Closing Bell - Closing Bell: The AI Boom & The Fed's Next Move 5/24/23

Episode Date: May 24, 2023

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 at the New York Stock Exchange. This make or break hour begins with the countdown to NVIDIA earnings less than an hour away now. The stock up more than 100% year to date, which means there is so much riding on those results for those shares and arguably for the tech trade overall. Here's your scorecard with 60 minutes to go in regulation. The debt ceiling dual weighing on the markets for most of the day. The speaker says the two sides are still far apart on spending cuts, though he does remain hopeful of getting an agreement, says the country will not default on its debt. All three of the majors trading lower, as you see their yields rising again today.

And that is proving to be a considerable headwind on stocks as well. It leads us to our talk of the tape, NVIDIA's moment, and whether it will live up to the hype. Let's ask our panel of experts, Stacey Raskin, one of Wall Street's top chip analysts, Bryn Talkington of Requisite Capital. She owns the stock. And Malcolm Etheridge of CIC Wealth. It's great to have everybody with us. All right, Bryn, you got this stock. You've done incredibly well. It's up more than 100 percent right into the print. What are you thinking about today? So it's pretty incredible. NVIDIA IPO'd in 1999. And actually, I went back and looked. It has had eight years, Scott, where it actually had a return of over 100%. So while this year seems very rare for a

stock to be up 100%, actually in the history of NVIDIA, it's not that rare, which is so phenomenal. And it shows you what a powerhouse this stock has been, been able to evolve over the last 20 years. I think it's going to come down to, obviously Jensen Wan is a master salesman, but he's got the goods to back it up. I think we want to hear about these H100 chips, which are really used for these large language models, which we're all getting to experience. You really want them just to hit that ball over the fence and really have tremendous demand. So I want to hear about that, especially. I think so do a lot of investors all right stacy are the goods to use brin's term are the goods going to be good enough to justify this incredible move we've had in the

stock by the way you haven't outperformed your price targets 300 bucks we are there it's there it's run a lot and so we'll see how things go tonight um look i can't imagine that they're going to say anything that's going to kill the narrative, right? It's very clear that AI finally, even for the person on the street, is a real thing. They're actually able to reach out and touch it. They've got tons of demand, clearly more than they can supply at this point for these data center chips, these H100s and everything else. And like I said, I can't imagine that anything that they will say will will kill the

narrative nobody's going to come out of this call thinking that demand is less than they thought it was going into this call i think the expectations clearly are and again the stock is up a lot of your debate that's up dot dot on your beer on at the same time i i i think that how did you put jensen's got the good i think jensen probably does have the goods yellow i mean what do you know what do you do though, Stace? What do you, what do you do

with the stock as an analyst here? You know, it was, it was six weeks ago where you, you just raised the price target. Are you, are you tempted to move it to a neutral because of the run? Do you think it's justified and has more? I mean, how do you look at it as one of the top rated analysts on wall street? Look, I always say expensive all by itself is never a reason to sell a tech stock. Just like cheap all by itself is never a reason to buy it. There's got to be a catalyst one way or the other. I think you can identify a ton of catalysts here. I mean, yes, it's expensive.

It's always expensive. The day I launched on it, which was years ago, it was 50 times earnings. And it was not expensive. It was incredibly cheap because in the price to forward earnings, the E, the denominator, was wrong. The E was actually a lot bigger over time than people were thinking. I think that's what you need to believe to buy it here. But I think anybody that's owning it here is of the belief that that E is wrong, is that it's not as expensive as it looks, because it can still grow, and ideally it can grow and drive earning power more than what people are thinking right now.

I still think that's a very plausible story for these guys. I guess E equals AI, so to speak, if you want to just stay in the alphabet. There's a reason for tonight, maybe. Thank you. Yeah. All right. Malcolm, Malcolm, Malcolm, you don't own NVIDIA. I don't, but I want to.

And I think that the point that you just made about all of the analyst price targets was a good one, because the average price target is about $299 and change right here. And we're literally right there today. So either we're going to get a bunch of re-ratings here, and folks are going to have to increase those price targets once again, one after another following earnings, or we're going to see a lot of downgrades to neutral. And since I seriously doubt many analysts are going to be willing to stick their necks out and go against the grain and drop those calls down to neutral, I'd imagine those price target increases we're bound to get are going to also lift the stock a little bit near term

Even if we get the the slide and share price today that I as a wannabe investor. I'm hoping for yeah, but that's so funny I mean I saw the notes that you gave to our producing team and you said that if it falls below 290 You'd buy it. I mean over 10 bucks really you'd buy it. I mean, over 10 bucks, really? So I don't mean I'm going to go buy the entire position that I intend to own in the name, right? Let me be clear there. But I definitely think a 10% slide in the name is enough to make it interesting, because I think that we're having one of those moments we saw in 2019, the back part of 2019 with Tesla, where Elon Musk was trolling analysts left and right, all the short sellers left and right, because every time someone would make a call that this is the moment when Tesla's got to fall, it would find a reason to go up

again. And I think that's the same thing that we're seeing with Nvidia right now. Yes, it could be overbought, but they keep finding a reason to go up again and again in share price. And so I think it's a case where maybe you average down. Right. So each time we get a significant pullback in the market, 10 percent or more is a good time to be going in and buying a few more shares and adding to your position so that that way, if it does continue to go up into the right the same way it has this year, you get to participate in it. But you're also not in danger of getting whacked over the head because you jumped in with both feet and bought your entire position at what

turned out to be the hype. Yeah. Hey, Stace, Intel, AMD, data center slowing somewhat for them. Does NVIDIA buck that trend? Are they able to do it? Do they just see slowing, you know, not to the degree that the others are? How do you assess that as you look at what must be an absolutely critical metric today? Yeah, no. So enterprise spending in data has been weak. Cloud spending in general started to roll over and it's impacting both Intel and AMD, their data centers, their data center revenues. I do think, though, that spending is being prioritized on artificial intelligence, on AI. And so while they're not spending as much on servers and other infrastructure that maybe they bought a little too much of over the last year or so,

it does look like that spending on AI is happening. And clearly there's not enough. There's been all kinds of stories about even some of these big cloud companies who have to ration internally their use of GPUs. They just don't have enough. So I do think spending is happening there. My biggest thing I'm wondering is, you know, if NVIDIA has gone upside and they need to deliver it, it takes time to get the wafers, right? There's a lead time. And so, you know, that's something that may gate their ability potentially to show near-term upside. And if that's the case, they've got to talk up the back half. But there's's the case, they've got to talk up the back half.

But there's a real story, I think, to talk up the back half if that's what it takes. Like I said, I can't imagine they're going to say anything right now that's going to make people feel worse about the current narrative. No, well, of course. You know, they're going to talk about AI as much as you possibly can and for good reason. But, Stacey, I joked about, you know, E equals AI. What kind of upside do you do you really see in the numbers as it relates to where artificial intelligence is now for the company and where we think the total addressable market for it could really be? I think we're early. And so look like Jensen loves to get up on stage and throw out big numbers, and that's fine. And they threw out, I think it was a trillion dollar TAM for the whole company. And for data center silicon and hardware, I think their number was 300 billion.

And it seemed kind of crazy, although I'd say it seems a little less and less crazy every day. But if it's 300 billion or 200 or even 100 billion, which I have no problem believing, NVIDIA is running their business today at $15 billion a year, give or take. There's a ton of headroom in in in front of us i think we're very early on on this so it'll have its ups and downs it's volatile we had a 60 percent drawdown reason although that was mostly crypto driven fine but it'll have its ups and downs over the years but i mean this this type of a secular trend it we're just at the start of this jack gpd's only been around since november you know bren it's amazing you know to hear you talk like that and and bryn i've had some people on the show recently whether it's halftime or here you know suggesting you gotta have portfolio management you gotta take some profits the stocks run so much the size of the positions now too big

whatever the excuse is for for suggesting that you've got to trim a little bit here. Stacey paints almost an opposite picture that if you do, you run the risk of missing out in in some sort of tremendous upside that the market shockingly is still arguably underappreciating. I think more investors are like Malcolm, that if they don't own the name, it has a very small short position, by the way, if they don't own the name, if you happen to get a pullback or if the debt ceiling, what have you, I think there's a lot of people

that are under-owned in NVIDIA and will be adding to it. And so I do think we're just scratching the surface because we can all see what AI is doing. And so I think this stock will continue to get a bid. And like Stacey said, it's been volatile, but once again, it's had over eight years where it's had 100% return. And it seems like this new vertical with AI is just now gaining steam. And so if their revenues are growing, their earnings are growing to back up that E, then I think people are going to continue

to want to buy this stock. And I do think it's under-owned by the broad investor. Yeah. Malcolm, I mean, what do you think is really riding on these results for tech overall? It's not just an NVIDIA story. It's the handful of mega cap stocks that have really led the way this year is a lot riding

is everything riding on on what nvidia does today so i actually don't think everything is riding on what nvidia does today i like most people have been calling for tech to start to get sold off probably the last six weeks because i thought you know know, it can't continue this run. It just doesn't make sense that it continues to lead everything else. And we have the same five to 10 names that are leading the charge all throughout the year. But what I started to look at was the fact that the majority of the momentum we were seeing was coming in from retail investors owning only eight or nine different names wholeheartedly. And a lot of the institutional money was still sitting in cash. And so that's what's ultimately following behind these names that are pushing up the tech trade now. And we saw the same thing happening in 2020, where the

quote unquote smart money was saying, we need to be out of this market. We don't know what's going to happen with COVID. And you had retail investors who were willing to step in and buy up a lot of the high flyers. And then ultimately institutional money had to follow. That's kind of what we're seeing happen right now. And I think that's what gives us the momentum behind a name like an NVIDIA and anybody else who could continue to bid up this market in ways that don't make sense based on traditional metrics and giving technicians a headache. Bryn, how would you assess the same question of what might be really riding on this, just given where the market is, given what tech has done,

and how you think it's vulnerable here or not? I think, I mean, the majority of the returns for tech came in that first six weeks of the year, right? That's where, if you were out of tech in January, in the first couple weeks of February, you really missed the majority of that return i still i still think that the majority of returns for tech have already been had and so that's why i really like covered calls i think though jensen's speech and his earnings call it's going to be packed he is going to validate ai and so i

think he's going to give it more juice and i don't think there's any risk here that he says something that derails any type of AI rally. But in general, I think these these big stocks, Apple, Microsoft, seem a bit tired and hitting that upward resistance. Stacey, what about the chips themselves? Are they tired, too? SMH is up, I don't know, 30% year to date or close to that number. Yeah, yeah. So the chips in general, I mean, not such a good day today. ADI reported this morning it wasn't so hot. But chips in general have had a good year. People tend to buy the cuts. You want to buy it when earnings are bottoming. And estimates started coming in in June. And they're down 30%, 35% from that peak. It's the biggest negative

revision since the financial crisis. So people have probably been buying that. Now, at the same time, you know, it's starting to get in there. You look into the back half numbers broadly or above seasonal. And inventories, if you look out in the channel and on balance sheet, they're really, really high. And the sector itself is at a pretty sharp premium to the S&P. It's like at a 30% premium or was, which is one of the biggest premiums we've seen since things normalized from the financial crisis and so you know i was in people looking for that back half like recovery like we better get it like it's starting to get a little although it is you

know it is really different market by market some of the really out of favor markets pcs and smartphones and they're farther along on that cycle right and you can make the case that that could look better in the backup other markets like industrial and auto they either haven't rolled or they're just starting to roll so it's sort of an asynchronous kind of progression as we go through the different end markets but in general yeah i think expectations for the group are pretty high malcolm leave me with a thought on amazon we've got a shareholder meeting going on today don't we yeah the big thing to me i'm sure amazon will want to focus most of their attention on is how much they've improved their delivery network and cut costs and how they've integrated AI into their different business lines. But I, as a shareholder, the thing I'm most interested in hearing about is what their

expectations are for their ad sales business going forward, right? You've got Google, who owns about 29 percent of that market, Facebook Meta, that owns about 11 percent of that market. And Amazon has quietly come in as a third place participant in the global ad sales market. And Meta that owns about 11 percent of that market. And Amazon is quietly coming as a third place participant in the global ad sales market. And that's a company who that isn't their number one or number two business line. And so I'll be really interested to hear if Andy Jassy tells us any anything interesting about how they intend to push forward and take away more market share in that arena. All right. Great conversation. I enjoyed it. I hope you did as well. We'll talk to all of you soon. Stacey Raskin, Malcolm Etheridge, Bryn Talkington. We'll see you in just a little bit.

Let's get to our Twitter question of the day. We asked, does NVIDIA still have room to run? You can head to at CNBC closing bell on Twitter to vote. We share those results with you a little later on in the hour. Let's get in the meantime, a check on some top stocks to watch as we head towards the close. Christina Partsenevalos is here as always with that. Christina. Let's start with shares of Intuit moving to the downside after issuing quarterly results. While its Q3 earnings came in above what the street was looking for, it reported a revenue miss. The tax software company's earnings outlook for the current quarter also missed analyst expectations, and that's why the stock is down 7.5%. Shares of retailer Petco are plunging right now, about 14% after surprising investors

with a Q1 loss. Management says consumers are more cautious after the banking uncertainty in March and lower tax refunds, and that's why they saw a slowdown in supplies and companion animal business. Despite the earnings miss, though, Petco maintained its full-year outlook. Shares are down 18.5%. Scott? Yeah. Yikes. All right. Christina, thank you. We'll see you in just a bit. We're just getting started here on Closing Bell. Up next, the near-term triple threat to stocks. BNY Mellon's Alicia Levine is here. She gives her strategy as she braces for even more market

volatility. And later, the one area of the market that is trading at its biggest discount in more than two decades. We'll reveal that sector and some of the names that is trading at its biggest discount in more than two decades. We'll reveal that sector and some of the names investors need to be watching. We're live in the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. The latest Fed Minute showing a growing divide among committee members over the need for future rate hikes. Our Steve Leisman joining us with those details. I think the words that I've heard some say, split decision. Steve? Yeah, a definite split in the Fed.

Scott, the minutes from this May meeting showed after the Fed hiked unanimously in May, divisions did emerge among Fed officials about the next decision in June. All agreed the next move was more uncertain because they didn't know what the effects would be of aggressive tightening so far and the potential for banks to tighten credit conditions and have an economic impact. They also agreed the Fed needed to, quote, retain optionality so they could go either way. Now, here's the specific language. Some officials saw the need for additional rate hikes because of the slow progress to bring down inflation. That is, in official Fed speak, more than the, quote, several participants saying they did not see a need for further hikes.

Just a note, I reported this wrong in the last hour. The way it actually is in the English language, not Fed speak. Some is more than several, according to the Fed. So the committee is now tilting slightly hoggish on the outlook for future hikes. And minutes also show some officials stress the Fed in public communications should not indicate cuts were likely this year or rule out further hikes earlier in the day. Of course, Fed Governor Chris Waller said he was uncertain about whether the Fed should hike, pause or skip a meeting because of the inflation data. It says the Fed should hike. Banking uncertainty said maybe the Fed should skip a meeting.

Policy lags, as in all the rate hikes so far, and credit tightening suggests him a pause. He seemed to lean towards a skip, that is, not hike June, come back later, and hike later, because of his concern about inflation. There were several mentions, Scott, of the debt ceiling in the minutes, with many officials saying it was important for Congress to raise that debt limit to avoid risk both to the economy and the financial system. Scott? You know, Steve, it appears from like hearing Jamie Dimon and David Solomon this week,

you know, David Solomon's at our inaugural CNBC CEO summit. And then listening to all this Fed speak, it seems as if the only party not really trying to prepare people for higher rates or a higher Fed funds rate is the market. Doesn't want to believe it. No, the mark. But I will say this, Scott. First of all, I need to have a little clause here to say, look, we don't exactly know, but the market has come closer to the Fed. If you were to look at the Fed market gap for the end of the year, it's now about 30 basis points. It had been as much as 100 basis points between where the Fed thinks it's going to be and where the market is pricing it. The trouble with that story right now is that that number is polluted by concern over the debt ceiling. You've seen all of these short-term T-bill rates surge because of

essentially default concern. So we're not sure how pure a reading we're getting. If that default concern came off the table, that gap may be wider. As to the stock market, which is what I think you're thinking about, I mean, Scott, they've been dancing to their own tune. They seem to have the ability to raise rates when inflation is high. And if inflation comes off, well, they go back to the world they were in beforehand. So I think it might be, you know, there's obviously pain ahead, concern about a recession. But the market seems to keep chugging along here. Yeah, it certainly does. Steve, thank you. Steve Leisman joining me now. Post nine, Alicia Levine of BNY Mellon Wealth Management. Good to see you again. How are you thinking about

the Fed? Do you think they're done? So I think they're definitely going to pause in June and they have to because of the debt ceiling and some of the liquidity issues around that. To the extent that we have our slow credit contraction going on without an event, it's likely to be a skip. And they could be back at it in the autumn. Is that why you suggest that it's going to still be a difficult environment for equities? So I see three reasons for why there's a difficult environment for equities. The first is that gap in the pricing between where the Fed is saying they are and where the market is. And agree with Steve Leisman, of course, we have some mispricing because of the debt ceiling. But to the extent that equities have

rallied because inflation has moved lower and the bond market's pricing in cuts by the end of the year, you get a higher multiple. So if you take that out, if you take that cut by the end of the year out, then equities have to come and meet the new curve on the Fed pricing. The second reason, of course, in the event that there is some sort of credit event, let's call it 10%, that something really bad out there could happen because it is a Fed tightening cycle, then, of course, equities are still going to have a problem, even if the Fed cuts, because there'll be an event. And of course, the third reason is liquidity issue that happens. We are assuming the debt ceiling gets signed. But when that happens, the Treasury issuance and the T-bill issuance from Treasury could cause a little bit of volatility.

I hear many people suggesting that. I hear most people paint a worrisome story about the market for the reasons why they're not bullish and being a bear is easy at this point. Very easy. Why not talk more about the strength in the economy and the resilience of the stock market in the face of all of that and the fact that the Fed might in fact be done. Remember, we're going to get more inflation prints when the Fed is allegedly out of the game. Even if it's sitting on the bench temporarily,

they're still out of the game. Why aren't more people talking about that? Because it just feels that with 500 basis points of hiking in 12 or 13 months, you're bound to get some event that happens and some slowdown. But I agree with you. We think by the end of the year, the market could be fine and you could even rally from here. What we're

talking about is that short-term volatility when all these issues come together. So the debt ceiling, the Treasury issue, the T-bill issuance, the issue of whether or not the Fed has to reprice on Fed hikes. But then the bottom line is the economy's been great. The data have held up better than expected. CPI is still 4.9, although the core is higher, as you know, a 5.5. So that's the issue that really has to happen. If the data go in the right way, the Fed, of course, could pause. But even if they pause, that pause is still not a cut.

And it's still higher than where the market is pricing in the end of the year. So what do you make since we started the show with NVIDIA and it's just all things and all roads seem to lead to AI and a mega cap tech trade? What do you make of it here? Is it vulnerable? I think it's extended and vulnerable. It's clear why investors flock there after the epic sell-off of last year and the excitement over AI. And let's talk about the cash flow funding models for large companies that don't really need to borrow and can fund their models. So it does make sense to a point, but they're very extended if you look at the 200-day or 50-day. So vulnerable, but not fundamentally vulnerable,

not like last year, where it was a bit existential about how high inflation was going to go and where the Fed was going to go, compressing the multiples. We're more or less going to finish around 5 or 525. You know, I don't think we're getting awfully higher than that. And with that, the multiples can hang in there. They're very extended. They could be vulnerable to some sort of pullback and some sort of event out there. But I don't think this is a fundamental story. So what about like Jim Breyer? You know, the investor was saying again out at our summit out in California that this is akin to the 95 period of the Internet that early.

And that these core stocks, we're not talking about the pets.coms of the world. We're talking about the companies that are going to be the leaders. And as the Stacey Raskins of the world suggests, the total addressable market possibilities are so large. And again, as Jim Breyer suggested to use a golf analogy, we're only on the second hole of all of this. Are we fully appreciating the power of this transformational technology and also what it means to earnings and any stocks? So that's a great question, because I think if you make the 95 analogy, I think we didn't know who the winners were going to be in 95, although we knew the world was changing and we knew it was going to be enormous. We don't know how enormous

yet. I think the sense that incumbents and large incumbents can win this because of that, I think that that gains some credibility here. It would be very, very hard, I think, for smaller players to come in here. They'll get eaten up. They'll get eaten up by the incumbents that have free cash flow and don't need to float debt in order to do this. In other words, you see through the noise this time, right? It's like you can't just be any company and suggest, well, AI this and we do this in AI and we're going to be huge in the

total addressable market, blah, blah, blah. The incumbents will see through that this time, I think. I think the incumbents win. We just don't know how they're going to be reordered on the puzzle, right? Like we just don't know who is going to be the ultimate winner. You know, I like to talk about, you know, there were there were times in 99, 2000, 2001, there were a couple of companies vying for the best of, and one fell out and really wasn't clear at the time which one was going to fall out. You may have something like that here, but I think the excitement is real. There is going to be pressure from Washington to regulate some of this, but as we've seen, very hard for Washington to regulate tech that they

simply don't understand. Yeah. All right. It's good to have you here. Thank you. Thanks, Alicia Levine here. We're about 30 minutes, really, from NVIDIA's earnings in overtime. Speaking of AI and all of the hype straight ahead from first to worst energy, the biggest sector loser this year. But have the stocks gotten cheap enough for investors to take a second look? We'll discuss that. And throughout the month of May, CNBC is celebrating Asian-American and Pacific Islander heritage, sharing stories of influential AAPI business leaders. Here is the Ketos founder and CEO.

As a woman of Indian heritage in the tech sector, where funding is really limited, and more so in venture capital, recognition is extremely minimal. So what you have is your power to believe in yourself and do not lose your vision or your mission because that's what makes you who you are and help yourself achieve all those goals by remaining as steady as you can and never quitting. All right, welcome back. Energy, one of the only positive sectors today, despite that tape right there, which, by the way, take a look at that. And we're down, I don't know, 300 points. Not that long ago. Dow's still down, of course, but about 162 or so.

Again, NASDAQ and the S&P have been in the red all day long as well. The debt debate talks are certainly an overhang. Interest rates are, too, as we count down to those NVIDIA numbers in about 25 or so minutes. But let's talk more about energy. Valuations are tumbling to new lows now. Pippa Stevens joining us now with more. Pippa? Hey, Scott. Well, after two years of outperforming, energy stocks are lagging this year with the sector's P.E. ratio relative to the S&P 500 now sitting at its lowest level in more than two decades. Now, drilling down on the sector,

the refiners are currently the cheapest, with Valero Energy and Marathon Petroleum trading at 5.2 and six times forward earnings. APA and Phillips 66 also on the relatively cheaper side, while Hess, Baker Hughes and Williams are the most expensive. Now, when it comes to Wall Street's favorite energy stocks, Halliburton, Targer Resources and Schlumberger are top picks, with more than 90 percent of analysts rating them as buy. On the flip side, Kinder Morgan has the fewest buy ratings at 29 percent, with Cotera at 34 percent. Now, Goldman Sachs said investors should focus on companies that have underperformed relative to peers, but that have positive catalysts on the horizon. That includes names like Antero, Conoco, Halliburton and H.F. Sinclair. Scott, back to you.

All right, Pippa. Thank you. Pippa Stevens, let's bring back in now Bryn Talkington of Requisite Capital, obviously a big investor in energy names, which I'm looking at the sector. It's down, as we said, more than 8 percent year to date. Is a turnaround in the cards or not? I think so. I think I think what's happening, as Pippa said, this area is really cheap. But as we all know, cheap can stay cheap for a long time. You need a catalyst. And so, you know, what's happened this year is, you know, since mid last year, Russia's pumped two more barrels, two million more barrels than expected, China reopening, not nearly as robust as we had hoped for. And then you also have recession fears. And so what is the catalyst? Well, bonds and oil, Scott, are pricing in a recession right

now, while tech stocks are pricing in a soft landing rate cuts and AI to infinity. And so I think as the months progress through the summer, which is the strong season for oil, as we get into the narrative, if nothing breaks and if we have this soft landing drumbeats pick up, then oil is mispriced today. So I think that's the potential catalyst is recession fears get pushed out to 2024. And if that's the case, that will be kindling under the fire of these energy names. I just wonder if, you know, as you mentioned, if you've only got so much money left after the money that's gone into communication services and technology. And with that extra money, you are putting it in longer dated treasuries and money markets just as a safer play with less risk.

Sure. And I think with money markets, you're getting, you know, 5%, which is a great cash rate. It's a wonderful cash rate the way that you just sit there and earn 5%. But that is not a long-term investment stream or investment outcome. And within the energy space, when you have a free cash flow yield of the sector, right around 13%, they continue to have capital discipline. They're low PEs. And then if you don't go into a recession, then that's the catalyst to go higher from an investment theme. So I think clients are more, I would say, underweight bonds go long money markets. And then when your investment dollars barbell between, you know, technology and energy, because those are good hedges to each other as

well. What's the most recent energy move that you've made? You know, I added to Devin. So I added to Devin during spring break when, you know, SVB was falling apart. And that day, literally everyone thought that was going to take us into a recession. And Devin sold off just with the rest of the complex down to that 45 level. I think with Devin, you know, they have a really nice buyback, free cash flow yield, distributions. So I bought it at 45, and then I will sell once it gets to, it's right almost at 50 now. If it gets to 55 or 53, I will sell $60 out of the money calls just to give me some protection. And you'll see these companies like a Devin are trading in that $45 to $53 range. And so if you buy the stock, get the dividend and covered calls, it's been a really good strategy this year to own energy if you're timing it correctly. Bryn, we'll talk to you soon. Thank you. That's Bryn Talkington, Requisite Capital.

Up next, we are tracking the biggest movers as we head into the close. Got about 20 minutes or so left. Christina Partsenevelos is standing by with that. Christina. 90s, wide leg jeans and fancy outfits for your pets are just some of the reasons why the retail sector is soaring today. I'll have all those big stock movers after this break. Touch more than 15 minutes to go before the close. Let's get back to Christina Partsinovalos now with the stock she's watching.

Christina. Abercrombie & Fitch has been reinventing itself. Gone are the days of the dimly lit, perfume-infused stores with shirtless male models. The 90s-style jean and workwear lines are a hit and driving same-store sales up 3% in Q1. The company that also operates Hollister posted a surprise profit, beating estimates and raising its guidance. Shares are up 31%. Urban Outfitters, another bright spot.

The stock up, what, 16% right now on an earnings beat and a surge in sales at its upscale brands, Free People and Anthropologie. I should say the stock is up almost 18% now. And another surprise from Kohl's, a first quarter profit allowing management to reaffirm its outlook. The new Sephora shops and pet and home decor offerings are definitely helping this name up almost 8%. Scott. All right. Appreciate it as always. Christina, thank you. Christina Partsenevelos. Last chance to weigh in on our Twitter question. We asked, does NVIDIA still have room to run? You can head to add CNBC closing bell on Twitter.

The results are coming up right after this break. And do not miss a big interview tomorrow. Avenue Capital's Mark Lazzari is going to join us. We'll discuss the markets, rates, the debt ceiling, investment opportunities in sports, and much more. We're back in two minutes. Let's get the results now of our Twitter question. Does NVIDIA have room to run?

The majority of you saying yes, indeed it does. Near 60%. Up next, we're only a few minutes away from that big earnings report. We're going to break down the key numbers. You need to watch ahead of it in overtime. There is the countdown clock. 32 minutes and change that story and more when we take you inside the Market Zone. All right, we're now in the closing bell Market

Zone. CBC Senior Markets commentator Mike Santoli here to break down the crucial moments of the trading day, plus big earnings out in overtime today. Christina Parts and Novelos on what to expect from NVIDIA. And Frank Holland on what he is watching when Snowflake reports. That's another big one. We'll be watching all of that closely. Mike Santoli is with us first. I thought the Dow was trying to make a run back.

Now it's gone the other way. It's just going to hang on the debt ceiling and interest rates and Fed speak and the minutes and everything else. Yes, we have firmed up a little bit in the last hour or so over the last two weeks. So this week and last, the lows for the day, the lows for the week have been just about 4,100 on the S&P. So in the absence of these big directional drivers, it's going to suggest that the real money wants to push this market out of its sideways trend. You get the intraday ping pong as the big Nasdaq stocks have cooled off and it's created a little bit of that shakeout effect.

Also, got to be this game theory effect underway as well, where we're watching the debt ceiling negotiations. We know they're going to sound kind of like they're not close until perhaps it's done. So you take everything with a grain of salt. Maybe you think the market has to panic to really inject a sense of urgency. But no individual wants to be the person who panics in a lost cause because it's going to be a temporary shakeout. So I think we're in that mode right now, getting impatient, but not necessarily feeling as if anything much has changed. I was just looking, you know, the volumes on the big index ETFs, not really huge.

So people are definitely holding back, making significant bets. I want to obviously chat in video with you, but first I want to go to Christina Parts of Novelos, who's waiting for that report. As really, Christina, we all are, in part because the stock has been such a massive winner and we think that there might be, you know, a lot riding on this. A lot riding on data center revenues and how much that contributed to q one growth how much that will contribute to q two guidance we're anticipating data seven center revenue guidance increase about nine to ten percent so

what we're looking for this particular name yes the guidance because will it justify the sky-high valuation that you're seeing what trading over fifty times earnings so settling not a cheap name other things is there gonna be any uh, the recovery in China, is that still going strong or still slow as what we've seen with other chip makers? And will that affect more importantly, gaming for NVIDIA, which is a big business for them? And then there are some comments I'll be looking for from Jensen Wong on just China and the restrictions that are happening

from the United States. He told the FT just yesterday that the U.S. tech industry is at risk of enormous damage from the escalating battle. So these are all factors that we need to consider when listening to this call. But I'd like to make a quick comparison. You had data center sales for what, Intel down 14 percent quarter over quarter. For AMD, down 22% quarter over quarter. Yes, AI is the hype. Yes, AI requires the H100 chip from NVIDIA for a lot of these generative AI systems. But will that be enough to drive that growth in this quarter and in the subsequent quarters in the near term? All right.

We cannot wait to see you in overtime with the numbers. So we'll see you in overtime with the numbers. So we'll see in just a bit. Christina Parts and Avalos, go get ready for what is no doubt one of the biggest earnings reports of this season. Mike Santoli, you know, bespoke. They always have some great information about the markets that I know you like. The stock NVIDIA has been up 90 percent plus in the six months leading up to an earnings report five other times. On the five earnings reaction days that followed, NVIDIA stock was up four times out of the five. So huge moves and not really a sell on that news.

No, momentum is a real phenomenon in markets, both price momentum and fundamental momentum and storyline momentum. So I think that's one of the things it does tell you. What's fascinating is the way this stock has so massively repriced at a time when earnings in the current fiscal year are basically coming, are supposed to come in where last fiscal year came in. In other words, we kind of moved forward this sort of earnings power by a year, meaning moved it further

into the future. So by August 31st, fiscal 24 estimates are basically the same as they are right now. Last August 31st, stocks doubled since then. For fiscal 25, that's next fiscal year, earnings estimates are up 8 or 9 percent in the time that the stock has doubled. The point being, it's mostly about what's on the com. It's mostly about what can you tell me about whether this is the perfect play for the big picture shifts in technology we're expecting. Yeah. We also, Frank Holland, have some pretty big

valuations to live up to as it relates to Snowflake, don't we? Yeah, absolutely, Scott. It's trading at 290 times forward earnings, so a pretty lofty valuation there. Let's get into the earnings report we're expecting after the bell. Snowflake is kind of one of those indirect beneficiaries of this whole AI craze. Shares are far outperforming the broader cloud sector

since last quarter. Snowflake, it provides the data that you really need for artificial intelligence and power AI functions in cloud and other areas. So it's supposed to be AI, it's supposed to be a long-term tailwind, the broader trend, a tailwind for a company like this and other names in that similar space. Think about a Palantir. So near-term guidance, that really remains the big question when it comes to this report. Product guidance for the current fiscal

year is the key metric to watch. Products where Snowflake gets almost all of its revenues, analysts are really kind of questioning the ability to reach 40% year-over-year growth in the current spending environment. You also want to look out for M&A. That's something to watch. Snowflake reportedly is in talks to acquire AI-powered search startup Neva. Analysts say this would be a very valuable acquisition in the growing AI race. But again, you mentioned the valuation, 290 times forward earnings. This is a chance for Snowflake to prove that it has a business model to justify that lofty valuation

if you can actually do so. Shares are up 1% ahead of the print. Yeah. All right, Frank, we'll let you bounce as well. Get ready for that print and we'll see you in overtime, no doubt with the delivery of those numbers and the stock reaction as we always have. All right, Snowflake.

I mean, remember when this thing went public, what was it, like 200 times sales or something like that? Absolutely. It was a big deal when it was just achieving that $100 billion valuation at some point as well. It's under 60 right now. Very different places in terms of lifecycle, Snowflake versus NVIDIA.

I mean, NVIDIA, revenue-wise, like 10 times as much. Market cap-wise, more than 10 times as much. Of course, NVIDIA, firmly profitable and for a long period of time. So it'll be a little bit of a test of that class. I keep calling it the class of 2020 and 2021. The new companies, the big phenoms of those years that both have the race to nosebleed levels and then a real crash and now base building. And so it's happening all over the place with those stocks that basically took advantage of a very, very generous new issue market. I feel like nobody really looks at the market wiser than you do in terms of big picture stuff.

So what do you think is riding on NVIDIA in less than five minutes? Presumably that report's going to come out. We just had the two minute warning for all of you who might have heard the sound effect. What's riding on it? They actually keep you waiting a little bit longer after the close for NVIDIA. But yes, what's riding on it, I really do think it's about a reality check on the AI excitement and on the semi-cycle, both. And because I think it's going to have to inform both things. NVIDIA has almost got an escape velocity relative to the rest of the semis. on the semi cycle both. And, you know, because I think it's going to have to inform both things.

NVIDIA has almost got an escape velocity relative to the rest of the semis. And you have to say, do you have some kind of substantiation for that type of interest to have a $700 billion market cap company continue to have upside at this level when it's essentially rebuilt its valuation? Now, when it comes to overall market impact impact I don't really think it's supposed to tell you anything about the economy or about what's driving most stocks in the index. But if it causes people to say you know what we got carried away with the big mega cap platform tech companies in the last couple of months and they have to reset lower I guess it could have a broader impact. But right now we're trying to figure out exactly what the rest of the market can absorb along that road. I mean, conversely, too, if it justifies continuing to put money there, if it pushes an apple over that goal line of a new all time higher

questions like that, we shall see. There's the bell.