Closing Bell - Closing Bell: Overtime: Vista Equity’s Robert Smith On Software Dealmaking; Dr. Iman Abuzeid On AI In Healthcare 12/8/23

Episode Date: December 8, 2023

Google shares fell after news that its AI demo this week may have been edited; our Steve Kovach on what it all means. Major averages notch their sixth straight week of gains. Jon sits down with Vista Equity’s Robert Smith on the current state of the software market. Evans May Wealth’s Brook May and Unlimited’s Bob Elliott break down the week’s action. Plus, KBW’s Christopher McGratty on top bank picks for 2024 and Incredible Health CEO Dr. Iman Abuzeid on how her company is using AI to help healthcare workers. 

Mike Santola, take a breath. I guess good news is good news. The S&P 500 setting new 52-week highs after a late push higher before the weekend. That is your scorecard on Wall Street, but winners stay late. Welcome to Closing Down Overtime. I'm John Ford. Morgan Brennan is off today. Coming up, the financial sector has significantly underperformed the market this year, and KBW says it might be the right time to buy some names on the cheap. We will get your 2024 banks playbook with KBW's head of banking. Plus, billionaire private equity mogul Robert Smith joins us to talk about the value being created by AI and how it might even drive a wave of consolidation. Let's start, though, with the market as stocks make a push higher to end the week after jobs came in strong and inflation's expectations pulled back, fueling hopes of a soft landing.

Joining us now, Bob Elliott from Unlimited and Brooke May from Evans May Wealth. Guys, welcome. Bob, what's your assessment of how the market digested this jobs report with the 10 year higher, but the major indices also higher, led by energy and tech. Well, I think we're back to the environment of hire for longer that we saw over the summer and in early 2023 here, where the job market remains relatively strong. There's no good reason why the Fed needs to proactively ease monetary policy in this environment. And that is particularly bad for the bond market because there are still five to six cuts priced in for 2024. So bad for bonds, good for stocks because growth continues, fueled by those wage gains of strong employment. And the combination of which is, you know,

in many ways, just continuing the type of dynamics that we've seen higher for longer for a long time. You say good for stocks. Brooke May, you think potentially very good for stocks. You think the S&P 500 could rise as much as 17 percent next year? How? We do. Our price target on the S&P is 5,200 to 5,400 for 2024. Right now, consensus earnings growth is up about 11% from this year to next year. But if you look at Q3 earnings announcements, companies came out and their revenues were mixed. Margins stayed strong. And we think that's because they had two years to adjust for higher interest rates. And we think that that'll translate into a good market next year and we could see additional earnings surprises to the upside.

So then, Bob, why should people diversify here? Things might shift. Well, I think the question is, how long can the stock rally continue before it pushes the Fed to have to do more? And so that's why when I talk about this sort of higher for longer environment, it's generally bad for asset prices in aggregate because we've got to get more tightening in order to slow this economy, given how hot the labor market is and how wage growth continues to be above what's appropriate for the Fed to meet its target. So that's not necessarily a great long-term bet on stocks, even though in the short term, stocks outperform bonds. It's once we get that tightening that we'll probably start to see stocks roll over maybe at the end of the first quarter or the second quarter of next year, given the dynamics. Speaking of tech and financials,

Brooke, you like Charles Schwab and ServiceNow. Why? Schwab just completed the merger with TD Ameritrade. So there are going to be some cost synergies there. And when you look at Schwab, it's nowhere near a new 52-week high like some other stocks are. It's down 23% year-to-date. So when we look at the earnings growth projection of 20% from this year to next year and those cost synergies, they're going to contribute to earnings. And once we see a positive slope in the yield curve, there's going to be a contribution there from the net interest. In addition to that, when rates start to come down, people are going to move out of money markets and into traditional investments. And that'll bode well for Schwab and their earnings. All right. Interesting.

We also like ServiceNow. Oh, sorry. Go ahead. Go ahead. We also like ServiceNow. We added it to the portfolio a few weeks ago. They're a software company that focuses on workflow processing. And initially, they were focused on IT tickets. But since then, through improved programming, they've expanded their offering to HR and sales. So we think that their addressable market has grown significantly. And their earnings are expected to be up 38% from this year to next year, and then an average of 27% per year over the next five years. So we think that there's quite a bit of exciting news going on there. They've adopted generative

AI, and they announced in their third quarter call that they have had several multimillion dollar deals in that space. So there's a lot to be excited about. We have heard a lot from ServiceNow here on Overtime Indeed. Brooke, Bob, stay with us. We're also going to bring in CNBC's senior economics reporter, Steve Leisman, following today's jobs report ahead of next week's Fed decision and a lot of eyes watching inflation. Right, Steve? Yeah, that's going to be the big number next week, and it's supposed to be relatively tame, John. I think today's report was, you know, OK for the bond market, OK for the stock market. It wasn't a slam dunk on either side of it. You still had relatively strong job growth. But I do want to show you what's been happening with the private

sector job growth. And that's been kind of ticking down, getting to be a little bit more normal. I like the idea that it's still at one hundred and,000. I think that's good for workers. It gives them an opportunity to still bargain for wages, especially if you talk about skilled workers. On the other hand, the idea that it's well down below where it was in the $200,000 and $300,000 range just a little bit ago, I think that's an important story for the Federal Reserve. Several other factors in there today. The year-over-year wage gains were four percent so that's uh ticking downward uh the unemployment rate interesting down to three seven but still you had a pretty large influx into the workforce so i don't think they'll be too worried about that and then of course there was the uh big decline in uh inflation expectations in that michigan number

i think was probably pretty good you did have a bit of a reset, John. I'm going to come to the expectations for rate cuts next year. They had been as high as 68% starting in March, down below 50% as the day wore on, as people started saying, well, you know what? This number is not commensurate with a Fed that's going to be cutting right away, but maybe a little bit later in May or June. Okay. Bob Elliott, you're still with us. With all of that in mind, how do you set things up for 2024 differently than you might be positioned at the end of 23? Well, I think what we were seeing at the end of 23 was a big push in an effective easing that happened from the Treasury and then from market-based easing on expectations that the Fed is going to come to the market's rescue with a bunch of cuts into 24, even a reasonably high probability in March. Now, I haven't seen the Fed in the past come to the

market with meaningful cuts in an environment where unemployment is at 3.7 percent. Like what what is the reason why the Fed would cut here when the job market is going along quite strongly and when wages that they're seeing are still elevated relative to what is appropriate for them to meet their mandate over time? Steve Leisman, what about that? And when we look at the next inflation print, what are the most important subcategories that the Fed is going to be looking at? Because, you know, the prices are still high and growing in some areas, but not in others. Well, we're looking for precisely another flat line. So what I think, Bob, is confusing is the present day with the forecast. What the market is doing, and the market could be wrong here, is essentially forecasting what the Fed is going to do given its forecast for what's going to happen to inflation. It could be dead wrong. It's been wrong. But the forecast right now for next week is that we're going to get a big flat line when

it comes to inflation, up 0.3 on the core, and then it's going to sink to 3% year over year. The expectation is that you're going to have several months of relatively contained inflation. That will mean over time that the Fed has gotten objectively tighter over time. So the question, Bob, is not will the Fed ease? The question is, does the Fed have to get tighter from where it is relative to the underlying inflation rate, meaning its real rate will become tighter? I know you know this argument, but that's the expectation. That's the forecast that the Fed will pivot in a way, not necessarily to ease conditions, but to remain at least as restrictive as it was.

Bob, your thoughts? Well, I think the Fed is focused on what do the actual rate will create an effective tightening, as was just described, the reality is when it comes to consumption, if your wages are continuing to grow at 5 percent and inflation falls, that is stimulative and increases real demand. For instance, a big part of the driver of price falls that we're seeing or weakness that we're seeing is because gas prices have fallen considerably. What that's doing is it's putting money directly in the pockets of the everyday American who can go out there and spend as a result. The consequence of that is that real spending remains relatively strong, and that creates a continued flow of job creation,

a continued tight labor market, and those structural inflation pressures, not the measured ones, but the structural ones, which Chairman Powell has highlighted as being such a concern, will continue to remain in place until we start to bring those wages down. And today's unemployment report looked like a step back rather than a step forward on that dimension. To be continued as we get more data and decisions in the days ahead. Bob, Steve, thank you. Now let's bring back senior markets commentator Mike Santoli, who has caught his breath. He's got a take on the S&P's push to 52-week highs. Mike. Yeah, John, to 52-week highs. Matter of fact, more like 20-month highs. Here's a two-year chart of the S&P 500. We were just kind of sitting around there on that

4,600 level, kind of like I was saying we did in the spring, just sort of digesting the prior rally, finding a little bit of a lift today, getting us back to those levels from March, end of March of 2022. So, you know, from this frame, it shows you that we've kind of gone nowhere in a couple of years, almost exactly nowhere, as a matter of fact. And yet it's cheaper now, in theory, relative to the size of the economy and relative to earnings.

And now you have the trend having curled higher. So even though it feels like treading water, it's the kind of thing where there's some productive progress made in relative terms to earnings in the economy over that period of time. Now, the market has had to seize upon only a small handful of playable secular themes that it was very excited about. And I love this chart of Microsoft relative to the homebuilders ETF. Now, this is three years and it shows you they've absolutely trounced the broad market in that period of time 70-some percent. And even the downturns in 2022 don't look like a whole lot. So there's

nothing that really relates to these two things. It's kind of the ultimate hard good with the ultimate software company. But for me, it is really about how a lot of money has been funneled into a handful of safe-seeming trends because of structural changes going on or long-term disruptive opportunities happening. I think I would be alert for the possibility that a broader set of opportunities out there, especially if interest rates go down a lot, mortgage rates go down, existing home inventories start to build, maybe that's counterintuitively not necessarily the best thing for homebuilder stocks that have been absolutely vertical in the past several weeks. Mike, if I recall, the last time we were near these levels, certainly on the S&P this year,

was late July, right around the time of that Fitch ratings cut, which makes me wonder, could government somehow screw this up for us? Look, this could definitely be screwed up by something. Now, we're going to get the, you know, we don't have a budget yet, past January 19th. We could get some supply of Treasury issues next week. We'll see if the market has some indigestion over those things. I think what really happened in late July was everybody got on board with the idea that we had a soft landing, benign interest rates, Fed was out of the way, the economy looked good, and we just got challenged by a little bit of a surge in rates. We had a choppy

period in the economy off of a very placid summer. And, you know, we had to get through an earning season and weak seasonal patterns in the market. So we don't have exactly that sum of factors at play right now. But, yeah, I would never deny that something could knock us off course if we get complacent about good things right now. Five months later, people feeling good again. Mike, I'll see you in a bit. After the break, KBW's head of U.S. bank research reveals the one mega cap name he's betting on in 2024 after a volatile year for that sector. Overtime's back in two. Financials are slowly recovering after banks got rocked earlier this year.

The KBE is up 15% this month. The KRE is up 16%. But both still lag the broader market this year. Let's bring in KBW head of U.S. bank research, Chris McGrady, with names that should be on your radar heading into 2024. Chris, what's your favorite? Hey, John. So we're still market weight,

the U.S. banker. We moved there a year ago, really into 2023. We thought earnings were at cyclical highs and cycle highs. So we moved to a market weight. We obviously went through quite a bit of stress in March. Throughout the year, we've cut numbers 25 percent. And so valuations are really cheap going into 2024. So we're picking our spots across a variety of themes. So what's your favorite name? And while you're at it, tell me about the KRE, which is right knocking on the door of 49, which would be kind of recovering from that area that it fell down into back earlier in the year. But it's had trouble breaking through and staying through. Right. We've seen a lot of volatility throughout the year. But if you step

back, banks have underperformed the S&P by 30 percent since last December. So the broader market's gone up, the banks have gone down, and we've seen a 30-point relative underperformance. And so what we're looking at is really a question of, is this enough? Has enough been priced into the group? And we think our analysis shows that there's a really strong correlation between the direction of earnings estimates and the direction of the stocks. We think the top line net interest income pressures from the spring have largely abated, which is a good thing. We do, however, think there's a risk to the cycle with credit normalizing higher.

And so we're taking a cautious stance on the group. OK, let me move to large cap for a moment. You like Goldman Sachs. Is that truest? And Key Corp, too. But first on Goldman, we're hearing more about deal activity picking up. That's a big part of what Goldman does. Is it a call on that or just the consumer issues that they have

being largely out of the way? Right. As a firm, we like Goldman. We think capital markets are poised to rebound. And really, we've been in a recessionary environment for capital markets and investment banking for almost two years. So with clarity on interest rates, we've seen stocks perform better. We've seen rate expectations come down. That's all healthy for capital markets and around tangible book for Goldman. That's one of our top picks. Why Key Corp? Key Corp, yeah, they got caught up in a lot of the drama from March with interest rates moving up and capital levels moving lower. We think Key Corp is uniquely positioned. They're going to get book value growth as some of these losses come back into capital. And there's a real strong ramp in the earnings over the course of 2024. Between the first quarter

and the fourth quarter, we think earnings will grow by 70%. So there's a peak, really an improvement in earnings story at key. I want to rattle off some of the small and mid caps that you like. Webster Financial, Columbia Banking, Pinnacle, Prosperity, Valley National, Enterprise, Amalgamated. Is there one that represents why you like that group of them? Sure. Let's go to Webster. Webster is a name that I follow. Really, the call is the market's mispricing the return potential that this company can produce. We've done a lot of analysis on what the normalized ROE for this company can be in the industry. We think their structural ROE is north of 20%. The stock sells for seven times earnings. We think the stock is mispriced because of outsized credit concerns. We think as you go through 2024, that risk will get repriced higher, and that's one of our faves. In the financials,

two things I wonder about that could affect all this. You tell me, consumer debt, you know, credit's been stretched, and office on portfolios and some regional exposure to those. How do you think about those two things? Sure. I would say unemployment and the consumer are things we're watching closely. We've seen a strong labor market, but certainly the consumer is something credit card debt is at a high level. You're right. You know, more broadly, we think, you know, credit is something you got to watch more carefully this year. What about the commercial banks and that office portfolio issue? Sure. Office is a well-telegraphed risk. We've been talking about it for the better part of a year, really with the return to office dynamic that's played out since COVID. The good thing is office is a proportion of the balance sheet is pretty manageable. Most banks, you know, sub 5% of loans. So it's a manageable risk. We're going to have to go

through a reset period. But certainly the banks are well capitalized and they can get through that. Such pithy answers, Chris. I think I got a record number of questions in there. Chris McGrady, thanks for being with us. Thanks, John. After the break, private equity billionaire Robert Smith on the use case for AI that more than 90% of his portfolio companies are implementing now. And speaking of AI, Google in hot water after reports said its demonstration of its new Gemini models might have been, well, kind of artificial. We will bring you those details when Overtime returns. Welcome back. Shares of Alphabet jumped this week after Google unveiled

its advanced Gemini AI models, but now reports are saying the demos might not be what they seen. CNBC's Steve Kovach is here. How much did they fudge it? Oh, quite a bit. So they are taking some heavy criticism today, John, after we learned that the Google demo video for the new AI model called Gemini was manipulated to make it look more capable than it actually is. That's being generous. The video was supposed to show how Gemini is, quote, multimodal. That means it can interpret visual audio and written prompts in real time. And while the video initially went viral and wowed the tech world,

it didn't take long for folks to realize it wasn't legit. Instead, Google edited the video to make it look like Gemini was answering those prompts faster. And Google even went a step further than that, feeding Gemini text prompts, but making it look like it was responding to audio and visual prompts instead. This is supposed to be Google's answer to OpenAI's chat GPT, and it's very clear it's not ready yet. Now, a Google spokesperson told me the video was

meant to be, quote, illustrative of what Gemini could be able to do when it launches, but you wouldn't have known that watching the video. Of course, this doesn't mean Google or any other company we've been talking about in the AI space won't catch up to OpenAI eventually, but it is the latest example of how Google got caught off guard last year with the debut of ChatGPT. Google shares closed down a little over 1% today after that 5% pop yesterday on optimism around Gemini, John. So there needs to be fine print around these demos. And people are recovering this for a while, as you have. Know that for time immemorial, there's needed to be fine print around some

of these demos. Recorded demos. Yes. Or even live demos that appear to be live that big prominent CEOs are doing on stage and pieces of the product maybe aren't ready. The original iPhone, they had, this is a really cool piece of tech history. Steve Jobs, when he was showing off the original iPhone, literally the order he went in had to be perfect because otherwise it would have crashed. So, yes, that does happen. You should always be skeptical of tech company demos, especially pre-recorded demos.

Look at the fine print. But look, you would have been, like I said, you would have totally been forgiven, as most of the world was, looking at that video and thinking it was what Google was representing as. Mostly live demo a few months ago. Stock goes down. Somewhat fudge demo. Stock goes up. Stock goes up. Well, there we go. Steve Kovacs. Thanks. Thank you. Well, next year is shaping up to be an all-out brawl to capture value from the AI boom across chips, platforms, and application software. I spoke this week with Robert Smith, founder and CEO of private equity firm Vista Equity Partners. His net worth recently estimated by Forbes at just over $9 billion, by the way. I asked how he's assessing the risks and opportunities across the 87 companies in his portfolio. Some are saying

hardware vendors will capture a couple of trillion. The super scalers might be 10 times that. But the aggregate of what ultimately will be the enterprise vendors is multiples of that even. Because they serve a bigger, broader broader market they have the unique data and insights have unique capacity to utilize that data to provide uh you know highly productive tools uh to their customer set that the customers frankly are going to invest in themselves what are going to want to gain access to and utilize so gen ai can enable code assist, you know, make your coding more efficient. When you have our measurements today, we're getting between 10 and 35 percent efficacy. About 94 percent of our companies are utilizing code assist in one way, shape, form, or another. And so, you have

the ability to, on the one hand, you know, produce more code with less errors at a faster rate, or, depending upon the state of the company, you know, produce the same amount of code with fewer, you know, resources. I also asked Smith about the deal-making environment in the public markets with smaller company valuations lower than they were. Now we've come back down to a more normalized state, very close to the same sort of revenue multiples as what we saw in 2014 to 2018. And so from our perspective, that's a more normalized state of opportunity. And now, you know, it will be who gets out there and utilizes some of these other tools, Gen AI in particular, and demonstrates the capacity to accelerate their growth and accelerate their profitability, frankly, simultaneously, because that's what investors are now looking for in this marketplace.

And I think you'll see an expansion of those multiples of those companies going from that six times to maybe even doubling or tripling again in a sustainable fashion. But if you don't embrace those businesses, and again, if you have already high margin businesses and low growth businesses and fully saturated markets, it's going to be an efficiency game as to whether or not you can convince your customers that they need additional products or solution sets utilizing Gen AI to accelerate your growth from where it is today. Private equity firms, not the only ones licking their chops in this environment. Once a wave of innovation sweeps through the enterprise, big companies often start swallowing larger ones like Oracle did PeopleSoft 20 years ago. So I asked Smith if it's going to happen again. Then you see those executives look to accelerate their growth through doing fairly sizable transactions and add-ons and mergers. So, look, that's the nature of how our market works. And, you know, our role and job at Vista in particular is to, you know, build

fundamentally strong companies that are attractive to the public market, attractive to strategic buyers, attractive in some cases to financial buyers buyers and have sustainable business infrastructure so they can grow organically and or position those companies so they can do add-on acquisitions efficiently and, you know, capture the synergies from that dynamic. We talked for about 45 minutes in a Fort Knox one-on-one covering a lot, including his upbringing in Denver and how he's keeping up with those Morehouse grads whose loans he famously paid off a couple years back. You can check that out on Overtime's X or Twitter account if you insist on still calling it that, which I do. Anyway, time for a CNBC News Update now with Kate Rooney. Kate.

Hey there, John. The Michigan teen who killed four of his classmates in 2021 has been sentenced to life in prison without the possibility of parole. The Michigan County judge imposed the maximum sentence, calling Ethan Crumbly's crimes true acts of terrorism. Crumbly pleaded guilty last year to killing four students and wounding seven other people. A federal appeals court upheld but narrowed the gag order on Donald Trump in his election interference case. The former president and his lawyers are now being barred from making public comments about witnesses, court staff, and lawyers,

but the court found that the order should not restrict speech about special counsel Jack Smith. And more than 1,100 Teamsters employees are striking against DHL Express to protest unfair labor practices. DHL telling the Associated Press that it had to move to flights and bring on replacement staff after the strike expanded to other locations today, potentially delaying

deliveries ahead of the holidays. John, back over to you. Okay, thank you. After the break, Mike Santoli is going to dig into the one chart that could explain why the economy has held up even in the face of dramatically higher rates for the past two years. And don't forget, you can catch us on the go by following the Closing Belt Overtime podcast on your favorite podcast app. We will be right back. Welcome back to Overtime. The University of Michigan's consumer survey showed sentiment rising to its best level since July. Inflation expectations also plunged to 3.1 percent from 4.5 in November. Mike Santoli's back with a look at how the consumer is propping up the economy despite

these higher rates. And Mike, this reminds me of that relationship between gas prices and consumer discretionary you showed us a few days ago. Yeah, there's no doubt that falling gasoline prices fed into the consumer sentiment bump that we saw last month. Also, lower inflation expectations and then wages continue to grow. Here's another explanation for why the very aggressive campaign of Fed rate hikes and then higher market interest rates have not really impacted the economy as much as you might have expected. The financial obligations ratio and debt service ratio kept by the Fed basically shows the required financial payments of consumers relative to disposable income. So obviously up off historic lows after the pandemic, when everybody had excess savings, you had the stimulus money and rates were super low and basically up to even subnormal levels. I mean, it's really below where we saw in the mid 2000s. And like so many of these macro indicators, John, it looks like we've come up to pre-pandemic levels, but not to extremes.

And just to make the distinction, financial obligations include things like property taxes and homeowners insurance and basically everything that you would have to on a monthly basis, lay out to essentially finance your lifestyle. So, Mike, what, if anything, do the numbers say about if people are feeling so good about spending, why are people feeling so bad about the economy? Yeah, I guess it's all sort of relative to where we recently were and maybe what we expected. I think that the after effects of cost of living shocks is pretty significant. And so even though you tell people, oh, but your wages are still growing, the absolute price level is relatively high. And then I do think that there are, you know, households that have fallen behind. And so you had this 2020, 2021 vintage of things like auto leases and loans that were made under different assumptions when

people had a lot of savings and they've fallen behind. So there is a little bit of fraying around the edges. But in general, it does seem like there's some more catch up that could be done from the mood of consumers to kind of come into contact with the observable reality. It's hard to remember if we're better off than we were whatever period of time ago. And it's a counterfactual, too. You know, how otherwise might you have been? Yeah. All right. Mike, thanks.

Healthcare, meanwhile, is the biggest growth industry in today's jobs report, adding 77,000 positions in November. Next, we're going to talk to the CEO of Incredible Health. It's a startup with its pulse on the healthcare job space about how that company is using AI to drive hiring in nursing. And check out Paramount as we head to break, finishing at the top of the S&P 500 after reports said Skydance Media and Redbird Capital are considering a bid for the company. We'll be right back. Out of the nearly 200,000 jobs added in the month of November, 77,000 were in the healthcare industry,

making it the biggest growth sector of the month. Joining us now to discuss the demand picture is Dr. Iman Abouzaid, CEO and co-founder of Incredible Health. That company is a digital job marketplace that helps connect nurses with recruiting hospitals and streamline the hiring process. Incredible Health announcing this week it's rolling out generative AI across the platform, including a resume wizard. And I should mention your last raise that I'm aware of last year had the valuation at just over one and a half billion dollars. Dr. Abouzaid, good to see you. So describe to me the state of hiring in health care where workers have been overworked and frankly kind of unhappy coming out of this pandemic? Absolutely. So one of the reasons we're seeing this continuous growth in jobs and health care is because our demand as a country on the health care system continues to increase

because our population is aging. But we as a country have not done a great job of increasing that number of health care workers to fulfill that growing demand. And that's why we're seeing big shortages. That's why we continue to see job growth and high vacancy rates across this sector. So how does AI help? All right. So the way we're thinking about generative AI is that it's an important technology that can be used in healthcare. And so we announced this week that we are the first in our industry or are part of the industry to implement generative AI across the platform. And we did that because it's a way to expand opportunity and to further streamline and speed up the hiring process. What kind of results have you seen so far?

Okay, so there's three areas where we're seeing results. First is even beyond the generative AI, we've been using machine learning and algorithmic software for a long time. So we have a resume wizard, that's an automatic resume creation, it allows nurses to instantly build a high quality resume in the mobile app, and it's completely free. So 30% of nurses start their job search without a resume, you know, primarily because of socioeconomic reasons, you know, they might not have access to a laptop or computer, or they don't know what makes a high quality resume. And so we've had thousands of nurses use this feature already and get access and ultimately get hired. So we're ensuring that 30% of the workforce that doesn't have a high quality resume doesn't get left behind or excluded from the job search process. Thousands of nurses. I mean, I guess that's showing up in some of these numbers that we just reported, saw reported in the jobs number this morning, huh? Absolutely. Absolutely. The other area that we're seeing, we've used generative AI specifically, is in

customized health system outreach to the nurses. Now, today, with generative AI, the health system's using our platform. They can send highly customized messages to the nurses that are highlighting very important details of the hospital benefits and perks and other ways that the hospital can really differentiate itself from its competition. As a result, so we've seen an increase of 20%

of nurses accepting interview requests from hospitals that are taking advantage of this Gen-I technology. To what extent are you using AI to implement AI? Are you using CodeAssist with your workforce? No, we're not using CodeAssist. But primarily, we're using OpenAI's technology and GPT technology to power these. Is there a reason why it's not relevant to you? Nothing in particular. Not particularly. I have a very active product engineering team that's constantly innovating, and they're

always looking at the latest and greatest. And so when generative AI became more readily available at the end of last year, we definitely started to tinker around and figure out ways that we can use it to benefit users and to benefit the industry overall. For 2024, are there any new challenges for the healthcare systems, healthcare market that you're preparing for and preparing Incredible to be prepared to tackle? Absolutely. Look, the truth is the shortage is going to continue. The shortage of healthcare workers will continue. So we increasingly have to get better and stronger at increasing the amount of talent in the number of health care workers in this country. We have to get better at hospitals, have to get better at accessing that talent and differentiating themselves from the competition and continuing to invest heavily in, you know, retention and so on.

Things like career advancement for nurses, flexible scheduling for nurses, in order to improve their retention rates. For us specifically, you know, we're using technology to help expand opportunities for nurses and healthcare workers, and we want to continue making it easier, more personalized, and more customized for both the nurses and for the hospitals. How do you decide when you approach the public markets with Incredible Health? So there's no timeline on that that I could say publicly. But, you know, we definitely want to just we're just very focused on our vision of helping health care professionals live better lives and the mission of helping them find and do their best work. Ultimately, we'd love to go public, but this is probably still a few years away. All right. A few years. That's what I was wondering. A little bit of timing in there from you.

Dr. Iman Abouzeh, good to see you. Thanks, Iman. Thank you so much. Thank you. And CNBC is now accepting nominations for the 12th annual Disruptor 50 list of private venture-backed companies. To learn more, scan the QR code on your screen, or you can go to cnbc.com slash disruptors. Now, more than 100 applications have come in for the $53 billion in funding allocated in the CHIPS Act. And our Christina Partsenevel has got an inside look at how the government is deciding who gets the cash. She's with me here on set. How are they deciding, Christina? It's a complicated process. And I guess after a year and four months,

it's just not easy to disperse $53 billion of taxpayer dollars, especially when you mentioned you have to sift through more than 500 statements of interest, more than 120 applications for funding. And that's why the government turned to Wall Street, or I should say ex-Wall Street pros at this point. I caught up with KKR veteran Todd Fisher, who is charged with determining which companies get the funds, likening the process to a private equity transaction. And he says that actually takes a lot of time. I don't feel there's been a delay. I think we've been moving very rapidly.

We had to build everything from scratch, and we had to put out the rules of the road, which we put out at the end of February. So the end of February was really the starting gun. The team actually stays in constant communication with applicants. That's what they said is a little bit different during the due diligence process before they have to allocate aid. We're going to ensure that we get a good deal for the American taxpayer by giving the companies only the amount of money that they need to be commercially viable in the long term and to strengthen our national and economic security.

To play catch up to Taiwan, which leads the global semiconductor production race with the U.S. about two years behind, according to city analysts. The race, though, is underway, and I was just in D.C., and the first aid checks are expected to come as soon as next week. A lot of companies counting on a good chunk of money. Intel really could use it to fuel this turnaround that Pat Gelsinger is trying to keep going over there. I asked Commerce specifically about Intel and Wolfspeed because both companies are extremely confident that they will get funding. But according to Commerce Department, there's been no promises

made to these companies. But like you mentioned, especially with Intel, if he doesn't get the money, then those promises may not be fulfilled to the extreme that they have, the amount of money that he's promised thus far. It's probably not that they're not going to get any money. It's are they going to get as much as they hope for. And so I mentioned $53 billion, but really it's just $39 billion for manufacturing. So that pie, there's about $12 billion for R&D and then a few others. And there's also loan programs, tax rebates, all of this. But when you think about it, $39 billion, you have over 100 applications,

and they're not going to give a company like Intel or Wolfspeed all the money right at once. They're going to do it in milestones so that they have to hit these milestones, be more commercially viable, have these labor plans in place, like we saw with Micron's announcement yesterday, and then they get the next tranche of money. Chip CEO sending a lot of holiday cards to D.C. I'll bet. There'll be a lot of jobs, though, next in the coming year.

That's for sure. Yeah. Big moves in biotech as well today as the government approves gene therapy treatments for sickle cell disease. But shares of the companies that make those treatments are moving lower. We'll explain why when Overtime Returns. Welcome back. Shares of Sunova getting hit hard today, adding to steep losses for the year, after a letter from congressional Republicans questioned a Department of Energy loan to that solar company. Lawmakers writing in the letter, we are alarmed about recent credible reports that Sunova has racked up numerous consumer complaints, including those alleging

troubling sales practices, such as Sunova pressing elderly homeowners in poor health to sign long-term contracts costing tens of thousands of dollars. Sunova finishing lower by about 16 percent. In other Washington news, the FDA today approving two therapies for sickle cell disease, including the first treatment to use gene editing technology. But shares of those companies that make the treatments finish the day lower. CNBC's health and pharma reporter Angelica Peebles joins me now. Cynically, Angelica, I think making rich people skinny is better business than making poor people live. But I mean, is this about the amount of profitability that these companies, investors

think these companies are going to get out of these therapies? Yeah. So these therapies are transformative for patients. They're both one-time treatments that promise to rid people of the pain crises that they experience, but they're expensive. The one from Vertex and CRISPR, Casgevy, that cost $2.2 million. And the other from Bluebird Bio, Lifgenia, that cost $3.1 million. And we actually had the Vertex CEO on earlier today in Power Lunch, And here's what she had to say about the price. We have talked to patients, physicians, payers, both in the private and on the government side. There is unanimous enthusiasm for this medicine for patients with sickle cell disease because it's widely recognized that sickle cell disease, unfortunately, has been marginalized and there has not been innovation in this field for many, many years.

But at the same time, like you said, there are questions from investors, just how many people are going to want this therapy or be able to afford it? And I guess the question I would have is how much can governments afford to pay if a significant part of their population needs an expensive therapy that those people can't pay for? Maybe it's similar to what we saw happen with the AIDS crisis. Exactly. And it'll be interesting to see how this plays out and how exactly governments are able to pay for it. Many patients with sickle cell disease are on Medicaid or Medicare. So both of those are government programs. But just now I was listening to the Bluebird call and they were saying that they have a plan. They're already in talks with different

state Medicaid agencies. So we'll have to see. But it's a really interesting, interesting problem, a good problem for patients, you know, to have a therapy like this, but also something that we're going to have to grapple with as a society. Yeah. Successful therapy. And I just got to figure out how the people who need it can pay for it. Angelica, thank you. Well, we're going to have the CEO of CRISPR Therapeutics right here on Overtime. Talk more about this area Monday in an exclusive interview. Don't miss what he has to say about today's news and that stock drop. And it's been a big week for Wall Street. It's another one coming

up as key inflation readings to big name earnings reports and the final Fed meeting of the year are on tap. We'll tell you the events to circle on your calendar when we come right back. Welcome back to Overtime. The S&P 500 hitting its highest level in more than a year and a half today. And some important potential catalysts are on the calendar for next week, including the CPI report on inflation, the final Fed meeting of the year, and earnings from Adobe on Wednesday, Costco Thursday. Mike Santoli, how much does all this matter?

It matters plenty. I think the CPI report in particular, because if inflation is behaving well, if the Fed satisfied with that, if investors are good with the trend, it almost supersedes everything else going on that the Fed might, in fact, say. We know they're not going to do anything. Rates are going to stay steady. The Fed is, to me, not in, I was hearing the discussion with Bob Elliott before, I don't think they're looking for bank shots here of trying to do this to the economy so that inflation comes down if inflation itself has downside momentum. So that'll be CPI. Now,

I think people's eyes are pretty big, so to speak, about how good that number might be. We might be getting a year-over-year number in the twos if we're very lucky and flat to potentially down on the headline. So, you know, maybe we've priced in some of that, at least psychologically. Well, what are people saying about how good that number has to be? Because a lot of people might have said, looking at what we got this morning in the jobs number, that it wasn't that good, but we hit these highs. Yeah, it wasn't that good. I would say it was more just in line with what the run of data has told us to be. I don't know exactly if we've used up all that good inflation news and the oil prices down.

Now, Treasury yields did bounce today a little bit. Oil also firmed up. The dollar was a little stronger. So all those things that were in free fall and helping the market on this massive six week run higher, you know, have kind of backslid a little bit. So maybe that was what gave the market pause. Is it you really just sort of hesitating ahead of its next move? How much of this dynamic is just sellers aren't showing up? No, no. Yeah. And people know it's December and it's just no incremental strong reason to push against the rally yet. People are going shopping,

if not for stocks, something else, so they're not selling. Mike, thanks. All right. See you next week. And hey, that's going to do it for Overtime. Fast Money starts now.