Closing Bell - Closing Bell Overtime: What Amazon’s Possible Entrance Into Mobile Services Means: Under The Radar Winners From Apple’s New Headset 6/2/23

Episode Date: June 2, 2023

Major averages surged to end the week, leading all three to close positive for the week. 3Fourteen’s Warren Pies and UBS’ David Lefkowitz break down the rally and the markets are primed to hold this breakout. MongoDB surged 28% after posting strong numbers; CEO Dev Ittycheria joins to discuss the company’s quarter and its opportunity in AI. A report saying Amazon might enter the mobile service arena sent other provider stocks tumbling; former AT&T Mobility CEO Glenn Lurie joins to break down the future of the industry. Samsara CEO Sanjit Biswas talks what’s next for the Internet of Things company. Plus, 3M surging over 8% on reports of a possible PFAS settlement and Moor Insights & Strategy’s Patrick Moorhead on what suppliers might benefit from Apple’s new headset coming next week. 

And what a market rally it was today with the Dow finishing up 2.1% and the S&P up almost 1.5%. The Nasdaq closing at its fresh 52-week high. That is the scorecard on Wall Street. The action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Coming up on today's show, two CEOs whose stocks are flying today on the back of earnings. We'll speak with MongoDB's chief about last night's better than expected results and today's double digit move to the upside. Plus the CEO of Samsara, whose stock is up just shy of 28 percent today. We're going to talk to him about his company's strong report.

Stocks surging to end the week, but off session highs. Joining us now is Warren Pies, 314 Research co-founder and David Lefkowitz, UBS Wealth Management Senior Equity Strategist. Good afternoon to you both. David, I'll start with you. You're saying $3,800 by the end of the year, but you think we could potentially go higher before we go lower. Break it down for me. Yeah, sure. I think, Morgan, some of the issues that we're still worried about is that, you know, look, the banks are tightening access to capital. The yield curve is inverted. The Fed's probably not going to be able to cut interest rates anytime soon. So, you know, we still think there's going to be pressures on earnings growth in the quarters ahead, notwithstanding the fact that the most recent earnings season

has been pretty good. So we look at it more from a risk-reward perspective is how I would approach it. In a true soft landing, stocks could rise another maybe 5%. I mean, I think we're pricing in a lot in terms of a soft landing. And if we slip into a recession, we certainly could see some more material downside, say, 15 to 20 percent. So from that perspective, we think stocks are not as appealing here, especially with reasonable yields in fixed income.

Yeah, Warren, we've been talking about narrow breadth. I mean, when you see the rally you've seen today with the Dow leading the charge and the Russell 2000 up 3.4 percent. Are we looking at a breakout here? How do you how do you think about it? How I'm thinking about it is this is this is what the bulls would want to see exactly from the breadth, honestly. And, you know, I've been pretty cautious on the market, but you have to honestly let the evidence guide you in the way I interpret the market moves today is this is the big recession trade getting kind of priced out of the market. So we came into the year. The consensus was we were going to have a recession early in 2023. At 314, we always thought it was a second half 2023 event, which keeps us kind of cautious and, you know, in no man's land.

We ran we ran our model yesterday and issued a report yesterday after rerunning our housing model and getting some new data. And our conclusion is that basically this recession is drifting off into the distance. And it's most likely a Q1 2024 event. And every single data point, including the jobs that came in today, is just pushing that recession out in the distance. So what this means is it's negative for bonds and stocks get a bid incrementally. And if you're going to buy the stock market here, you're going to need that bottom 490 stocks that we've been talking about to really do the heavy lifting. So those are cyclical sectors. Those are economically sensitive sectors and consumer driven sectors. That's what

we saw today. So if you're a bull, this is what you want to see. I think you continue to get that rotation out of bonds. For us, I would rather play it through commodities, underweighting bonds and getting to commodities. I'm still going to run a max overweight on my cash position, though, because cash is king in this environment. OK, sounds like we got a little disagreement here. You know, Warren saying negative for bonds. David, you were just talking about fixed income and reasonable yields there. So what what how do you play fixed income safely here? There are expectations of a pause from the Fed coming up, but we just got that strong PCE number, a relatively strong jobs number. Is it just that interest rates aren't going much higher and that makes it relatively safe? Or do you really have to watch out in bonds? Yeah, no, I think I don't. We do think interest rates are going to be trending

lower by the end of the year. You know, let's not forget that the Fed is already well above its assessment of what neutral is. And I think that's going to keep an anchor on how high, you know, even in a really benign outcome where we do have a soft landing and everything works out fine. I think that's going to keep a bit of an anchor in terms of how much rates are going to go higher. Because, you know, because, again, we're, you know, the Fed is so much above neutral at the moment. So, you know, the way we think about it is you can get a pretty good yield. And we're not really talking so much about, we're not so worried about the risk of yields going higher or rates going higher. And if inflation does fall, which we do think will happen,

and growth slows down, I mean, yields could even go a little bit lower. So from that perspective, we think fixed income looks pretty attractive. So then, Warren, is it safe enough? Since you say the recession is being pushed out, is it safe enough to really look at smaller cap stocks again? I would say especially tech stocks, because a few months ago there were people saying, oh, go away from growth tech. Not enough profits there, blah, blah, blah. But we got a couple of CEOs on today whose stocks are up more than 25 percent just today, arguably because they were underestimated and smaller stocks have not participated as much in the upside that we've seen over the past couple months. Those are more idiosyncratic stories to me. You know, there's a ton of money in market cap in those

mega caps that have carried the market this year. And even if a fraction of that rotates out in small caps, yeah, you get a bid. But to me, logically, if you look at these mega cap divergences that we've studied, they either resolve with if breadth doesn't improve for the bottom 490, and those are really cyclical stocks. I mean, that includes energy, that includes materials, that includes consumers and industrials. I don't think financials are going to really participate in this environment, but those other areas have to participate. So to me, if we're getting a breakout and the breadth is improving, that's where you want to move your chips incrementally. I don't think it's a raging bullish backdrop by any means, but I definitely

like stocks over bonds. And just remember, stocks are baking in double-digit earnings growth for 2024 and 2025. And the bond market is baking in a huge round of Fed rate cuts in the next 12 months. One of these two markets is going to be wrong. The jobs report that came in today clearly signaled that right now, for right now, the equity market is looking like it has a better read on the economy. And so I think that's what led the price action. And that data is going to ultimately float into the markets. Equity stayed bid.

And I think rates have to come up. Bonds sell off. All right. Everybody sharpen your pencils. Make your plans over the weekend for trading next week. Warren, David, thank you. There's something for everyone in that jobs report today. And it's interesting listening to Warren because he sounds much less cautious, much less bearish, still cautious, but not as bearish as previous appearances on this. Yeah, something for everything for everyone in that conversation, too. If you if you like fixed income or if you

like equities more, we'll see what CNBC senior markets commentator Mike Santoli likes. He's joining us from the New York Stock Exchange. Mike. Hey, John. What I really like is the two-year glimpse at the S&P 500 because it tells you all about where we've been and how much of it we've gotten back here. So just about at the August highs, slightly below. We closed just under 4,300 at the peak last August, Traded above to about 4,325. So right a rounding error away from where we were in August. But this also reflects about halfway back from this 4,800 peak in early part of last year and then down to 36 and change. So it tells you we've regained more than half of it.

What I find interesting is in addition to the fact that we keep kind of creating these somewhat higher platforms, these landings on the stairway up, is this has been a slowish grind. It's been a very mixed market, not really one of these sharp, exuberant jumps higher. Now, today, obviously a sharp move. Sometimes on a payroll Friday, we get a lot of bears capitulating and we get a rush higher. Maybe that has to calm down a little bit, but definitely in general encouraging. Now, coming along with it is a collapse in implied volatility, which is what the volatility index measures, the CBOT, S&P 500 VIX. And you see now we got below 15. I wanted a long term look here. This is a 10 year chart. So it shows you that in a bull or bear market,

you're going to be in different ranges. That was kind of when things got really choppy off the peak. Bear market action last year rarely got below 20. But you could see these long periods of time where the lows were actually much closer to 10 than 20 of the lower end of those ranges. When you do have a kind of a market that's in gear, that's rotating, that's upward trending. We're not there yet. We can't say if that's for sure. But what is interesting is you broke this kind of trend that had been in place for a little while. So it seems as if right now the market's unwilling to bet big that we have a storm ahead in the way of sudden volatility. And also, Morgan, I would point out a 16 or 17 VIX statistically implies about a 1 percent average

daily move for the next 30 days. So even 16 or 17 VIX accounts for a decent amount of back and forth action. Interesting. OK, so so the grind higher potentially continues is what you're saying, Mike. Bespoke today noted that the S&P is now exactly flat on a total return basis since the close of Powell's first rate hike on March 16th of 2022. As a man who draws straight lines on telestrators on television and always talks about the round trip, I thought you'd find that stat interesting. I do find it fascinating. It's also very instructive that, yes, the Fed's aggressive tightening last year was absolutely a shock to the market. It did jack bond yields way higher. It caused a valuation reset in the market. But just the fact that rates are higher at a given moment doesn't imply anything about the level that stocks have to trade at.

So it's all about what's to come. Is the Fed just about done? That's allowing the market here on this two-year basis, by the way, you want to talk about a round trip. We're at one and three quarter percent above where we were two years ago today. All right. Mike Santoli, thank you. After the break, the CEO of MongoDB joins us to break down quarterly results that sent the stock soaring 28 percent. Plus, we're expecting the latest data on the bank balance sheets from the Fed. We're going to bring you that as soon as it crosses. Overtime, back in two. Welcome back. MongoDB up 28% after posting results last night that exceeded analysts' expectations, raising 2024 guidance. Look at the move on a year-to-date basis, the stock almost

doubling. MongoDB making the case that nimble software companies that prioritize data will be AI beneficiaries. Other cloud players getting a boost as well, including Snowflake, Datadog, and the broader cloud ETF. Joining us now, MongoDB CEO David Echeria. Dave, good to see you. So quite a day for the stock, but I want to get sort of beyond just the day here. You talked about consumption a lot on the call. Why is MongoDB's consumption outpacing at least expectations from others like Snowflake? Is it that the bar was at a different place? Is it that your customers are using database at a different rate and level and the application is connected and they're using data somehow? Yeah, so John, what you have to realize is what people do on MongoDB is they build software applications and those software applications have some utility. They want to be able to engage with their customers, their partners, drive more efficiency, deliver better experiences.

So when they build an app, there's a one-to-one correlation between value and price. The more that app is used, and most customers want their apps to be used, the more revenue we see. And if their app is not used as much, which we saw last year when the economy started slowing down, the revenue slows down. Now, the business has grown over the last couple of years really well, but there's a one-to-one correlation between growth and utilization. So we don't see the phenomenon that other companies do about optimizations where people are starting to wonder, do I need to put all my data in a data warehouse? Do I need to run those reports every week? How much value are they providing?

There's truly a one-to-one correlation between price to value with MongoDB. And you said on the call that part of the tailwind that you expect to get from AI is more applications, more use of this data. Are there also more products that you expect to layer on top of that Atlas database that's growing so much and driving so much of your growth right now to sort of provide more share of wallet to you from your customers? Or are you going to remain focused on continuing to drive Atlas growth? Well, John, I would say one, Atlas grew 40% year over year, which exceeded expectations. And I would argue that Atlas is one of the fastest cloud services in the world today. So it's bordering on a close to a billion dollar revenue run rate. So that speaks to how popular MongoDB is and how many people

want to build applications and run them in the cloud. To your point about AI, what we're seeing is an emerging trend with a lot of these next-generation AI companies are actually running their applications on MongoDB. And it makes sense. Modern developers want to use modern platforms for modern applications. And so we're seeing a lot of people start deploying these modern next-generation AI apps on MongoDB and on Atlas. And in terms of what we plan to do, well, John, I want to invite you to our event on June 22nd. We're having a big conference in New

York at the Javits Center, and we'll also have an event for investors to talk about our AI strategy. David Smorgan, you noted record levels of new workloads from existing customers. You added a lot of self-serve customers. You added a lot of customers and added more workload from your existing. I'm just wondering, as we have this AI conversation, how many of those customers are coming online or adding to the business that already exists because of AI? And if so, what is that going to continue to look like in terms of a piece of the revenue pie? Well, obviously, there's a lot of hype and excitement about AI. And I think AI can truly profoundly transform so many different industries.

But I want to be cautious. I think in the short term, many people overestimate the impact of a new technology. But in the long term, they underestimate the impact. We're still in the very early days of AI. We're really thrilled that all these modern developers are coming to MongoDB. But I would say the impact in terms of revenue consumption, the new workloads, is just our core business. It's not driven by some sun shock effect of AI.

But we think we're really well positioned and we're going to be a beneficiary of the AI wave because one, it's going to increase developer beneficiary of the AI wave because one is going to increase developer productivity. So that developer productivity means more apps. More apps means more operational data stores, which is good for us. And then as we build out our portfolio, you'll see more things happen there. I want to ask about something you said on the call. I think it was a China Telecom example that you were giving, moving off of Oracle and onto you. Now, I've been hearing doomsday predictions about Oracle and their share for as long as I've been covering technology, which is like 25 years now. They are still doing pretty well.

So how much of this is share gain that you expect to consistently get? Because Oracle's got a lot of share, how should investors think about where you think you really have advantage versus where, you know, the database leader, traditional though it might be in the eyes of some, will continue to be strong? Well, we've been peeling off workloads from Oracle for a long period of time. The China Mobile example is quite profound because they are the largest telecom provider in terms of subscribers in the world. And they made a decision, they were running a billing app. Essentially, they made a decision to replatform off Oracle to MongoDB. And in the early days of MongoDB, a lot of people didn't think that we could handle those kinds

of mission-critical workloads. That's point number one. Point number two is that, you know, what's more important than a billing for China Mobile? So they are basically entrusting us with their crown jewels, and they're basically doing it with our on-premise product called EA. They could have easily used our community version, but they decided to really leverage the full power of our enterprise product. So that's great news for us. So China is a massive market.

And when it comes to Oracle, we're seeing customers, you know, really look at their Oracle estate. Now, no one's going to just wake up some morning and say, I want to replatform. There's got to be some compelling event. There's got to be either a cost reason, a performance and scalability reason, which is a big reason for China Mobile, or there could be an innovation reason. They just can't move fast enough and add new features fast enough on the legacy platforms. They want to move to a more modern platform. And with AI and with a whole bunch of applications ready to be either embedded with new AI functionality, that would be a big impetus for people to replatform off legacy to modern platforms like MongoDB.

All right. China Mobile, thanks for correcting me there. Dave, thank you. My pleasure. New 52-week high for that stock today as well. Coming up, Amazon's next target. The company that's changed the game in retail and streaming is now reportedly setting its sights on the mobile service market. We're going to discuss with the former head of AT&T Mobility. That's next. Breaking news out of the Fed. Steve Leisman has it. Steve. Hey, John, thanks. Yeah, some decent news out of the Federal Reserve here. The deposits of U.S. commercial banks rising again. This is the second straight week. I'm just double checking my numbers here. Second straight week they're up in a row. They have been down for two weeks leading

into these two weeks. Now they're up three and a half billion this week and sorry, wrong number, 86.5 billion, 86.6 billion this week. Deposited domestically charter banks up by 102 billion. These are just the domestic banks. Large banks surging ahead, $86.5. You could call it $87. Small banks also doing well, $16.9 billion increase in deposits. And because we continuously innovate, we want to bring even more numbers from this, which I think is equally important. Not the deposits.

That was during the scare. Now we're kind of shifting our focus to looking at the economic impact of what happened with the banking term was we're going to look at lending lending up just a smidge by three and a half billion commercial and industrial loans down by 679 million this is where people expect to take the brunt of the uh pullback by the banks is in the cni area real estate loans though up by six and a half billion and consumer loans down by $1.3 billion. So, Morgan, we're continuing to watch this because I think we're shifting from this idea of is money fleeing the banks? It may not be fleeing anymore. That's not necessarily the most important

economic indicator any longer. It's going to be lending by the banks. And we're going to try to look at that on a weekly basis here, Morgan. Okay. And we are going to be looking at that with you. Steve Leisman, thank you. And of course, the bank stocks have been rallying in recent days. The Amazon effect on the telecom sector today after a report said the tech giant is in talks with Verizon, Dish, and T-Mobile to launch a low cost or possibly free mobile service for prime members. Amazon, Verizon, AT&T, and T-Mobile all denying this news. And we have yet to hear back from Dish. Shares of the wireless carriers, though, all lower today. Verizon hitting a 52-week low, but Dish stock surged 16 percent. It's worth pointing out that today's news comes a week after another report said Dish plans to

sell wireless plans for its new mobile service through Amazon. So joining us now is Glenn Lurie, former president and CEO of AT&T Mobility. He led the negotiations with Apple to become the exclusive carrier for the first iPhone. Glenn, it is great to have you on the show. I want to get your thoughts on this. Yes, we've seen all of these companies bat this report down, but key to the Amazon statement, they said they don't have plans to add wireless, quote, at this time. Your thoughts? Well, first, thanks for having me on, Morgan. Appreciate it. And, you know, look, I have no doubt that they're having conversations. I have no doubt that Amazon's looking for other

ways to improve their current performance with their prime customers. But the math has to work for everybody in the ecosystem. And I think what we're looking at here is a wholesale type deal that they would be looking at. But when you start talking about zero or ten dollars, the math really doesn't work. When you think about a current postpaid user today, the amount of gigabytes they use on a monthly basis, and you kind of do all the math on that, even in a wholesale environment for the three large players, I think that's going to be a hard task to make that work. Okay. So Comcast, CNBC's parent company, offers a wireless service, very, very, very low prices for its customers.

So I'm just kind of curious how a business model like that couldn't not necessarily, like how it could not necessarily transfer to something like Amazon, where wireless would be one of many different services. Yeah, I agree with you, Morgan. I think it could transfer in a similar way. But when you start talking about the economics around a completely free service, or in a sense, you have a service that Amazon would have to subsidize significantly to get there, you have to look at both sides of the model. You also have a situation with the carriers where they have current wholesalers, Amazon would have to subsidize significantly to get there, you have to look at both sides of the model. You also have a situation with the carriers where they have current wholesalers, right, that they have, they're working with today. And when you think about a carrier's lens, you know, they're

thinking about postpaid, prepaid and wholesale as very separate customers. They have separate costs of acquisition and they have separate ARPUs and revenues that they drive. So this would have to fit in the model. So I agree if there's potentially a way to do it. But when you sit back and look at the math today, as things are happening now in the marketplace, I think it's going to be tough to get there unless Amazon obviously has a plan to do some significant subsidies to get those prices down. And Glenn, hey, first of all, it's good to see you. It's John Ford. It's been a while. There's also the customer loyalty piece here, isn't there? Because unlike a lot of other companies that do MVNO deals, Amazon has so much data on the customer. If you're a carrier and you let them in the door, it might be sort of hard for the customer to know that you're the

carrier and you're not just commoditized because Amazon is the nameplate in front. Is there risk there for certain carriers that might think about doing this kind of a deal? Yeah, John, great to see you as well. And absolutely, you nailed it. I mean, when you think about doing a wholesale deal or bringing in somebody that you're going to give a rate and allow them to use your network. And we all know how much money, billions and billions of dollars the three carriers are spending each year on their networks. The number one issue you have in mind is cannibalization. Right. So if I why would I go give somebody the ability to take my customer? And actually now I get less revenue. And especially to your point, John, if I just acquired that customer a year or so ago or two years ago, I'm still haven't paid back potentially the cost of acquisition.

So the carriers are going to have to take a very hard look at this. And, you know, when I was obviously with AT&T, we looked at every possibility to grow revenue and wholesale was one of the things we looked at. And I believe today all three carriers are very open to finding those new revenue streams. But to your exact point, you've got to be very, very careful, right, who you give the ammunition to, right, who you put in business to come, in a sense, compete with you. Yeah. I mean, Amazon's also developing its Project Kuiper, a $10 billion satellite constellation to beam broadband service back down to Earth. You know, I think about that. I think about AST SpaceMobile, which has teamed up with AT&T or even a Starlink SpaceX's service,

which is doing a partnership with T-Mobile as well. I mean, it seems like there is this next-gen iteration, to your point, of future revenue streams that involve these space-based constellations. The fact that Amazon's working on one, what could that mean here in terms of, even if you don't see some sort of partnership or wholesale deal right now, what could it mean about the future? Oh, I think you bring up a great point. You know, satellite is going to and is today playing a role. It's going to play an even bigger role down the road.

As you mentioned, a lot of the deals I got announced, it was also the Apple Global Star deal that was announced as well. And I think what you're seeing is that the expectation of the end user is that their device never goes off network. And I think that's what we're talking about today, the IoT business, where the IoT business is going. The fact that if I take my truck and I want to go way off-roading, I'll still want to have E911 services to start. And I think that's where we're beginning. And to your point,

there's a whole bunch of people playing in the space, Amazon included, that I believe down the road, we're going to see these things come together. And you're going to have the ability in your car on that smartphone to not only use terrestrial services, but to also be able to utilize services, obviously, like a global star or like these other players that Amazon's building here to actually make your service more valuable. And I think that's absolutely happening. I do believe it's going to happen in the IoT space first, but I do think exactly your point, there's going to be partnerships happening down the road for sure. Glenn Lurie, great to get your thoughts today. Thanks so much for joining us. Thanks for having me, guys. Appreciate it.

So we just touched on it a little bit. When we do talk about Amazon's connectivity ambitions, longer term or where wireless service is headed, space does factor in. You have all these thousands of communication satellites that are launching to orbit. You've got companies racing to offer space-based broadband services. I just mentioned some of the partnerships that we see playing out in real time right now. And this is a topic that comes up regularly on my podcast, Manifest Space. So check that out. This week's feature, or this week I should say feature, is a company that's looking to become the quote-unquote UPS of space with tugs that can move satellites and other spacecraft in orbit. Momentous has logged a number of tech milestones lately, but its stock does now trade

for pennies as investors fear a cash crunch. But you can listen to that discussion with CEO John Rood wherever you get your podcasts. All right. UPS for space. What can Brown do for you? Time for a CNBC News update with Bertha Coombs. Bertha. Hey, John. Well, here on Earth, the Republican National Committee is requiring presidential hopefuls to pledge support to the party's eventual nominee if they want to participate in the first primary debate. NBC has reported that Donald Trump is likely to skip the first two debates. So far, none of the declared candidates have publicly stated whether they will sign the so-called loyalty pledge. And Trump himself also hasn't said whether he'd get behind the eventual candidate. The first debate takes place in Milwaukee on August 23rd. Seven people were hurt this afternoon when a building under construction partially collapsed near the Yale

School of Medicine. New Haven City officials say when firefighters arrived, they found three people buried under the rubble. All 36 people working on the site are accounted for. Two are in critical condition. And Tropical Storm Arlene formed in the Gulf of Mexico today, becoming the first named storm of the 2023 Atlantic hurricane season. Storm is packing winds of about 40 miles an hour. The National Hurricane Center says there's no significant threat to land, at least not right now.

Hurricane season officially getting underway June 1st, yesterday. Tis the season, John, back to you. And the first one starts with A. Bertha, thank you. Up next, Mike Santoli breaks down two under-the-radar metrics in today's blowout jobs report.

Plus, check out some of the names making 52-week highs in today's big rally. Meta, Royal Caribbean, Apple, Microsoft, General Electric. All names on the list. We'll be right back. Welcome back to Overtime. This morning, we got a blowout jobs report for May, with payrolls surging by 339,000 for the month. That was almost 150,000 more than economists expected. The unemployment rate rose to 3.7 percent, and the jobless rate hit its highest level since October of 2022. Mike Santoli joins us again with a closer look at the report. Hi, Mike.

Hi, Morgan. Yeah, there's a little something for everybody in this report. Absolute blowout on the headline payroll number, as you mentioned. But some of the number crunchers were maybe soothed by the slowdown evident in average hourly week works, hours worked per week. This is obviously declined well past this sort of pandemic and post-pandemic peak. And it shows some moderation or in the terms that the Fed likes to use, maybe a labor market that's going from very tight to back into balance. You don't want to see it go down too much. But with moderating wage growth, this was a little bit of an offset to the very strong payroll number. Now, there's another quirk some of the number crunchers were fixated on, which is the household survey, which drives that big jump in the unemployment rate, showed a large decline

in self-employed workers. So there was a big drop in the household survey, people saying that they were employed. And a lot of those people who said they're not employed this month were no longer self-employed. Some of those basically incorporated and maybe just went to other jobs. But it shows that there's been this long term decline. It's a very long term chart in self-employed, but a big spike right after the pandemic, and now it's coming back down again. So this is one reason why not too many people are extrapolating that jump in the unemployment rate. We got to see how these numbers shake out over multiple months, guys. We'll trust you to keep us on top of it, Mike. Thank you.

And up next, the CEO of Connected Operations Platform, Samsara, joins us on the back of strong earnings guidance that sent the stock up as much as 30 percent in today's session before settling down near 28 percent. We'll be right back. Welcome back. Operations technology company Samsara hitting a 52 week high today. That stock popping about 28 percent after earnings. Revenue beat of more than $850 million. That's more than 40% higher year over year, a smaller than expected

loss. The cloud company helps drive efficiency in supply chain and manufacturing, think construction, transportation, logistics, through trackable data collection using cameras and sensors. Joining us now exclusively, SEMSARA co-founder and CEO Sanjit Biswa. Sanjit, always good to see you. Wow, another strong quarter. I want to first go to the non-transportation customers, utilities, energy, field services, construction. What does that signal about the nature of your customer base right now? Well, first, John, thanks for having me on.

As we talked about before, our business is diversified. We serve the world of physical operations, which is very, very broad. We're talking about all the industries that power our planet. Supply chain and logistics is where we got started, but we found construction, energy utilities, passenger transit, local governments, everybody wants to figure out how to digitize their operations. And the point of that is to be safer, more efficient, more sustainable. So I think what we saw in Q1 was that continued trend and this whole wave of digitization hitting all at once across physical operations. And the need is really very broad. And this is a world or part of the world that hasn't digitized the same way that we've seen in the carpeted office. If you think about financial services

and IT, these are where kind of digital transformation happened first. Now we're starting to see it happen in the world of physical operations. And you said that the desire to save on cost is driving a lot of your customer demand. Where are you constrained in your growth right now? Is it international? You had like something like 17 percent growth there. You're growing in Canada grocery. But do you have the specialists that you need to find where you can help customers outside of transportation? Do you have the partnerships that you need to do that? Or is this tight labor environment affecting you at all in your ability to continue this rip-roaring growth rate?

So we're investing. And last year, we grew our headcount about 40% year over year. So very significant investment year. And those are in the go-to-market teams, but also in research and development, overall corporate infrastructure. So we found that we've been able to grow our top-line revenue, invest in the business, and improve our profitability all at the same time. And I think that also signals just how much pull we're starting to see from our end customers. We're going to continue to invest year over year, and this is a long-term build for us. This is not a transformation that happens overnight.

So from our perspective, this is something we're going to be working on for decades. We were just talking to Dave Itacheria at MongoDB about the AI impact on his business. You and I have talked about how that data collection from IoT feeds into AI. How much are customers able to take advantage of that right now? What kind of acceleration in that AI-driven efficiency do you forecast over the next one to three years? So data and AI go very closely together. If you think about the amount of data we're able to pull from these physical operations,

not just GPS location, but things like driver safety and risk scores, workflows out in the field. There's just a tremendous amount of data. And the amazing thing about AI is you can make sense of all of it in real time. And so that's how our customers get value. It's something we've been investing in now for about five years. We have a few different applications that really harness the power of AI, and it's something we're going to continue to invest in. So we believe it's still the early days in terms of the AI wave. There's a lot of new tools and technologies. I think we've heard a lot about generative AI recently. But this is something that's been going on now for the better part of a decade, almost two decades, in terms of transformation. And we think AI is only going to make it easier to process massive amounts of data.

Sanjay, it's Morgan. I've got a more macro question for you. We had ISM manufacturing this week, shows that the manufacturing part of the U.S. economy is still in contraction mode. We've been talking a lot about freight recession. We're seeing trucking get hit really hard as well. What are you seeing? What is your read, especially as you do have customers in these markets that are looking to streamline their operations? And we talked about this a little bit earlier. We serve a very wide range of industries. And you mentioned manufacturing. We do work with customers also in construction. The general theme that we see is while there are these kind of cyclical or seasonal changes in the business, everyone is always trying to get more efficient. That's an evergreen problem in these physical operations industries as a safety,

worker safety, workplace safety, very front of mind. And that has to do with keeping these teams and workers safe. It also has to do with insurance costs. So I think in an environment like this, where companies are looking for ways to save money, finding ways to use digital transformation and data to help drive some of those outcomes is really critical. And we're helping our customers do that. All right. Sanjit Biswas, CEO of Samsara. Thank you. Thanks, guys. They're almost back to the all-time highs from the days after the IPO in late 2021.

Wow. It's amazing what some of these smaller software and Internet names have been doing in terms of this rally lately. 3M, another name that moved big time today, leading the Dow higher, making a huge move on a report about a settlement surrounding so-called forever chemicals, PFAS. We're going to bring you those details when Overtime returns. Well, shares of multinational industrial manufacturer 3M surging today, up almost 9%. It's an uncharacteristic leap for this company. They don't usually see stock moves this large for 3M. But this was due to reports surrounding so-called forever chemicals.

The stock actually having its best day in more than three years. Seema Modi has a story for us. Hi, Seema. Hey, Morgan. PFAS, are these toxic chemicals tied to serious health risks, seen as a big overhang for chemical manufacturers. So news this morning of DuPont, Chemours and Corteva setting up a $1.2 billion settlement fund sent those three stocks sharply higher on the day. And then separately, Bloomberg reporting that 3M, the biggest manufacturer of these toxic chemicals, is nearing a $10 billion settlement with several U.S. cities on water pollution claims. It comes ahead of a bellwether trial in federal court

this Monday. RBC Capital analyst Dean Dre telling CNBC that this settlement, if it goes through, it does not fully address all of the lawsuits and damages. He's betting that 3M stock will give back most or all of its gains it saw today. 3M tells us it does not comment on rumors or speculation. Morgan and John? Yeah, I mean, $10 billion, if that turns out to be the number, and just the fact that you made, you know, you just made this point right here that it doesn't necessarily even take care of all of the litigation that surrounds this topic. Exactly. And the fact that the stock ripped higher the way it did, is it because it adds some potential stability or certainty or pulls one of the, and there have been a couple of them, but one of the overhangs out of the way in terms of some of the trading action we have seen in this name?

Yeah, that's exactly right. It's been this big overhang, Morgan, for 3M stock over the past year or so. So the idea that potentially it's moving forward towards some type of settlement, even though it may not cover all the legal liabilities, is seen as a step in the right direction. But we're still in the early innings. The EPA says about 64 million Americans are affected by PFAS contaminated drinking water. At the same time, the agency is looking at designating PFAS a hazardous chemical, which experts tell us would lead to even further litigation. And if you look across Wall Street, varying estimates on how much this could really add up. RBC Capital says $20 to $25 billion risk,

Morgan. Capstone, a different firm, says it's around $35 billion. So again, this is definitely a developing story, but signs of a resolution on part of it is what moved the stock higher. Yeah. Sima Modi, thanks for adding some context around that. And of course, we saw all of the major industrial stocks trading much higher today, John, as you did see this rotation into some of these cyclicals and more economically sensitive names in trading today. Yeah. And now up next, we are looking ahead to an event tech watchers have been waiting for. Apple's much-hyped launch of its mixed reality headset.

We expect that Monday. We're going to preview what to expect from the companies in the Apple ecosystem that might stand to benefit. We'll come right back. Welcome back. Apple is expected to unveil its augmented reality headset next week at the Worldwide Developers Conference. 52-week high today, less than $2 from a record high. New hardware from tech giants can be lucrative for their suppliers, but not always. Look here. Meta's Quest Pro has parts from names like Micron, Western Digital, and Lattice Semiconductor, but those parts don't necessarily move the needle for a stock unless they're unique technology and the product eventually reaches

high enough volume. Here to help us figure out what kinds of names could benefit if Apple succeeds here, Pat Moorhead of More Insights and Strategies. Pat, great to have you. You analyze the technology, you test the product so you know this stuff. I'm thinking here cameras, glass displays, and sensors are maybe going to be different about this type of device, but what's the sort of new technology and who's the sort of provider that might be offering it here? Yeah, so first off, these volumes are going to be super low. It's not going to make any company move, and I think we're probably three to five years from scale. But with that said, you can always pick a winner, like a TSMC and ODMs who build this at scale, whether it be a Foxconn or a Pegatron.

I think that you're going to see companies like Skyworks, maybe Qualcomm, maybe Broadcom in the mix for RF capabilities. And, you know, you have some very narrow group of folks who are doing displays and cameras. And I think you will see a lot of overlap between what we're seeing in the Quest headset. But we also know that Apple loves having very unique components. So I think you're going to see a lot of custom type of parts in their headset, but again, very low volumes at the outset. So Patrick, I mean, when I hear you talk about low volumes at the outset, what is the business case for doing this and doing it right now if you are Apple? I mean, we've been talking about this technology for years, and it has yet to take off.

Well, we have, and there's been so many. The biggest issue are user issues. I mean, net-net, people don't want to wear a big, bulky headset on their face to do anything. And I think the industry has already gotten through, hey, is it VR? Is it AR? Hey, let's do both of them. Let's call it Nick's reality where you actually have cameras, even though your face is entirely closed and your eyes can't see. I think the industry is betting

on Apple coming up and fixing all of these usability issues that this technology has been fraught with. I liken this to the earliest of early days of Apple Watch. And I'm expecting this to be even less mature than version 1 of the Apple Watch. And quite frankly, that of the iPhone 1. So this is a five-year play. This is a long-term play and it's one of the big bets in addition

to, let's say, potentially automotive that I see Apple getting into. Pat, let me throw this at you. One, it's probably got to have a lot of cameras. Sony does image sensors better than most out there. So is it an advantage for them just because you got to have so many of them versus any other type of device? And how much danger is there for Meta, which is already subsidizing the cost of a headset, if Apple's, which costs a lot more, is more popular? Yeah, so I see that both working in symbiosis. So you always need somebody at the highest of level, and that's where I see Apple playing. And then I see more of a mainstream play with Meta and Quest. I do think Sony is a potential front runner for the sensors of this camera, because you literally,

you have something on your eye and you have to have a camera to see the rest of the world. Samsung is another potential here for sensors. If it's not Samsung, then it's Sony. But having somebody else in the market actually demonstrates that it's actually a market. There is no market of one. And I think that Meta has seen that. Google flirted a little bit. Samsung flirted a little by putting in a smartphone. But I think this is going to be good long term. And there's an overall interest in this because people believe that Apple can figure out the experience.

All right. Well, we'll leave it there. Pat Moorhead for more insights and strategy. Great to have you. Thanks. Apple, OPEC, and Fed members in a blackout. Also, ISM services. Those are key things to watch next week. That's going to do it for us here at Overtime. Fast Money starts now.