think the strength of December is probably more indicative of where the consumer is going, but definitely enough to look out for in the report in terms of the consumer's appetite to spend on discretionary

goods. Okay. So where is the consumer spending and how does it set us up for Walmart next week, which we know has been taking market share from quite a number of players? Yeah, Walmart, you know, Walmart sort of its own separate discussion. Its results, you know, have been, have gotten better and better really over the last couple of years, even while discretionary retail was getting weaker and weaker. So, you know, first on the consumer as a, you know, kind of reference, I think the right read here is the consumer is somewhere between fine, perhaps better, perhaps quite good. You know, the consumer strengthening should only help Walmart. You know, it was insulated when the consumer wasn't spending on goods for the home

and so forth. But as the consumer strength, I think you could get even better results from Walmart. So next week, you know, we would expect to see a very solid fourth quarter. It's quite possible that they take a conservative approach when they guide 2025, and that's what, you know, investors will zero in on for sure. But I think it will be, you know, if that is in fact what we get, I think it will be just that, you know, a conservative start to the year to plan the business prudently and then try to do better. I was wondering if we'd get an inventory hangover post-holiday, but I wonder how concerns about tariffs might feed into that. Are retailers stockpiling items anyway, even post-holiday, regardless of whether the consumer is strongly buying?

I think we are for the first time in quite a while. Inventory is, you know, coming back front and center in retail. And, you know, you may recall there was not nearly enough inventory early in COVID and then there was way too much. and we kind of had a Goldilocks situation. But to your point, really going back to the first threatened and then brief port strike, retailers kind of loaded up, and as demand has whipped around, you know, a bit, you've had pockets of excess inventory. So I think that's increasingly an issue in terms of where, you know, now prospective Trump 2.0 tariffs play into that. The bigger factor, I would suspect, is you might have actually had a little bit of consumption help from, you know, some consumers buying ahead of potential tariffs. OK.

And ahead of potential price increases. I think that would probably be a bigger factor. John San Marco, thank you. Well, third points, 13F is out. Leslie Picker back with those details. Leslie. Hey, Johnny, I just wanted to share with you a couple of these interesting moves in big tech world. Third point, selling out of a $200 million stake in Apple during the fourth quarter. It pared back a little bit of Amazon and actually said in its fourth quarter letter that Amazon was among the top five winners of the quarter. The firm also selling about 31% of its stake in Microsoft to

hold about $250 million worth by the end of the quarter. It bumped up Meta by 22% to $389 million. So it appears, at least from this filing, that Meta, among the Mag7, may be among the firm's favorites. In the quarter, selling out of Bath & Body Works also took a new stake in Capital One, worth about $165 million at the end of the quarter. And just that reminder, these are a snapshot at the end of the quarter. They may have changed in the six weeks since then. Guys? All right. Leslie Picker, thank you.

Probably a good time to be buying meta ahead of that record run yeah exactly ahead of it yeah so we got walmart next week that's a big one especially from both the consumer read in general and at the lower end yeah we get lots of fed speak too we get minutes and uh some chinese tech earnings but that's going to do it for us here at overtime happy valentine's day happy valentine's day i was gonna say it you beat