Closing Bell - Closing Bell Overtime: Why A Recession Could Boost Stocks; Databricks CEO Ali Ghodsi 10/23/23

Episode Date: October 23, 2023

A volatile session for the markets today. Wilmington Trust EVP’s Meghan Shue and Barcalys Head of US Equity Strategy Venu Krishna break down the market action. Melius’ Head of Technology Research Ben Melius previews tomorrow’s big tech reports from Alphabet and Microsoft, plus a late-day report from Reuters on Nvidia partnering with Arm to make PC chips. Jon sits down with Databricks CEO Ali Ghodsi.Citi’s Scott Chronert makes the case for why a recession could actually boost equity prices. Plus, Marqeta CEO on consumer health and a new deal the company signed for a credit card platform. 

We were up, we were down, stocks finishing the day mixed after the 10-year treasury yield hit a fresh 16-year high and then retreated dramatically today. That's the scorecard on Wall Street, but the action's just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. Yeah, the streak is broken on Mondays for the S&P at least. Coming up this hour, city equity strategist Scott Kroenert is sounding the recession alarm but says it might not necessarily be a bad thing for stocks. He's going to join us to explain why. And we're getting you set for a huge week of earnings. Today, we'll get Cleveland Cliffs. Tomorrow brings big tech with Alphabet, Microsoft, and more. We'll break down the key factors to

watch in this crucial week for the market. Let's get straight to the market action. It was a busy Monday. Stocks climbing out of an early hole, but closing well off their best levels of the day. The Nasdaq is the only major index, well, out of the three to notch gains. The early pressure came as yields on the 10-year rose again above 5% before retreating. ComServices leading to the upside while energy pulled back even after a monster deal between Chevron and Hess. Mike, you're our CNBC senior markets commentator. What do you think? You know, you mentioned this streak that was broken. We have been up 15 Mondays in a row in the S&P 500. That goes back to June. I don't think that's a negative that we broke the streak because some of these, you know,

these fluky streaks that you have in the market sometimes get more attention and probably kind of obscure what's really happening, which is a market that is still on guard against what might happen in the bond market and then, therefore, by extension, in the economy because of where yields have gotten to. We did get some relief, that 10-year yield coming down well below 4.9 percent. That definitely took the pressure off and enabled the market to stabilize not too far from the recent pullback lows. On the other hand, that only got us back to where we were last Tuesday. And it's hard to have high conviction that this is a real inflection point. So we come into the week, market kind of stretched to the downside, maybe not to a super extreme.

The earnings coming up this week, I think a lot of folks have a fair bit riding on that, dragging some of the attention toward corporate fundamentals that maybe can be the catalyst or the escape hatch in the short term. Yeah, the move in the 10-year yield, which happened, it coincided with those Bill Ackman tweets shortly after the market opened today. It was a dramatic move. I mean, we fell something like 15 basis points in the 10-year. To your point, I mean, we are in this Fed media blackout right now. We are in the calm before the storm with earnings as well. And you noted in your column over the weekend that in many ways we're kind of primed here for a potential bounce. You should be. I mean,

things are lining up in that direction. We know about the seasonal factors. This is just about when they should kick in if they're going to show up. But even beyond that, I think the cyclical parts of this market have really taken on punishment. So if you were to sort of draw out what should really get hurt by yields going up in a hurry the way they have, well, those are the parts of the market that have been hurt. Very small relief today in some of the travel names. It was like cruise lines and casinos and a couple of airlines that got a lift. That's just maybe a dead cat bounce. But you have to watch for a little bit of signs of life going into those markets,

the parts of the market that have front-run weakness in the economy that has not yet shown up. All right. We'll see you again, Mike, in just a couple of minutes. Meantime, Intel getting hit hard in the last hour, weighing on the Dow following a report from Reuters saying NVIDIA is planning to make ARM based PC chips, Kind of a new challenge to Intel, Morgan, but the main issue for Intel and Intel stock is, can CEO Pat Gelsinger and his team fix the manufacturing issues that they've had for years since before Pat got there? Can they do that in time and crank out designs that can hold or regain share in PCs

and, more important, gain in data center and AI. Right now, the stock is priced as if, investors are saying they're not going to be able to even get any of that done. And we're going to know whether that strategy is likely to succeed before NVIDIA comes out with these ARM-based CPU chips. That's an important piece here. Yeah, that's exactly where I was going with you with this. And yeah, Intel really fell in the last

hour of trading, ended up being one of the worst performing DAO components behind Chevron. We were up more than 100 points in the DAO. We finished down more than 190 points in part because of this report. But Intel's been doing this already. And we know that there are lead times associated with the design and rollout of new chips. And it's not just the lead times in the rollout of them. Gaining share in the PC business isn't as simple as putting an ARM chip in a PC, underpricing Intel, rinse, repeat. Apple was able to do this because, A, Apple had practice doing CPUs for mobile devices, for iPhones, for iPads. So putting it in a Mac wasn't that much of a leap for them. Plus, they control the operating system, right? This isn't Windows for them. It's Mac. They're making

that so they can tune it to that. And they have experience migrating app developers from one version of a chip to another. So it's really going to be a process for Nvidia, for Qualcomm, for anybody who wants to come out with an ARM-based Windows chip that's successful across all kinds of uses. If you want to just target gaming, that's one thing, that's one segment of the market, but you know you've also got to get OEMs, the actual PC makers, to say we're gonna build this into a good number of machines, etc., etc. So important market reaction here, but there are a lot more moving pieces than just NVIDIA saying, here's an ARM chip. Let's grab share from Intel.

It's always good to sit next to you when you have a report like this come out so you can add some context that's much needed in the market when you see the moves we've seen today. Thanks, Morgan. Well, we're going to talk a lot more about chips and AI tomorrow on Overtime when we're joined in a first on CNBC interview by Qualcomm CEO Cristiano Amon. He's making an ARM-based CPU. He's going to be coming to us from the company's Snapdragon Tech Summit in Maui. Maui can use, of course, that presence right now. I can't forget what they've been through this year. Yeah, it's been really tough.

All right. Meantime, we talked about earnings. Cleveland Cliffs, those results are out. Pippa Stevens has the numbers. Pippa. Hey, Morgan. That's back up about 4% here. The steelmaker earning 52 cents per share, beating estimates by 9 cents.

Revenue coming in at 5.61 billion. With the company noting it shipped 4.1 million net tons of steel, including record automotive shipments. CEO Lorenzo Gonsalves saying the shipments to their auto clients happened both before and after the UAW strike affected three of their clients in Detroit, with major clients outside of Detroit picking up the slack. Gonsalves also striking an optimistic tone looking forward, saying he expects to see an end of the strike in Q4. That, of course, comes ahead of GM earnings tomorrow morning and forward later this week. Stock up about modestly here in extended trading. Morgan. All right, Pippa Stevens,

thank you. Let's get back to the broader market now with our panel. Joining us now, Megan Hsu of Wilmington Trust and Venu Krishna of Barclays Investment Bank. Good afternoon to you both. Megan, I will start with you because you've been on for months now saying that you're cautious about the equity market. Has anything changed? Yeah, Morgan, first of all, thanks for having me. We have definitely been expecting a choppier second half of the year than we had in the first half. I think what's been surprising at least for me is that the market weakness has been a result not of deteriorating growth but re-accelerating growth and we've seen the importance of interest rates playing into basically what equity investors are

willing to pay for stocks today with the equity risk premium the lowest since two thousand two it's just been very unappealing- the decision between equities and cash. I think going forward- we're still cautious on equities overall. But the prospects for both bonds and stocks are starting to look a little bit more attractive

certainly on the bond side of things- expectations for. A higher probability of rates to fall than to move significantly higher from here- could lead to some nice things- expectations for a higher probability of rates to fall than to move significantly higher from here- could lead to some nice total return for bond investors over a twelve month.

Investment horizon- and then even on the equity side I'm I've been encouraged by some of the air coming out of the balloon- but for U. S. large cap if you look at the equal weighted index. We're trading in the basically the twentieth coming out of the balloon. But for U.S. large cap, if you look at the equal weighted index, we're trading in basically the 20th percentile of valuations going back to 2010. So while the

overall market might look expensive, underneath the surface, there are opportunities. And even in a mild recession scenario, it's probably going to be short, shallow. And I think equity investors are probably going to do OK compared to historical recessions. Yeah. And yet, breadth has been relatively poor. There's been a lot of focus, Venu, on the fact that we're going to need to see that really widen out for a rally to take root here. I wonder how you see it, because you've got stocks at, what, seven-month lows. You've got the 10-year Treasury, you know, at its highest level in 16 years. Issues, you know, concerns with rates, concerns with geopolitics, and then so far what I will call a mixed earnings picture, or at least not a much better-than-expected earnings picture with the way investors are reacting to it. What

matters now, especially as we come into mega- cap tech week with four out of seven of the magnificent seven reporting? So, too, let me start with your question on the narrowness or the breadth of the market you talked about. So we expressed this view in the summer when that narrown narrow, that in itself becomes a catalyst for a correction led by the leaders of the market. But we were of the opinion that big tech was in good shape, that we would use that as an opportunity to actually buy into that correction. So we've seen that correction. The second important point we made from our perspective is that it is not going to broaden. If you look at the ratio of SPW to SPX, it's collapsed and it's been flat over there for quite some time. The reason is quite simple. If you look at where

the earnings are coming from, they're overwhelmingly coming from tech and within tech with a smaller subsegment of large cap tech. In fact, if you look at, for example, next year, if you strip out big tech, then earnings for the rest of tech and for S&P broader are actually down. And so S&P, even outside of tech, is trading at full multiples. Earnings are going nowhere. And, you know, and there's really no catalyst for that to change. And hence, we continue to expect that that broadening is more of a hope until such time that we see a tangible increase in earnings estimate,

which in our view are very optimistic. So if you look at the consensus, it's about over 12% for next year. All right. Well, Megan, speaking of tech, you're actually underweight utilities and staples, which are normally defensive sectors, if you think we're getting a real slowdown. But overweight tech, does that mean you're not convinced that the economy is going to shrink that much, if at all? Or you're just not sure when it's really going to grow gangbusters? Yeah so we actually recently- just over the past couple of weeks upgraded the probability of a so called no landing scenario- which is just to say that growth stays above trend. But we still think that there's a greater likelihood of either a soft landing or a mild recession our greatest

probability is on that soft landing- but that, our chief economist has flat growth penciled in for the fourth quarter, which is going to feel like a steep deceleration compared to the third quarter. As we look at where different sectors look attractive to us, I think the overweight to technology is a combination of a structural growth story, a high quality profitability story, as well as a rates more likely to come down story. And we saw that today with rates coming off a little bit and the NASDAQ being the only outperformer. I'd be a little bit more cautious on something like Staples, where we see continued disinflation and probably a higher, a greater degree of difficulty for those Staples companies to pass through price increases.

All right. Megan Hsu, Vinu Krishna, thank you. Thank you. Now the S&P 500 struggling for direction to begin the week, but Mike Santoli sees one bright spot in the market that has outperformed today and over the past year. He's at the market dashboard. Mike? Yeah, John, a pretty consistent outperformance by the so-called He's at the market dashboard. Mike? Yeah, John, a pretty consistent outperformance by the so-called quality factor in the market. You know, you would always think maybe that quality should shine through, but it doesn't happen in all market environments. But this is

this QUAL, Q-U-A-L, is MSCI quality factor ETF versus the average stock in the market, the equal weighted S&P 500. What's interesting about this is this ETF and this index it's based on is sector neutral. So it doesn't just kind of go into those areas of the market like the Magnificent Seven, which are known to have strong balance sheets and consistent profit margins and all those quality attributes. It goes across all industries. So even within energy, financials, it's picking the stocks that seem to have those quality kind of more durable characteristics. And you see that this turn has so many things. This market came right as the SVB threatened the failure, threatened to tighten up financial conditions quite a bit. Now, when it comes to consumer cyclicals, the market has really done a lot of work of downscaling expectations for spending power.

If you look at some bellwether names in this area, like Target, Whirlpool Capital, and this goes back to the very end of 2019. So where they're trading right now, you can see those losses over that period. It's not that far above where they were at the bottom in the COVID sell-off. So it shows you that they've been cheapened a lot. The growth outlooks are treated with a lot of skepticism. I'm never one to say that a recession is priced in before it's become evident. But this part of the market has really braced for a slowdown more than most. Mike, does quality tend to index a little bigger? Would we see a similar bifurcation between the S&P 500 and the Russell 2000 right

around that same period as well? Yes, absolutely. There's no doubt that, you know, the S&P 500 in general, especially over time, has become more of a quality growth index just based on the market caps and just businesses getting better. I know Bank of America has made this point quite a bit. And that's exactly when things did diverge between better balance sheets, producers of cash flow, as opposed to consumers of capital. All right. Mike, thanks. We talk with guests sometimes about how cheap the Russell is compared to everything else. Well, quality is another way of looking at it. Quality is another way of looking at it. You've got to break it all down into these different definitions and be very clear on what specifically you're looking at, because there's value, there's value traps,

there's quality value. On down the road. Well, the countdown is on to earnings from Microsoft and Alphabet. They are due out in less than 24 hours here on Overtime. Up next, we're going to talk to an analyst who says only one of those names is a buy and it could be heading toward an inflection point. And you may have seen it at the top of the hour. Members of CNBC's Technology Executive Council rang the NASDAQ closing bell ahead of the fifth annual Tech Council Summit happening tomorrow in New York,

where both John and myself will be hosting panels. To learn more and to apply to be on the council, visit cnbccouncils.com slash TEC. I'll get that right before the hour's out. Overtime's back in two. Welcome back to Overtime. Check out shares of Redfin right now getting a big spike on news that Redfin has received $250 million in financing commitments from funds managed by Apollo Capital Management. Redfin announcing that news in an 8K filing. And according to the filing, the company borrowed half the loan on October 20th. Redfin is up around 10% right now after hours.

We should note the stock had a market cap of around $600 million as of today's close. And we are in the busiest week of earning season right now. 30% of the S&P 500 reporting in big tech. Microsoft and Alphabet both hit the tape tomorrow, along with Amazon and Meta results later this week. Joining us now, Mellius Research Head of Technology Research, Ben Reitzes. Ben, it's a big day tomorrow. Alphabet hit a 52-week high two weeks ago. It's taken on AI narrative momentum. Microsoft has really driven the AI narrative

for software in 23. Are there key numbers that you're looking for from these names tomorrow, or is it more about the AI color? Well, it's about the AI color. There's a couple things I'm looking for. With regard to Microsoft, the stock has actually underperformed Google quite a bit since the last report. They actually reported on the same night three months ago.

And since then, Microsoft has underperformed Google by about 18 percentage points. And Google's really outperformed because they've retaken some of the narrative with regard to AI. So we actually think into year end, Microsoft has a chance to regain some of that relative performance because their revenue growth is higher than Google. And Google has easy comps when it comes to EPS growth. Their EPS growth has soared this year and it should slow or decelerate a bit relative to Microsoft, who keeps chugging. So that should help relative performance. Key number with Microsoft's Azure, Azure is slated to grow 25% to 26% on the street.

If they can beat that even by just a little and then accelerate, that's the key number. And then they have to kind of talk about the launch of their office co-pilot on november 1st and if we can see some upside or some talk of sequential improvement due to ai especially by june that could lift the shares on a relative basis okay well ben but to put it this way which company's core business would you, is under more pressure in this uncertain economy? Is it Google search on Alphabet's side or is it enterprise productivity on Microsoft's side? Well, our checks and search show that Google's growing still and holding share, and they look pretty good with regard to market share. Bing hasn't really done anything. I think they're OK. But if the

economy really tanks, I would think that search is more volatile. Microsoft's business is very annuity based, much more so than Google. But I think that one of the things that's really interesting is there's been this Google antitrust trial. And we'll have to see what happens with it. But if there's any opening for Bing with regard to the rulings there or some of the developments there, that could be really interesting for Microsoft on a relative basis. And we'll be looking at that too with regard

to share dynamics into next year. So far, Bing hasn't been able to do anything. I want to shift gears with you, Ben, because ahead of the close, we did see these headlines cross from Reuters about NVIDIA and AMD both planning to enter ARM-based CPU chip market. We saw shares of Intel sell off on those headlines as well. Your take on these developments and what it could mean for this market. Well, I sure want to hear what Intel says about it, as well as AMD when they report on Halloween. I think that, look, you've got to take news like this seriously. We obviously really need to see all three companies weigh in on this, as well as Microsoft. The thing I'll just say is that, look, there's been perceived threats to

Intel in the past, and there is such an amount of inertia in that PC market where there's apps developed on PCs, et cetera. It really is not an overnight type of thing, even if this is true and going to have a lot of money behind it. But you've got to take NVIDIA seriously. AMD, it's pretty expected that they would be in the PC market doing new things, maybe with ARM, especially now after the IPO. But NVIDIA, you've got to take really seriously because they work with Dell and Lenovo on the AI side, AI servers, and their market power with this AI thing is so strong that if they start doing CPUs for PCs, like do they bundle? What do they do? So you got to kind of take that all into account. So I think it's a little early. Usually this stuff is an overreaction in my history with Intel. But, you know, we obviously have to see in the long term if

NVIDIA has its sights on anybody. We care whether it's networking, CPUs, any business they want to touch right now. They have the mojo. OK. Ben Wright says thanks for joining us. Thank you very much. After the break, Citi's equity strategist Scott Cronert explains why a recession might not be as bad for equities as you think. And as we head to break, check out Okta logging another rough session now down about 20 percent in the past week after the company disclosed a data breach on Friday. Citi and Evercore both putting a negative catalyst watch on the stock with Evercore saying the breach could force downward

revisions to 2024 estimates. We'll be right back. Welcome back to Overtime. Bitcoin and crypto related assets turning in a strong session following the cryptocurrency's best week since June as investors remain enthusiastic about a potential approval of a Bitcoin ETF. Bitcoin trading well over the key $30,000 mark today. And stocks like Coinbase, Marathon Digital, MicroStrategy, Riot, platforms all outperforming in the session as well. How about that? Yeah. Meantime, the broader market having a volatile session following the 10-year yields. Brief pop above 5% this morning.

Our next guest says recession risks still remain, but an economic slowdown might not be as bad for equities as some think. Joining us now, City U.S. equity strategist Scott Krohnert. Scott, welcome. So things are really bad, but neither the economy nor the market will tank, you think. Why is that? Well, we've been arguing earnings resilience for the better part of this year. And we think as we go ahead into 2024, you have a couple of things unfolding. First, the current setup for 23 is such that we think we're going to get a normal upside surprise

pattern with Q3 results, which actually lifts what we think will be full year 23 estimates up to potentially a 225, maybe 230 level. What that does is give you a pretty decent base for heading into 24. There, our 245 estimate is probably higher than most consensus. But nevertheless, we feel very good about that as a function of some of the underlying sector dynamics at work. So what are the wild cards, though? Are there things that you're watching? There's plenty going on in the world that you could be worried about, where if one of those or two of those or many get out of hand, then your opinion changes here? Yeah, so I think there are obviously many, many components to this.

Obviously, we're watching the Middle East situation. The interest rate backdrop is probably more front and center right now. The move up to a 5% 10-year certainly has a couple of implications. The first is valuation, which we're less concerned about. The second is more the manner in which it plays through to end demand. There we're comfortable that a lot is being discounted already, and that ultimately, with some of the action we're seeing on the industrial side being discounted already and that ultimately with some of the action we're seeing on the industrial side of the economy, there's actually some room for improvement from here that offsets some of that potentially hot. Scott, I'm looking at your

note from Friday, I believe, and you say in it in a nominal world where higher for longer inflation risk carries with it an implicit tailwind to most corporate fundamentals, even as margin issues remain an ongoing concern. A tailwind. Break that down for me. Just if you think about it, us equity investors, when we're navigating the earnings situation for the S&P 500, we have to remember that we do live in a nominal world where our revenues and potentially our margins and earnings can be influenced by higher inflation. It enables you to price higher than you would otherwise. Now, clearly, we have to pay attention to margin risk and the influence that input costs can play.

But in aggregate, what we're pointing to here is that much like we saw for the better part of last year is that, heck, as it turns out, higher inflation is good for revenues. It implies something about the ability to price and does come with a positive benefit to S&P 500 earnings. OK. Does that I mean, if you have high I'm just reading through on this. If you have higher inflation and thus a Fed staying higher for longer. Is there a point at which that dynamic, that tailwind would turn into a headwind? Yes, very clearly that's what we're watching for. And so the pivot points here become pretty important, right? So if you play it through, let's think about how the world might look three, six months from now. Let's say you do begin to get a slowing as a function of the Fed rate backdrop

and the 10-year rate situation in addition. Well, as you get to that point, there might be an earnings read through to the negative, which we think is probably more contained than commonly perceived. But the flip side of that is that then you begin to talk about a different Fed circumstance. And quickly, at that point, you might lose in earnings. You gain in valuation support. Ultimately, it all kind of plays through and you get to the other side of this concern regarding the interest rate backdrop that we think ends up setting up the S&P 500

pretty decently from an earnings picture. Okay. Scott Croner, thanks for joining us. It's time now for a CNBC News update with Contessa Brewer. Hi, Contessa. Hi, Morgan. And here's what we have for you. NBC News has learned Hamas has released two more hostages, Israelis who were turned over late today. Hamas claimed it released the pair for compelling humanitarian reasons. Three days ago, two Americans were also released. Senator Robert Menendez is back in court this afternoon to be arraigned on charges of conspiring to act as a foreign agent for Egypt. The New Jersey Democrat pled not guilty. He has denied wrongdoing and has vowed not to resign his seat. The Justice Department is moving to claim a 340-foot superyacht.

It says it belongs to a sanctioned oligarch known as the Russian Gatsby. The civil claim says the $300 million yacht should be forfeited to the U.S. government. The billionaire has ties to the Russian government and was sanctioned in 2018 for alleged money laundering. I don't know if you noticed this, John, but they did not make me say his name. I appreciate that, and I'm sure you do, too. Contessa, thank you. Yes. When we come back, we will talk details about the deal news of the

day, Chevron's $53 billion buyout plan for Hess and why the environment could be primed for a lot more energy M&A in the future. We'll be right back. Welcome back. Databricks, the private cloud data company with a $43 billion valuation, today announced it is buying data pipeline startup Arsion for $100 million. I spoke with Databricks CEO Ali Ghodsi about why financial services companies have become his biggest customer vertical. He said this purchase will help that growth. Well, let's just take financial services and industry or vertical for Databricks. I would say three or four years ago, it was very small because those kind of companies,

they were talking about, oh, we have to move to the cloud, but we don't know if the regulators will let us move to the cloud and so on. Fast forward today, it's our fastest growing vertical and it's our largest vertical. How much does Arsion help you with that growing industry? Very much so, you know, because the fintech companies are all about the data sources. You know, alternative data is huge here, right? Can you squeeze out alpha out of these data sets, whether it's images or whatever you can get your hands on, you know, text, you can scrape off the web. Can you find some signal in

it and do better investments? And now with large language models and AI, people are excited that they can do that even better. But how do you get the data? You have to have the data first. I also talked to him about the IPO market. He said he's watching it, but in no rush to come public after the so-so performance of the three most recent tech debuts. Ali also told me the round he raised last month was mostly to get NVIDIA and Capital One, a big customer, into the fold. When news broke, a bunch of other investors wanted in, and he turned many away. Interesting. And kind of the IPO piece of it, too, very much reminds me of what we've heard from so many others on this set, including from the

investment banking community, that 2024 is really going to be the time period to watch in a more meaningful way. Yeah, it's not happening in a sustained way this year. All right, well, fintech company Marketta unveiling a new credit card issuing platform today, allowing brands to have more ownership over the card experience for customers. Joining us now from the Money 2020 conference as well, Marketo CEO Simon Kalaf. Simon, it's great to have you on. Now, if I'm understanding this news correctly today, you're basically creating a one-stop shop for rolling out credit card programs. Break this down for me. Who are you partnering with on it and what makes it so different than what's

currently in the marketplace? Sure. First, thanks for having me on your show and having Marquette. I really appreciate it. Yes, we're extremely excited about this new platform because at the same time of our release, we did actually issue the state of our credit report. And when we interview consumers, they believe that they are the customer of the brand, not a customer of the bank. So what we've done here is we put a credit platform that allows any brand to issue a card, like your store card, but it's actually a digital card. It's a card that's alive. It's a card that's personalized and allows every brand to establish great loyalty with its consumers. So it's kind of a change to the credit cards that are out there.

Most of the credit cards are not digital products. They're actually a piece of plastic. But if you think about it, a card is the most adopted technology product ever built by humanity. It has more distribution than Google and Facebook combined. And what we're doing to this card is bringing it alive and allowing the brands to make that the homepage of their digital experience. So with every tap, you get that engagement. Okay. I mean, you're still working with the bank. You're still working with a lender to issue that credit as well. Do you already have customers signed up or companies that you're going to work with in terms of these issued credit cards?

And I guess just as importantly, how is this going to help expand the pipeline of new business in general? Of course, yes. So we do work with an issuing bank, of course, and that's where the balance sheet or the debt would come from. But the bank is behind the scene. The consumer experience is built by the brand. So we will be announcing. We don't have brands that we can announce, but obviously we're working with some, but we'll probably announce them soon. In terms of the broader business, obviously, Marketo established its growth through the debit program. Welcome back. Databricks, the private cloud data company with a $43 billion valuation, today announced it is buying data pipeline startup Arsion for $100

million. I spoke with Databricks CEO Ali Ghodsi about why financial services companies have become his biggest customer vertical. He said this purchase will help that growth. Well, let's just take financial services and industry or vertical for Databricks. I would say three or four years ago, it was very small because those kind of companies, they were talking about, oh, we have to move move to the cloud but we don't know if the regulators will let us move to the cloud and so on fast forward today it's our fastest growing vertical and it's our largest vertical how much does arsion help you with that growing industry very much so you know because the fintech companies are all about the data sources you know alternative data is huge here right can you squeeze out alpha out of these data sets, whether it's images or whatever you

can get your hands on, you know, text you can scrape off the web. Can you find some signal in it and do better investments? And now with large language models and AI, people are excited that they can do that even better. But how do you get the data? You have to have the data first. I also talked to him about the IPO market. He said he's watching it, but in no rush to come public after the so-so performance of the three most recent tech debuts.

Ali also told me the round he raised last month was mostly to get NVIDIA and Capital One, a big customer, into the fold. When news broke, a bunch of other investors wanted in, and he turned many away. Interesting. And kind of the IPO piece of it, too, very much reminds me of what we've heard from so many others on this set, including from the investment banking community, that 2024 is really going to be the time period to watch in a more meaningful way. Yeah, it's not happening in a sustained way this year. All right. Well, fintech company Marketta

unveiling a new credit card issuing platform today, allowing brands to have more ownership over the card experience for customers. Joining us now from the Money 2020 conference as well, Marketta CEO Simon Kalaf. Simon, it's great to have you on. Now, if I'm understanding this news correctly today, you're basically creating a one-stop shop for rolling out credit card programs. Break this down for me. Who are you partnering with on it and what makes it so different than what's currently in the marketplace? Sure. First, thanks for having me on your show and having Marquette. I really appreciate it. Yes, we're extremely excited about this new platform because at the same time of our release, we did actually issue

the state of our credit reports. And when we interview consumers, they believe that they are the customer of the brand, not a customer of the bank. So what we've done here is we put a credit platform that allows any brand to issue a card, like your store card, but it's actually a digital card. It's a card that's alive. It's a card that's personalized and allows every brand to establish great loyalty with its consumers. So it's kind of a change. So to the credit cards that are out there, Most of the credit cards are not digital products. They're actually a piece of plastic. But if you think about it, a card is the most adopted technology product ever built by humanity.

It has more distribution than Google and Facebook combined. And what we're doing to this card is bringing it alive and allowing the brands to make that the homepage of their digital experience. So with every tap or every swipe, you get that engagement. Okay. I mean, you're still working with the bank. You're still working with a lender to issue that credit as well. Do you already have customers signed up or companies that you're going to work with in terms of these issued credit cards? And I guess just as importantly, how is this going to help expand the pipeline of new

business in general? Of course, yes. So we do work with an issuing bank, of course, and that's where the balance sheet or the debt would come from. But the bank is behind the scene. The consumer experience is built by the brand. So we will be announcing. We don't have brands that we can announce, but obviously we're working with some, but we'll probably announce them soon. In terms of the broader business, obviously Marketo established its growth through the debit program, and that's 50% of the market. Now we're taking all the innovation we've done with debit and putting it in the credit, so it actually doubles our total addressable

market. Okay. Simon, I looked at your survey results. I found it a bit troubling that, you know, A, consumers are stretched. They're using credit to make ends meet like they haven't in a long time. And they're having trouble getting credit on good terms. So they're very interested in getting more new cards. I mean, it sounds like a house of credit cards potentially when it comes to consumer spending. Why isn't it? Well, it's actually they're not looking for yet another card. They're not looking for something else. They're looking for something different. So it is very interesting that most of the consumers would trade APR for a better customer experience. They want the loyalty to go to the brand.

And they want that to come in near real time. And they want that card to help them in their spending habits. They want the card to help them in their spending habits. They want the card to find them the good deal. And also, with velocity controls, if they go on a shopping spree and their debt stack is increasing, that card could turn itself off. I think that's what I'd say the new generation is looking for more of a concierge or a financial assistant more than they're looking for a payment vehicle. I think it helps consumers bring down their debt stack. So what's going to happen with the various relatively new types of consumer debt that consumers seem to be stacking up? Your survey

found a lot of interest in buy now, pay later continues. Of course, they've got some traditional credit card debt, I'm sure. Now they're going to have this. If things get more challenging and things get really stretched, what are they going to drop? What kind of product is going to be hurt the most? Yeah, I mean, of course. I mean, BNPL was once positioned as a card killer. Now I think it's a card maker. So for folks who do not have a credit history, they're going to start with buy now, pay later. They will build the credit history.

And from there, they'll go into the traditional card, which is the revolver. So if you add them all up, you look at you have a large swath of the population that is on very high APRs. So let's say 19% to 22%. And then you have a 7% inflation, then you're at 29%. So for every dollar they make, they're losing 29 cents. So if you actually work with them and move some of that debt and bring the APRs down, you put money back in their pockets. And then the merchants can kick in a lot of the rewards

that will also bring down their cost of goods that they're purchasing. So we believe that will help because there's something in the merchants to give them a lot more incentives and price reductions because they're getting the loyalty and they're getting the return sale. So there's something in it for the merchants to give kickbacks to consumers. All right, Simon, thanks. Simon Kalaf, CEO of Marketo. When we come back, we'll get Mike Santoli's take on Chevron's takeover of Hess and why more energy M&A could be coming after more than $100 billion of tie ups just in the last couple of weeks. Stay with us.

Welcome back. Let's talk about today's big deal. Chevron's plan to buy Hess in an all stock deal valued $53 billion, just weeks after Exxon said it would buy Pioneer for nearly $60 billion. Mike Santoli is back with his take. Mike. Yeah, Morgan. Well, first of all, let's look at how those two stocks have performed over the last few years. Here's a five-year chart. It shows you why perhaps Chevron felt the need to maybe chase after the likes of Hess. It was really rewarded by the market for its exploration projects,

these new Guyana fields we know about. But it shows you also they're paying around $50 billion for a company that two years ago had a less than $25 billion market cap as Chevron itself has gone kind of sideways. So maybe that's why the market is feeling as if it's a little bit of a rich price to pay at this stage, even though it was no real premium to Hess's last trading price. Now, bigger picture, here's the energy sector's valuation based on price-to-sales ratio compared to the S&P 500. And what you see here, yeah, it's up off the lows in the last year and a half,

as, of course, oil prices have come up a lot. But it's way below what would have been the prior, let's say, 15-, 20-year average. Now, part of that is because the overall S&P 500 is more expensive, a higher price to sales ratio. But it suggests that the market itself is not really valuing energy revenues today as if they're going to continue in the future and grow. So maybe that means that existing publicly traded energy companies are the place to actually go to source new production

more so than it is, you know, kind of just prospecting on your own. That seems to be what the big oil companies are thinking right now, Morgan. Yeah. And of course, the majors all have very strong free cash flow, to your point. We saw Oxy shares of Occidental Petroleum falling today as well because there's an expectation there had been, I guess, some speculation that maybe this would be a name that would be a good tie-up with Chevron. I do wonder, though, Mike, how much of this is specific to oil and gas versus the broader market, as we've seen everything sell off or pull back in recent weeks. And I ask that because we have $80 billion-plus worth of M&A deals announced today.

You saw stuff in pharma. You saw stuff in tech. It wasn't just Chevron with a deal today. No, that's true. No, it's starting to percolate a little bit. I mean, a lot of the things, if you've been waiting a while and you can get to some equilibrium price, get the sellers to basically bring down their ask and get a deal done. I do think it makes some kind of sense right here, especially if you don't think you're going to be able to rely on years of economic growth ahead of us to figure out if it's the time actually to pair up and get more scale. That could be one of the dynamics we're in right now. Although I'll say

again, when the deal activity is really humming, you can't even name all the transactions. They just keep flying right past you. Indeed. Mike Santoli, thank you. Now we've got an earnings alert on Cadence Design Systems, the $65 billion market cap software company, pulling back despite a beat on the top and bottom lines. The company's CEO saying trends like AI and autonomous driving are fueling robust design activities. But Q4 EPS guidance coming in well below Wall Street estimates. And the low end of the revenue guidance range was below estimates as well.

You can see it there down about 4.5%. Now, weight loss drugs have captured all of Wall Street's attention this year, but there's another big category of treatments in the pipeline that could be a game changer for big pharma. We'll tell you what it is when Overtime returns. Welcome back to Overtime. Weight loss drugs like Ozempic and Wegovy have garnered big headlines on Wall Street and beyond, but there's another arena that could prove to be the next big battleground for pharma companies. CBC's Angelica Peebles joins us here on set to discuss antibody drug conjugates. What are those? What are we talking about? Yeah, it sounds a little confusing, but these are actually really interesting cancer drugs.

And the way they work is basically they're targeted chemotherapy, and people describe them as targeted missiles. And the idea is that they can go and kill those cancer cells instead of doing the damage across the body, which is really exciting because, as you know, chemo is not great, causes a lot of really unpleasant side effects. And this is a really exciting area because it's been decades in the making. And now we're starting to see the results

where you have these drugs that are delivering promising outcomes for patients. And they're also making money. This year alone, RBC is saying that they could, about nine of these drugs, could do about $9 billion in sales. And by the end of the decade, that could reach about $30 billion for this class of new drugs. So what public companies have some of the more interesting pipelines and hopes? Yeah, well, just a few days ago, Merck signed a pact with another company, Daiichi Senkyo, up to $22 billion for three drugs, three of these ADCs. And outside of Merck, AstraZeneca is also working with Daiichi and, of course, Pfizer acquiring Cigen for about 43 billion dollars

to access these drugs. So does this disrupt some of the current cancer treatments that are already on the market or does it act as a supplemental to them? It could disrupt. You know, the timelines here can be long. You start in some of the later lines of treatment and then you work your way up to the front line. But they could really change the paradigm for treatment here. This weekend, Merck is showing data

with its drug Keytruda combined with an ADC from Segen and Astellas that it doubled the length of survival in bladder cancer. And so that is with, you know, if you have bladder cancer, now you're looking at potentially 31 months versus 16 months, which is a big deal for those patients. It's huge. It's huge. We'll wait eagerly to see what the results from here deliver.

Angelica, thanks. Our Angelica Peebles. Well, we told you about the big tech earnings lighting up tomorrow's calendar, but there are some other key reports you need to know from industrials, consumer stocks and more. You've got your full rundown right after this break. We've got another earnings alert to tell you about. Steelmaker Nucor just out with results, topping on EPS and revenue. The company did say, though, that it expects fourth quarter earnings to decrease versus Q3 due to lower pricing across its different steel segments and to a lesser extent decreased volumes. Nonetheless, those shares are up 1.5% right now.

And speaking of earnings, they're going to be coming fast and furious for the rest of the week. 30% of the S&P 500, 40% of the Dow reporting. Tomorrow, we will hear from MegaCaps, Alphabet, that's Google's parent, and Microsoft. We will also get results from Verizon, Coca-Cola, GM, 3M, Texas Instruments, and Chubb, as well as defense contractor RTX. That's formerly known as Raytheon. Morgan, interesting read-throughs on a couple of these. Microsoft, Azure for Amazon Cloud, and then Google and its ad business for Meta, which reports later in the week. So investors are going to be comparing. Yeah, we're going to be watching those closely. And as we talked about earlier in the hour, AI, the talk about AI, the monetization possibilities around AI and what those narratives look like for those companies are going to be in focus. I do think some of

these industrial earnings we get in the morning, whether it is a GM or a 3M or even an RTX, which has both the commercial book of business, they've been dealing with some of their engine issues, but also a big defense portfolio with all the missiles, munitions and missile defense, including some of those key systems that they co-develop in Israel as well. That'll be one to watch in the morning, too. And then, of course, we get flash PMIs as well. What questions are there out of their earnings that might reflect what's happening in the macro? For the industrials? Just the industrials. Yeah, I mean, yeah, I mean, you're talking about you're talking about big multinational conglomerates that touch different businesses, different end markets across different parts of the world. And of course, we know. Okay,

well, that's it for us. That's going to do it for us here at Overtime. Find out tomorrow. Fast Money starts now.