Closing Bell - Closing Bell Overtime: Writer CEO On How They Lowered Costs For Training AI Models; Buffett’s Under-The-Radar Financials Winner 10/11/24

Episode Date: October 11, 2024

Writer just released its latest LLM and its scoring across a range of benchmarks is impressive. Co-founder and CEO May Habib joins to discuss how the company lowered the costs of training its AI model – and what that means for its competitive prospects. Our Kate Rooney reports on Warren Buffett’s under-the-radar winner. Plus, reaction to breaking financial news from Boeing and analyzing the financials earnings that sent that sector into record territory. 

That's the head of regulation, Duke Common Incorporated, ringing the closing bell at the New York Stock Exchange. Sarah Bell doing the honors at the Nasdaq. Well, we got them. Record closing highs for both the S&P 500 and the Dow as stocks finish out the week with a bang. Fifth straight week of gains and earnings season officially getting underway. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford is off today. Well, coming up, the financial sector hitting a record high today. Best performing sector in the S&P. It was boosted by earnings from J.P. Morgan and Wells Fargo. We will talk to Bank of America's

senior analyst about how to position now ahead of more big bank results coming next week. Plus, the CEO of AI Unicorn, Ryder, which is currently raising more money at a nearly $2 billion valuation, joins us to talk about the one big thing the company is doing to try to set it apart from open AI. It may surprise you. And Tesla shares hitting the brakes following last night's cyber cab event. We will talk about why some analysts were less than impressed and why Uber may be the big winner. It's certainly how the market played it today. But first, let's begin with our market panel, with the major averages all up around 1% on the week. This is the 45th record close this year for the S&P 500. Joining us now, Victoria Green of G Squared Private Wealth. She's also a CNBC contributor. And Ryan Dietrich

of Carson Group. It's great to have you both. Ryan, I am going to start with you. Given the fact that we have record closes again for the S&P and the Dow, and tomorrow, I know it's Saturday, but technically it's two years. It marks two years for the bull market. You've been very positive on stocks for the better part of that two years. How do you see it now? Happy Friday, everybody. And tomorrow is the birthday.

The bull turns two. And I think it's really important to note, so the S&P, I'm not exactly sure with today's close, we're up over 60% these past two years. And you look, Morgan, at the average 11 bull market since World War II, the average one lasted over five years, like 180%, median well over 100%. So I think as people kind of hear about this bull market hitting two, it's important to note, yes, this has been an incredible run. No question about it. But there could be a good deal left. And we get into the economy and things. Economy still solid. The Fed is no longer headwinds. I mean, the reality is this bull market's really beautiful, but it really could have a lot left to it.

And that's how we're positioning ourselves here. Victoria, I want to get your thoughts, because there are a lot of push-pull dynamics for this market, both on the macro and the micro. But particularly interesting today that with J.P. Morgan's earnings, the CFO on the conference call basically said that what they're seeing in the results lines up with a soft landing scenario. And so some folks are taking that to mean that they're basically calling it that the landing is in and it's soft. I would debate that, especially based on Jamie Dimon's comments from earlier in the week in an interview. But just lay this out for me. If we do, in fact, have a soft landing scenario. What needs to happen from here, given the fact that valuations are stretched, but we do have earnings getting underway? Yeah, it's all about earnings growth, right? We've got to justify the P.E.

And we may see the earnings growth continue to come up and keep multiples about level. I will always say JP Morgan and Damien Diamond is always a little bit negative Nelly before earnings. And you talked about, again, we have all of these traumatic things happening and the end of the world may be coming. But my company is doing just great. And we beat again and actually earn higher net interest income than analysts were expecting. So for me, I look at this and say, if earnings keep growing, then we're in good shape. If rates, we don't see a spike in yield, we don't see a spike in unemployment, then we're in good shape. And I think also the scenario of the no landing is definitely on the table. If there is a soft

landing, we're already in the middle of the soft landing. I think people keep waiting for a shoe to drop. I don't think a shoe is going to drop. I think if anything, it's soft or no landing at this point. The Fed has done a good job. The market's absorbed a lot. I know you've seen yields back up about 50 basis points as Fed speeds come out hawkish. We've gone from 50 basis point cuts in November to 25 to maybe none, what Bostick brought up today. But the market's fine with that because they're pivoting to earnings. And I look for catalysts. Today was a great first kickoff day. I mean, the banks just crushed it. I'm really excited for next week. I think we're going to see some easy beats here. And it's actually a lower bar. Remember, we're now only expecting about four percent earnings

growth versus seven percent when we started Q2. So I look at this and say, I think bull markets, middle innings, you know, keep calm and rally on. Yeah. And that's a good point, too. The fact that you have seen yields move back up towards those August highs, Ryan. If I look at some of these cross-currents, whether it's Fed, whether it's earnings, whether it's China, whether it's disinflation, whether it is some of the more specific stock stories out there like Tesla today, I mean, we know from a seasonality standpoint, October tends to be weak. Do you buy on the pullbacks here, assuming you get them? Or is this really a market that's turbocharged where maybe we don't get them? And if so, what do you buy into? Yeah, great question there. Listen,

the S&P is up five months in a row, 10 of 11 months. I mean, this is awfully stretched. October, when you're up 20 percent for the year heading into it, like we were this time, only been higher two out of nine times. So let's just remember those pre-election jitters. We still expect to see that. I think it'd be fairly contained. I mean, 8% pullback is all we've seen so far this year. We don't think it'd be anything more than that. Maybe one of those quick 5%ers or so, perfectly normal. But the discussion we just had, what's leading? I mean, financials hitting all-time highs. I've come on all year with you saying we like financials, we like industrials. Yes, I know small caps can be a dirty word. Small caps up 2% today, 11% on the year, not great, but historically you find alpha out of small caps once they start

cutting. So small and mid-caps, two areas we like, and those cyclicals are still areas we like here, Morgan. But one final thing, advanced decline lines, market breadth, right? New all-time highs today on like the NYC advanced decline line, S&P 500 advanced decline line, more at small cap, mid cap. They all hit a new high today. What does that tell the listeners? Market breadth leads price. We saw those advanced decline lines breaking out in May.

I talked about it back then in May, saying maybe it would be a summer rally because breadth is strong. Market breadth is still strong. It's not seven stocks anymore. It is a lot more. And that's something to be thankful for. Victoria, I mean, you just touched on it with the banks, but the banks did lead with the S&P sectors. We also saw industrials. We saw real estate. We saw utilities. We know that this

market rally has been broadening out here. Is that something that continues? Or do you look at some of these areas that have been a little bit weaker or more recently coming into earnings, like, for example, tech? Yeah. And I'm keeping my core tech. I do not think tech and AI is dead. I think they're going to justify their valuations once again, and they're going to have well above market earnings growth. And so far, they've been good beats. And you see a little bit of a pullback. The Magnificent 7 right now in Q3 and a little bit here in Q4 are more like the Magnificent 4. We've lost a couple here that haven't been doing so well. But I'm keeping my core tech. I love the rate sensitive. I want But I'm keeping my core tech. I

love the rate sensitive. I want my utilities, my REITs. I want things that historically after the first rate cut have done well. And that's what's playing out right now. I want my health. I want my financials. I want my industrials. And I want to keep my core tech as my transformative. And I also think it's very expensive to sell it. I see nothing falling apart in the AI trend. I see that continuing to grow earnings. So for me, yes, you want to broaden out. You don't just want to own seven stocks anymore. I think you need to look at value. I'm a little bit more hesitant on the small caps.

I think we've been in a love-hate relationship now with them for a year where they keep trying to break out and not really successfully doing it. So I'm leaning in hard on the large caps. I really love U.S. large cap, but value is something investors should not pass up. We are currently doing the rate cut playbook. This is how stocks react after the first rate cut. Don't be missing out sitting around. Financials are a great place. Industrial sell have room to run, absolutely.

Energy is one. I do agree a little bit. Bank of America came out a couple of weeks ago. It might be more of a value trap. Oil prices right now are being pushed and pulled by multiple factors, which are impacting the energy sector. And it's hard to understand where that'll go depending on geopolitical events. And that's one more thing that investors have to keep an eye on right now too. Victoria Green, Ryan Dietrich,

thank you both for kicking off the hour with me as we do have record highs for the Dow and the S&P and fifth straight week of gains for all the major averages. Well, let's turn now to Tesla. That's sitting out the rally after last night's event in Los Angeles, showcasing a long-awaited cyber cab, along with Tesla's latest Optimus robot and a surprise Roboban concept. Phil LeBeau joins us now with a look at why some analysts were not impressed. And Phil, I mean, the stock shed something like $50 billion in market cap today, down almost 9% in trading. They were not impressed. Not at all. And if you watch the event, look, it was on a Hollywood lot and it was what you would expect in a Hollywood production. It made you say, wow, that's really cool. Now give me the meat of the matter. And he didn't come up with the

meat of the matter. Let's show you what it looked like last night. Elon exits, waves to the supporters, gets into the robo taxi prototype. He's by himself in there. You're sitting there thinking, oh, this is kind of cool. What's going to be the future here for the robo-taxi? Here's what Tesla did say. They will start autonomous full self-driving rides next year. California and Texas to begin with, with Model 3s and Model Ys, not with that vehicle. The robo-taxi you see there, that goes into production by 27. Elon Musk says it should cost under $30,000. And here's why he believes they can charge a lower price. The solution that we have is AI and vision. So there's no expensive equipment needed.

So the Model 3 and Model Y and S-NEX that we make today will be capable of full autonomy unsupervised. And that means that our cost of producing the vehicle is low. Here's why analysts were not impressed. Not enough details. It's not enough just to show the car and to say, this is what we're going to do. Analysts wanted details in terms of where do things stand with full self-driving, with autonomous drive technology. Give us some metrics to show us how you compare with the other AV leaders. Talking about Waymo, there was none of that. And there was no mention of a lower-priced model.

You've heard people talk about this so-called Model 2. By the way, that's just a name that is thrown out there. It's a lower-priced model, probably will be a decontented Model 3-type vehicle that they've said they're working on and plan to roll out sometime early 2025. Not a peep about that last night. By the way, we could hear more about that on October 23rd. That is when Tesla will report its Q3 results. By the way, that is also the expectation for many analysts that on that date,

they will give greater clarity in terms of a lower-priced model when it rolls out. And as Tesla fell by almost 9%, take a look at shares of Uber. Why was Uber up as much as it was today? Because going into this event, Morgan, a lot of people said, well, boy, if Tesla comes out with a robo taxi app and a ride share service. And if they can do it quickly, this is bad news for Uber. Well, you saw the reaction today once people realized there's no details yet in terms of when we may see a ride share service from Tesla. Yeah. And of course, Uber was the best performer on the S&P. Tesla was the worst performer on the S&P, to your point.

One of the things that I think has been overshadowed here, though, with this event last night, Phil, has been the optimist humanoid robots. I don't think people fully understand or appreciate how much power, compute, connectivity, how much data goes into these robots being developed. I mean, it's going to take a long time. It has taken a long time for them to be fully realized. So the fact that you had these robots moving around and mingling in the audience was notable in terms of how Tesla was putting its AI capabilities on display. I know Dan Ives talked about it last hour and

the possible business opportunity there, but not getting a lot of play from the analyst notes I've seen. Well, a lot of analysts did note that what they saw from the Optimus robot that was out there, Morgan, was impressive. Certainly a step up from what they've seen in the past. So there is that recognition about the progress that is being made there. I think part of the issue here, at least with the analyst community, is they're still trying to wrap their minds around how does this fit into the future? Theoretically, yeah, it's an incredibly large market. But are you talking about humanoid robots that would be used in an industrial setting? Are you talking about them being used in more of a commercial setting? You know, Elon Musk likes to say, well, you know, twenty thousand dollars.

People will be able to have a humanoid robot and they can employ it or do whatever they want to do with it. And on paper, that makes a lot of sense. And you're right about all of the things you're talking about in terms of A.I., the compute power, et cetera. But I think at this point, the analysts are still trying to wrap their heads around, OK, what is that market going to be? And when will we see the commercialization of the Optimus robot? Yeah, it sort of goes back to the broader AI theme, I suppose. You can put all the investment in, but when do you actually realize the return on investment? To your point, Tesla was light on those details.

Phil LeBeau, thanks for bringing it all to us. Let's bring in senior markets commentator Mike Santoli for a look at where stocks are headed after reaching new highs. Mike. Yeah, well, right now, Morgan, of course, you were talking about that anniversary pointed higher, the trend, without a doubt. The question is whether it's getting a little bit stressed in the very short term. The closing low for the bear market that preceded this ball was October 12th. As you've been saying, that's tomorrow of 2022. The intraday low is the next day, the 13th.

So take your pick. Either way, this chart captures the entirety of it. You have the 50-day average near to both show that the trend is higher. But you do have a little bit of air between the index level and that sort of short intermediate term trend line. It's about 4.2 percent above it. You sometimes get 5 percent above thereabouts before you've gotten to these points where it looked like we were getting a little overheated. Of course, the moving average will also keep going higher. So it's not as if it has to stop in its track. The bigger point is that this is sort of the upside spot that the trend has been getting

toward. You see, it looks like a little bit of an overshot to the upside from July of this year. So trend intact. Maybe don't be surprised if you get a breather. Now, take a look at the discrepancy between how that headline S&P 500 has performed over the same span and the emerging markets ETF and the Russell 2000 small cap. So U.S. small cap stocks and emerging market equities have really been pretty close to lockstep here, right? They don't have the mega cap growth names to drive it. Also, maybe a little more Fed policy sensitive. Maybe we need more confirmation that we have a global soft landing intact. And so both of them acting better recently. We'll see if they can close the gap or play some catch up or stay bid here. Russell 2000, it's been this halting move higher, but we are sort of close to those late 2021 highs. So something to watch. And certainly, you know, financials are a big part of the Russell 2000. So as we have more of these

regional banks roll out their results, that'll be something that could potentially propel it from here. I want to go back, Mike, to something we were discussing with Ryan Dietrich and Victoria Green. And that is the fact that as stocks are hitting record highs, you have seen yields move higher as well. How sustainable is that relationship? Well, it's been actually pretty well correlated recently. In other words, higher yields and higher stock prices have been completely compatible. That's been a switch from what we were dealing with when the Fed was tightening and when yields were threatened to go higher because inflation was too high. So for now, it's acceptable.

Now, is there a level of the 10-year or the 2-year note yield that we'd have to rethink that relationship? That's a question. I think it might be around 4.25 on the 10. I think that's where most people are looking. Maybe it's 4.15. But again, we can make our peace with each incremental higher level in yields if it's coming with a decent economy and not because inflation is flaring up.

You sort of have to know the why to determine whether it's okay or not. A resilient economy perhaps outweighing a Fed moving less quickly to cut rates here or less aggressively. All right, Mike Santoli, thank you. We'll see you later this hour. Coming up, it was a big day for the big banks as J.P. Morgan and Wells Fargo surged on the back of results. So why was Jamie Dimon losing his patience on the earnings call? We're going to tell you that next. And we will talk to Bank of America's analysts about what today's results mean for the other big banks on deck next week. We've got a big show ahead. Overtime's back in two. Welcome back to Overtime. J.P. Morgan and Wells Fargo helping

propel the financial sector sector to a record high today on the bank of on the back of earnings. Leslie Picker joins us with the big takeaways from those reports. It's Friday, Leslie. The bank of earnings, though, I kind of like that. It's catchy, Morgan. Yeah. On both investor calls, you got analysts trying every which way to get a better input on net interest income for their models. But despite the lack of clarity surrounding that profitability metric for loan making, both stocks soared today. Wells Fargo CFO Mike Santomassimo said the firm is, quote, close to the trough on NII. Deposit costs a big factor, but so too is the potential resurgence of loan demand. Santimassimo said the 50 basis point reduction in rates is helpful, but not the sole factor

that will drive people to borrow, especially with the uncertainty around the election and the macro backdrop. Perhaps there's more visibility toward the end of the year, he said. NII was also breathlessly discussed, as you teased,ased Morgan on the JP Morgan call as well. is a number, but all things are never equal. And the yield curve, you know, if you have a recession, the effect of the yield curve will be very different than you have continued growth. JP Morgan Management said the current market consensus for NII X markets is about $87 billion for next year, which they think is closer to their expectations, but maybe, quote, still a little bit toppy there, guys. All right. to their expectations, but maybe, quote, still a little bit toppy there, guys. All right. Leslie Picker, thank you. Well, today was just the appetizer for

bank earnings. On Tuesday, we'll get Goldman Sachs, Bank of America, Citigroup. Morgan Stanley reports on Wednesday. Let's bring in Ibrahim Poonawalla from Bank of America. Ibrahim, it's great to have you here. You know, we had your colleague Osung Kwan on the show yesterday. He was saying he was overweight, financials, and he was laying out the case that it's less about net interest margin, more about book value. We look at the results we've gotten so far from the names that reported this morning. Yes, I realize results were were largely solid, but it does seem like it's more about multiple expansion and investors pricing in the realization or potential realization of a soft landing here as well. Your thoughts. Well, thanks for having me.

And you're right. Since the start of the year, it has been a story about multiple re-rating. If you recall, if you go back six to 12 months ago, bank stocks, especially if you look at the regional bank stocks outside the top four or five banks in the country, have been out of favor because of different reasons, commercial real estate, what happened with the post-SVB crisis. So as we came into 2024, this was a group that was trading at eight to nine times earnings, historically trades around 12 to 14 times earnings. So as we move forward in 2024, increased probability of a soft landing should have given the re-rating. And that's what we are seeing. And that's what we expect to continue in the near term until we as we wait for a rebound in customer activity at some point next year.

Is Diamond right when he basically says you're paying too much attention to net interest income and that perhaps it's a little toppy even as they put a number out there? I mean, again, I think you're talking about a billion dollars here or there on a base of 85, 86 billion dollars. So he's right in that, yes, banks are going to be under pressure in the near term. If the Fed had to cut rapidly 50 basis points back to back, maybe more pressure. Looks like that's not going to be the case. What really matters for bank stocks, if you're putting new money to work here, is what's the economy going to look like six to 12 months from now? Is investment banking going to be picking up? Is loan growth going to be picking up? Is credit quality going to be getting better or worse? And in the greater scheme of things, what happens to NII in any given quarter is less important. The fact that you did see investment bank results in both Wells and J.P. Morgan today

a little bit stronger than expectations, how does that set us up for Goldman Sachs and Morgan Stanley next week? So we've been extremely bullish on investment banking activity. Goldman Sachs is on BFA's best ideas list. And when I look at both Morgan Stanley, which we think the stock is about

to kind of escape three years of derating where it's gone sideways, and Goldman Sachs, the pent up. So we've seen a decent year so far year to date, and the results should be fairly healthy when both banks report. Importantly, as we move into 2025, rate cuts, post-election visibility, and private equity sitting on a lot of assets that they need to monetize augurs extremely well when we think about M&A and IPO activity looking out into 2025. And we do think that's one way that investors should absolutely have a gearing towards is the rebound and cap markets activity. And we like both names, Goldman and Morgan Stanley. Okay. Abraham Poonawalla, thanks for joining me. Thank you.

Bernie season's still young, but election uncertainties, that does seem to be a catchphrase coming out of these results across industries so far. When we come back, the S&P 500 setting a record close today, but Chinese stocks had a rocky week. We're going to discuss whether the pullback is a buying opportunity or if you should steer clear. And OpenAI getting plenty of headlines for its massive funding round. But another AI startup is quietly raising money at a nearly $2 billion valuation. The CEO of Rider joins us to explain how her company's approach is different and potentially

cheaper than its rivals, which include OpenAI. Welcome back. China market seeing volatile moves this week. The major index is all down more than 3% since Monday as a stimulus-fueled rally loses steam. Is it a buying opportunity or is China too risky to invest? Well, joining us now is Anya Emanuel, Aspen Strategy Group Executive Director. And Anya, it's great to have you on the show. Welcome. Thank you, Morgan. Happy to be here. So that's exactly where I want to start, because we talk about volatility in the U.S. markets, but it's nothing compared to what we've seen in China in the last couple of weeks. It really started with monetary stimulus and then the beginnings of fiscal stimulus. There's going to be an event tomorrow where the finance minister is expected to lay out some more

details around fiscal stimulus. But it hasn't been this, quote unquote, bazooka style effort that investors were hoping for. Just walk me through what we're seeing in the Chinese economy and what that means in terms of possible policy. Yeah, that's exactly you got it exactly right, Morgan. Thank you. The Chinese stocks have been on a sugar high. And those few announcements that you saw in the end of September, there were some helpful reforms, you know, the small rate cut, lowered the reserve requirement to unlock some bank lending, cuts to existing mortgage rates. Now they're teasing some more. The problem is, most of this is really just short-term stimulus that helped the stock market. But if you look underneath, it doesn't really resolve any of the fundamental problems with the stock market. But if you look underneath, it doesn't really resolve

any of the fundamental problems with the Chinese economy. And there are two in particular there. One is a really weak state of employment. 18, 19 percent of youth in China are unemployed. That's a real problem for them. And two, the savings rate is incredibly high because the Chinese just don't have enough confidence in their own social safety net, their own government to start consuming more and saving less. So is this something that Chinese leadership under Xi is looking to change or fix, or do the priorities lie elsewhere, especially when you think about security and the role of technology and some of the other things that are playing out here in a geopolitical landscape that is heightened, particularly in terms of the relationships

between China and the U.S.? Yeah, I think you put your finger on it. The Chinese leadership under Xi Jinping has been preoccupied with national security and with maintaining the political control of the Communist Party over any economic growth. And I know even inside China, there are great reformers, great economists. They are quietly frustrated that there hasn't been more emphasis on reform, real reform, real opening up, that there hasn't been more emphasis on setting the private sector free. People kind of know what needs to be done, but it's very difficult to see those reforms actually happening under Xi Jinping. So when we started this discussion by asking the question, is China investable right now? From everything you're saying, it sounds

like you don't think it is. Well, I'm not an investor. I am a policy person. What I see of the Chinese government, they're opaque. They have unbelievable entrepreneurs, but those people have been really reined in. And when a government is starting to hide their key financials. We just found out we have some breaking news. Stay right there. Thank you. We're going to get back to Phil LeBeau right now because we have some breaking news on Boeing. Phil. Morgan, this is a big announcement from Boeing pre-announcing its Q3 results and some actions the company is taking to fix its balance sheet as quickly as possible. Let's start first off with the Q3 pre-announced loss of $9.97 a share on a gap basis. Now, there's no estimate out there on the gap basis. The street was at a loss of $1.65 for core earnings.

By my calculation, this is a loss of greater than $6 billion. That's just back of the envelope calculation there. Revenue coming in at $17.8 billion for the third quarter. The street's estimate, by the way, was over $18 billion in terms of revenue expectation. Operating cash flow, negative $1.3 billion. Now to the actions that Boeing is announcing. The company will be cutting 10% of its workforce across the board, everything from executives all the way down the line. That is approximately 17,000 jobs worldwide. There are 170,000 workers approximately

at Boeing. They're cutting 10% of that workforce. The company is also delaying the entry into service of its next commercial airplane, which is the 777X, was scheduled to go into service next year. Not a surprise given the issues that they've had with that plane and the strike and a couple other things. They are now pushing that back to entry into service in 2026. They are also ending production of the 767 freighter. They've got, I think, 29 that still need to be built that are in the order backlog. Once that is finished in 2027, that's the end of the 767 freighter. And they are also taking about $5 billion in charges between the commercial as well as the defense side of the business. A number of these charges, by the way, Morgan, are with the defense side of the business. A number of these charges, by the way, Morgan, are with the defense side of the business. As you know, they've had issues there for some time in terms of those fixed price contracts. That continues to be an issue there. But again,

the big headline here, preannouncing a substantial loss for the third quarter of $9.97 a share on a gap basis and cutting 10 percent of the workforce. Morgan, back to you. And as you're talking, we're seeing the stock trade down about one percent right now as as the market here in overtime goes through these results. Perhaps it's not surprising, Phil. I mean, Kelly Ortberg's new CEO. I think this is really his first full quarter at the helm. Correct me if I'm mistaken. So a lot of kitchen sink activity here to set the bar lower and start of a kitchen sink. OK, start of a kitchen sink and also a triage move. I mean, they they need to do something in terms of cutting the losses as

quickly as possible. Ten percent cut is going to go a long ways towards making that happen. But the changes that they're making in terms of the 777X and the 767 freighter, this is Kelly Ortberg saying, let's get stabilized here. These are some of the steps that we can take in that area as we move forward there. We're also going to be working on the defense side of the business. And these are the changes for now. Not a surprise that we're seeing a big loss for the third quarter, given the ongoing strike with the Machinist Union. And of course, on the defense side, Starliner factors in there, too. We know how messy that's been this summer. Phil, stay with us. Let's bring in Mike Santoli to the conversation. Mike, want to get your thoughts on this? Because we know Boeing, once a high flyer, has been a real drag on the Dow this year, and it is down double-digit

percentages. Got to wonder whether, as Phil just mentioned, triage and the beginnings of a kitchen sink. We look at this and it's potentially a bottom or whether it's just, I guess, another stop lower on the elevator. Yeah, obviously, capital conservation, you know, not, you know, withdrawing some commitments to these longer dated projects and businesses that are pre-revenue and trying to basically cut the cost base. They have the threat of credit downgrades hovering out there. I'm sure they want to be able to make sure that they're a little bit more liquid on a cash basis. The loss itself seemingly driven mostly by write downs, probably going to be looked through by the street. It's much more about how do we model out, you know, maybe slightly modestly curtailed ambitions in terms of, you know, future products and things like that relative to getting the ongoing business in line and maybe, you know, again, kind of getting the balance

sheet a little bit more flush. Seems like a pretty big priority here with the stock, not that far above its lows of, you know, the prior bear market a couple of years ago. Phil, the fact that it's delaying the 777X, I mean, is that a surprise here or was this somewhat expected? No. Okay. It's expected. And look, they had the issues with some of the final certification flights, which got a lot of attention about a month, month and a half ago. And they said, hey, look, we're going to go back to the drawing board to make sure this particular issue with the plane was going to be addressed. That was probably the beginning. And then you add on all of the other issues here. Not a surprise that it's being pushed out into 26.

Certainly not good news for the airlines that are waiting for the 777X. But they read the writing on the wall as well. But they read the writing on the wall as well, and they know what Boeing has to do right now. Okay. Philip Boe, Mike Santoli, thank you. Joining us now on the news line is Jeffries analyst Sheila Kayalu. Sheila, twice in one week here. I want to get your reaction to this pre-announcement we do get from Boeing, including $5 billion in charges being announced. Thank you so much, Morgan. Yeah, I think we touched on it a little bit maybe in our conversation earlier in the week. But, you know, I think what we've been telling investors is it's in Boeing's best interest

to kitchen sink as much as possible into 2024, with obviously defense being a watch item, S&P putting Boeing on credit watch negative, the other two agencies there already, they want to see free cash flow positive in 2025. So Boeing is doing everything in their power to put everything into Q3 that they foreseeably can without even being able to fully assess the strike, given that's continuing. The defense piece of the business, we know that their defense CEO parted ways with the company a couple of weeks ago. What does it take to right that ship? And I guess perhaps just as importantly, as it looks to recover or clean up that business,

does that business longer term make sense alongside the commercial one? Yeah, we've struggled with this. I think that's probably what Brian West, the CFO of Boeing, is struggling with as well. There are a lot of good parts of Boeing Defense, but there's also five programs that are currently loss-making. It's a $2 billion drain on Brown numbers this year, $1 billion next year. Let's hope it breaks even in 26. The company's a little bit more optimistic on that. But those are the problem programs. And how do you truly get rid of that? Who's going to buy a program losing $1 billion next year? So I think that's the struggle. But there's other good parts of that business that seems to be a 10 percent even margin business with about three

billion of free cash flow associated with it. So it's about how do you actually monetize those assets? Who's willing to take them on for the longer term gains? It has to be a strategic, clearly, or some sort of partnership. So I think that's the struggle. But can you perhaps sell off other bits of the business that are doing fairly well, and how could you monetize that? And obviously services comes to mind first. This is a business that's doing really well.

It's commercial aftermarket, 50%. Defense aftermarket is the other 50%. 20% off margins, $3.5 billion of free cash flow, essentially. So it's paying the bills right now for the commercial and defense businesses. But clearly, you can't sell that given what a free cash flow generator it is. So Bone does have assets within it that are potentially strategic to others. It's just a matter of how can you best monetize them. I always love speaking with you, because you just throw the numbers out there. So all of this happening with a machinist strike also happening. So I just wonder how much of that is factoring into these preannounced results we're getting here today,

how much uncertainty that injects, and perhaps just as significantly, if Boeing is in this position where it's trying to staunch the cash bleed, how much those machinists, those workers can actually realize here for their contract as the company is letting other workers go in the meantime? Yeah, thanks so much, Bergen. I think if there I'm I'm always about the numbers, but I'm also finding a silver lining. And if there is one silver lining in this pre reportreport, it's that $1.3 billion of OCF use for the quarter, for Q3. We had estimated $3.5 or so, or closer to $4. So that puts the cash balance, if I'm not wrong, at $10.5 billion. You know, folks are anticipating some

sort of equity raise, thinking the cash balance is closer to $8 to $9. So that $1.3 billion of cash use in the quarter definitely is a positive, just to keep that in mind in terms of what they have to do imminently, given we have no idea when the strike will end. So hopefully that puts some perspective on what to do next. OK, Sheila Kailu, thanks for joining us on the news line. Thank you, Morgan. Shares of Boeing are down two percent right now and after hours trading. I want to give our thanks to on Anya Manuel as well. Up next, the co-founder and CEO of startup writer on using AI to train AI models competing with open AI. And if she has plans to go public. Welcome back.

I startup writer is aiming to fix one of the big problems facing generative and artificial intelligence. The massive cost of training models, its solution? Synthetic data or data created by AI. That's allowed the company to train its latest model released this week for about $700,000. Now, that compares to millions of dollars for competitors like ChatGPT. The company is currently raising funds at a nearly $2 billion valuation and counts Uber, Salesforce and Vanguard among its corporate customers. So joining us now for more and an exclusive interview is Writer co-founder and CEO May Habib. May, it's great to have you on the show. Welcome. Thank you, Morgan. Hello. So I just, before we get into the cost of the synthetic data and the cost of training

language models, I want to take a step back and just sort of what does Writer offer into the enterprise market where Gen AI is concerned? How does it stack up against some of the other competitors that we do talk about day in, day out, like OpenAI? Well, the word is stack. You said it. Companies are struggling to adopt generative AI at scale. And what we do, we call a full stack approach to generative AI. So it's the large language models plus the critical tools that companies need to customize those models for their data, for their workflows.

Okay, so when we talk about synthetic data, what does that mean? How are you able to do this at such a lower price tag than your competitors? So first of all, our incentive is to create high performance models that enterprise customers can run in their own environment. So we are heavily incentivized to do this at a lower cost so that customers who are not GPU rich, like us, right, are able to do some pretty powerful

things. And our approach to synthetic data we've been working on for years. We have trained a separate LLM that can take real factual data, data that looks like the types of use cases that we address, and convert it to data that is synthetic, that is structured for the clean and clear training by the model. You just used the term GPU rich. I haven't heard that before, but it raises two questions for me. The first is, do you want to be GPU rich? Is this a workaround until you actually get to get your hands on some of those chips? Or does this provide a completely different

model in general, different pathway forward with these types of Gen A capabilities? Great question. It's definitely the latter. We think larger data sets are hitting their ceiling and the future belongs to this more precision training approach and the architecture innovation on the transformer itself. So we talk about synthetic data. I mean, there's risks that seem to be associated with it. Concerns about echo chambers, concerns about hallucinations. What do you say to those concerns? If you were creating gobbledygook synthetic data, then I would agree with you. But our approach is really different. And I think we're going to see a lot more companies adopt an approach where you're looking at real factual data, but rather than using data that, you know,

is meant for humans, you're building data that is meant for AI and meant to be training data. So Jensen Huang from NVIDIA came on the show last week with Julie Sweet from Accenture. They're striking a deal together to basically bridge the gap between NVIDIA's stack and enterprise AI. They think this is something that's going to happen and then simultaneously industrial AI too over this next couple of years. You actually work with Accenture. How do you see these chapters playing out, especially when we are talking about this application layer? And Accenture is one of your clients, and she talked a lot about software needing to be rewired. Yeah, absolutely. It is a complete rewrite of software. And both NVIDIA and Accenture

are customers, actually, and partners. So this is an ecosystem that we know very well. And there is just so much work to do for the last mile for these enterprises. And, you know, we love and respect both companies very much. And these are all going to be massive, massive opportunities to help the enterprise build and scale and really get their people to adopt. OK, May Habib, writer, CEO and co-founder. Thanks for joining me. Thank you, Maureen. Up next, find out how space based data we're sticking with data is helping to speed up responses to natural disasters such as Hurricanes Helene and Milton. And another check on Boeing after the breaking news this hour that the company is cutting 10 percent of its workforce and taking five billion dollars in third quarter charges. You can see shares are down about one and a half percent

right now, also preannouncing a third quarter loss of nearly ten dollars per share. That's Gap. Stay with us. In the wake of Milton, the second devastating hurricane to sweep through the southeastern United States in less than two weeks, space companies like IceEye are harnessing data that didn't exist before to enable faster and safer response efforts. We're very proud to support recovery, really advanced response and recovery efforts for both Helene and now for Milton. In the case of Helene, we're working with, I would say, federal, state, local government agencies, and also NGOs. As an example, we've directed over 60 rescue and emergency medical supply helicopter missions. So for example, when infrastructure and communication systems are down, folks on the ground have, for example, gotten access to Starlink for free. They've then requested imagery from us. We're taking that imagery through the night and through

whatever storms may still persist. That imagery allows us to see what infrastructure is damaged, which roads are damaged, which roads are passable. We can also see building level damage. So we can direct response crews, let's say, to the most affected areas versus the least affected areas. So IceEye owns the world's largest constellation of synthetic aperture radar, or SAR, satellites. IceEye U.S. CEO Eric Jensen says, unlike Earth imaging technology, radar doesn't need the sun's illumination of Earth to operate, meaning satellite sensors can work through clouds, darkness, smoke, even hurricanes. IceEye collects, analyzes, and sells its space-based data as a service. It's working

with governments and companies, including property casualty insurers, which use IceEye to map areas, including Tampa, before and after weather events to help with claims and to help model for future scenarios. As an example, back when the fires happened on Maui over a year ago now, the Navy called us up just based on kind of connections we had from veterans that we've hired to their former colleagues. And they said, look, we have six or eight Blackhawks that are on a carrier waiting to provide emergency burn kits, MREs, water, et cetera. We have no idea where to land on the island. We can't get a hold of anybody who was on the ground. Can you at least give us a map that tells us where to go and where not to go? Essentially, create a landing zone for us. And within 90 minutes, they had exactly what they wanted. So ICE is sharing with us initial images and assessments

of Hurricane Milton, showing the first flood extent and depth analysis that's from yesterday that's focused on Florida's west coast. That data showing a similar number of impacted buildings to Hurricane Helene, which totaled over 150,000 in Florida. Now, the Earth observation market is still nascent, but Jensen believes it will eventually get to a point where it's more analogous to how GPS is integrated into different systems that governments, businesses and even consumers use daily. So for more, check out Manifest Space. Scan the QR code on your screen or listen wherever you get your podcasts. Well, Apple, American Express and Bank of America are among the top holdings in Warren Buffett's Berkshire

Hathaway. But you'll be surprised by which stock is Berkshire's top performer this year. That's next. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast. A lot of podcast activity here on your favorite podcast app. We'll be right back. Welcome back. We want to take a look at an overtime mover as Boeing is down about one and a half percent right now in after hours trading after pre-announcing a Q3 loss of nearly $10 per share gap on revenue of $17.8 billion, which was shy of street expectations, cutting 10 percent of workforce, about 17,000 jobs, delaying the 777X entry into service, discontinuing the seven, six, seven freighter and taking

five billion dollars in charges. A large chunk of that tied to its defense and space portfolio. As I mentioned, shares are under pressure right now as investors digest this with new CEO Kelly Ortberg at the helm. And really, essentially, it looks like kitchen sinking the quarter as earnings season gets underway in earnest right now. Well, check out shares of New Holdings. This is the parent company of Brazil's New Bank. The stock has had a huge run. It's up more than 60% this year.

It's also the best performing stock in Warren Buffett's Berkshire Hathaway portfolio. Kate Rooney has the details for us. Kate. Hey, Morgan. So New Bank has been sort of an under-the-radar winner this year for Berkshire Hathaway. The Latin American bank is up roughly 60 percent. That's about three times better than the S&P. Jefferies is the runner-up in the Berkshire portfolio, up about 55 percent.

This is the largest digital bank outside of Asia, 105 million customers across Brazil, Mexico, and Colombia. CEO David Velez telling me that they were really able to leapfrog some of the incumbent banks in Brazil by going fully digital and that operating with all the headwinds in Latin America has actually made them more nimble. There is macro volatility, there is political volatility, there is interest rates happening, there is scandals all the time. I think what this creates, frankly, is it's a continuous paranoia in that you can never get comfortable because things are going to change. And it forces a level of just speed in how you make decisions inside the organization. It forces you to be extremely dynamic.

Wall Street's mostly bullish on new holdings. About half of analysts out there have a buy on this one, Morgan. All right. Kate Rooney, thank you. And under the radar name for investors to check out here. So just taking a look here, we get retail sales next week. We get China data, including stimulus details. Over the weekend, we have an ECB decision and we have earnings ramping up in earnest next week,

including UnitedHealth, more of the big banks, a lot of the transport names, including United Airlines and CSX. That's going to do it for us here, though, at overtime as the major averages finish the day higher. Record closes for the Dow and the S&P.