Closing Bell - Closing Bell: The Amazon Resurgence 6/26/24

Episode Date: June 26, 2024

Amazon hit a major milestone today. So, how did that happen and where could the stock go from here? Kate Rooney and Amazon shareholder Hightower’s Stephanie Link break down all the details. Plus, Deepwater Asset Management’s Doug Clinton tells us how he is navigating the tech trade – as the Nasdaq is on pace for its best month of the year. And, Seema Mody breaks down all the highlights from Nvidia’s shareholder meeting and what to expect from Micron’s report in Overtime. 

This make or break hour begins with a mega cap tech name reaching a new milestone today. And it's not NVIDIA. Strike up the band. It's Amazon topping two trillion dollars in market cap for the first time ever. We will talk about the stock supercharged comeback with a shareholder who is buying more today. And we'll do that in just a little bit. In the meantime, take a look at the scorecard with 60 minutes to go in regulation. Get the feeling from looking at the major averages that there's a pretty big wait and see ahead of Friday morning's PCE inflation report. No big bets being put on the table today as a result. Yields, though, have been creeping up, and that's something we're going to keep our eye on over this final stretch as well. There's the 10-year at 431. I did mention NVIDIA

earlier. Yes, it is in the news and it is important today. The company holding its shareholder meeting and talking up its next generation of AI chips as well. We'll have a report on what CEO Jensen Wong told his investors this afternoon. We'll do that in a little bit. It does take us to our talk of the tape, the Amazon resurgence, how it's happened and where the stock goes from here. Let's bring in CNBC's Kate Rooney, who covers the company, along with Amazon shareholders Stephanie Link of Hightower, also a CNBC contributor. It's good to have you both with us. Steph, I begin with you because you're the person I'm talking about who bought more stock today in this company. Tell me about it. Yeah, I mean, I've been involved in

this name for a while, Scott, as you know, but I was underweight relative to the benchmark. And I wanted to go overweight after I've done a ton of channel checks, which really shows that their momentum is continuing on top line, on margins, on bottom line. So if you step back, North America margins have now beaten for five consecutive quarters. And I think they're going to go from something like 4.2 percent last year to mid single digits. That's the guidance. But when I look at the components of that, retail is seeing a lot of momentum and retail margins are still well below pre-COVID levels. So I think that you can see that help the overall margin structure. And then, of course, you have advertising, which is growing at 24 percent year over year.

And those margins are 42 to 43 percent. And as the economy remains strong, advertising certainly is a tailwind, at least the trends that they will see. AWS, they have about a 35 percent market share, growing upper teens. Only 10 percent of the workloads are on the cloud. So I think the momentum continues. And they've gotten their groove back for sure because that really had been the issue that they were struggling with it for a couple of years and then finally scott the logistics business is seeing amazing efficiencies so they went to this regionalized strategy and now they're seeing 45 cents per unit cost reduction as a result of this strategy and And of course, we know last year

they delivered $5.9 billion deliveries, packages, and they are actually, they now have a 27% market share. They're actually growing and they have a higher market share than FedEx and UPS. They're getting close to the U.S. Postal Office as well. So I like all this stuff. I look at the valuation. One last thing. It's trading at not cheap, but 13.9 times EBITDA. The last five years, it's traded at 17.8 times EBITDA. So I wanted to make it bigger. So, Kate Rooney, Stephanie mentions the company getting its groove back. Let's put up the three-year chart again, because it shows a company that lost its groove, at least from a stock performance standpoint. My question to you is, how have they done it?

How have they gotten this groove back? And you can call this run in the stock stealth if you want. Maybe the last leg of it has been stealthy just because, you know, NVIDIA sucked all the oxygen out of the room for everybody else. But look at that move then. You know, that's a three-year chart we're showing you. You lose something and then you gain it back. And how has this happened?

I would say the takeaway, the headline, it's Andy Jassy and its efficiency. So he took over for Bezos, obviously the founder of Amazon, the face of Amazon, at a moment when it really was still taking these moonshot bets, trying to really do everything and do it well. And Andy Jassy stepped in, brought more efficiency, brought more discipline. That's something we saw across tech with layoffs. But they did a lot of investing in that sort of dip period you see there. They spent a lot on what Stephanie was talking about, regionalization,

getting more efficient, making delivery faster, which was an investment cycle. They're now reaping the benefits. They're on the other side of that, and we're seeing it pay off in North American margins. E-commerce is becoming such a bigger deal for the sell side. We've talked so much about AWS and AI this year, which is still sort of an open question for Amazon. I think they're seen as a laggard behind the other hyperscalers. But when you look under the hood at e-commerce and the margin structure there, that's really what the sell side has gotten excited about. J.P. Morgan last week writing about how they're going to be bigger than Walmart this year.

Bank of America talking about shipping and logistics really being part of the upside. So it's one of these mega cap tech companies. It also gets you exposure to consumer discretionary. So a little bit of a hedge there. And I think the chart really does say it all there, Scott. I was going to say, it really is, as you say, it's like a two-pronged story here. You have two things to lean on. You have the discretionary part of the business, mature, no doubt,

but nonetheless still obviously an important part of that business. But then you have the AI play, partnerships they've done with Anthropic, that though laggard, as you said, relative to some of its competitors, has made it more competitive in the AI arms race as well. I would point out, Scott, to a big leadership change at AWS. So Matt Garman took over for Adam Salipsky, and he is seen as the leader, really a technical sort of engineering type who's been a longtime Amazonian, as they call it. He's been around for a long time, has the respect of executives you talk to at Amazon, and is seen as sort of the person who's going to lead them into this next era of AI, where they've seen as so far as sort of behind

not having one of those leading large language models and just relying on anthropic sort of these third party investments. I would say there's a lot of excitement around what the potential is for Amazon when it comes to artificial intelligence. They've said from a revenue perspective, it's already a multi-billion dollar run rate opportunity, and they're already seeing it pay off. So I think that's another thing to point to with AWS. He just took over in the last month or so, but they're seeing more upside there and more opportunity, although they have to be quite careful. You've heard Andy Jassy talk about them not being able to do any sort of M&A, the iRobot deal falling through. And actually, we should also mention Rivian, by the way. Morgan Stanley, or excuse me, Goldman had a note out earlier pointing out Amazon's massive stake in Rivian.

They've got about 158 million shares. So they're estimating it's about a $500 million positive mark for Amazon. So as far as the near-term move, also important to note, you know, the 20% upside in Rivian today, not a bad thing at all for Amazon. Steph, you feel like this momentum has legitimate legs, you know, as we're going to be talking about AI every day. We already are. And we're talking about NVIDIA every day. And we're going to probably be doing that for the foreseeable future. And we're going to be looking at stocks like Meta, which you've been into,

which has had good performance in its own right as well. Is there enough momentum to keep this stock climbing? I think so. And I think it's not just a top line story anymore, which is what it had been in the past prior to the new CEO, right? Or fairly new CEO. Now you have the margin story.

That's why it's so incredibly important. We talk about margins and operating leverage and the power of that. And when you have the two, when you have revenue growth in the double digits and you have operating margins expanding, that leads to massive bottom line numbers, growth. And I think it's just underappreciated what more they can do. That's why I highlighted North America retail. Excuse me, North America margins. Those are going higher, driven by a lot of things. Not only retail and advertising, but also lower shipping costs, better inventory management, automation. So that piece is really set to go higher.

And then, of course, yeah, AWS certainly benefiting. And I love that they have gotten back to the industry leader. And Upper Teen's growth is huge for this company. They're massive. So I think those two pieces, along with all these other efficiencies that they're seeing, because they had a massive logistics investment cycle, and now they're starting to see the benefits of that. So you think you have a couple of different ways you can win here. Still looking up at the NVIDIAs, the Apples, the Microsofts in terms of market cap. But this is a significant day and milestone. Kate, thanks so much. Kate Rooney putting everything into perspective for us. Steph, you're going to stay with us. Let's bring in Brian Leavitt of Invesco

and Max Kettner of HSBC Global Research. They're going to join the conversation. Let's bring in Brian Levitt of Invesco and Max Kettner of HSBC Global Research. They're going to join the conversation. Now, it's good to have you here, Brian, here with me on set. You look at what Amazon's a good representation of go where the money is, right? I mean, the money has been flowing into these kinds of stocks. Is that how it's going to be as we make the turn into the second half? I think that's how it's going to be. I mean, ultimately, in order for the market to broaden, you would need a type of catalyst.

And what you have in the U.S. is actually an economy that's slowing a bit. And so the weight is now on the Fed. When the Fed lowers rates, normalizes the yield curve, the market could broaden out. But the reality is right now the market's priced in a couple of rate cuts, doesn't seem to want to do much more. The Fed doesn't seem to want to do much more. And the economy is slowing a bit in the United States. So is that the only catalyst that we can look to for a more, you know, lasting broadening of the market is you get the actual cut first and then the market's comfortable enough to start broadening out. We start having money coming out of, you know,

high growth tech and A.I. trades and into other areas. I think we saw the blueprint for it in November and December of last year when the market priced in six rate cuts and you had a huge rally in small caps and mid caps and cyclicals and more value oriented. This year, as the market has been pricing out the rate cuts, the leadership has gone back to the mega caps. So right now we're in this environment where the market is sort of aligned with the Fed. And what you'll need likely is greater expectation coming into this market that the inflation story is really behind us, that the Fed can lower rates and the soft landing

happens. Max, how's this market look to you as we're about to head into the second half? Yeah, it's still risk on for us, really, right? It's still an environment where we still want to be overweight equities. We're actually still maximum overweight and high yield credit because things are generally still looking pretty good. I do note, however, I think one of the risks for the second half of the year is really on the inflation side. Still, I know it's pretty boring and we keep, you know, keep talking about the same thing over and over again. And, you know, you know, you guys just mentioned at the start of the year, we had six, seven rate cuts. We're now at like close to two rate cuts by the end of

the year. And the problem that I see is when we look at short-term inflation expectations at the start of the year, if you look at two-year break-evens, for example, two-year market-based inflation expectation, we started at 2%. So the market decided really at the end of last year, OK, inflation is done. We've had the downside surprises. We're pretty much done. The Fed needs to cut very, very aggressively. And then obviously, we had this January, February story around residual seasonality. And we had this merely eight basis point upside surprise in headline inflation in March. And that made the market freak out. Let's remember, just two months ago when we looked at the number of stories mentioning things like stagflation,

they were actually shooting higher in April. People were really talking about stagflation. The worry I have now is that market-based inflation expectations have made a round trip. They're back to 2%. So I'm not really worried that it's going to go through the roof, but I'm a bit worried that we've buried the inflation theme a little bit too prematurely, just like we did at the start of the year. So then you, Max, think that this Friday's PCE report could be the deciding factor as to at least the start of the second half, how that gets underway? Yeah, I don't think it's this one, because we've got the data, we've got the CPI, we've got the PPI. got the cpi we've got the ppi so i don't think it's the pce this week i do think it's it could be something in the next couple of you know next couple two

three months because obviously uh the market is growing a bit more confident with the september rate cut so as that perhaps has started to be called into question right because we do see perhaps inflation a bit sticky and a bit stickier than thought. That is really, I think, one of the biggest, biggest risks. It's not really on the growth side. I don't think it's on the growth side because when we look at some of the common surveys, they do suggest that economists again and strategists again on consensus are increasingly expecting a deceleration of the U.S. economy once again going into the second half. Of course, we've had these negative surprises, but let's remember most of those negative surprises

have been on the soft data side. They've been on the surveys, they've been on consumer confidence, PMIs, all this stuff that's actually underestimated growth in the last two years anyway. So I'm a bit concerned that once again, we might see one or two data points on the growth side that surprise to the upside. And we're going to get another couple of days like today where yields shoot higher. And at some point, it's going to affect equities. Does that mean it's going to derail equities or high yield? Absolutely not. It's good for a couple of percent of a setback here or there.

But those are continuing to be buying opportunity. Agree. I take the other side of that, actually. When it goes to that inflation growth debate, see, I'm on the same side with regards to risk assets. That's the irony of it. I still favor risk assets as well. But I take the other side with regards to the growth inflation debate. I believe that the inflation story is increasingly passe. We already have the core personal consumption expenditure, which is the Fed's preferred measure at 275. In a world where the Fed funds rate is five and a quarter to 550, that suggests it's too tight to me.

And what I worry about is you're starting to see a little bit of cracking in the labor market. Nothing crazy, but a little bit of weakness, a little bit of weakness in Empire PMI, the Philly Fed. You're starting to see a little bit of weakness. And what I worry is that if we're too focused on inflation, we're focusing on the wrong battle. And so I would like to see the Federal Reserve start to lower rates. I would like to get out ahead of that rather than wait for cracks in the economy. I suspect that a recession is still not the base case, but I would argue that growth is the bigger risk than inflation. It's funny you say that. I mean, that's the view largely of Mohamed El-Erian, who was with us yesterday on this very program and suggested that the Fed's already late for many of the reasons that you suggested.

He would suggest that they do cut preemptively to prevent the economy from falling out of bed unnecessarily. Steph, you know, the risks around the Fed, we haven't obsessed about the Fed a lot lately. We just haven't. We've been obsessing about NVIDIA. We've been busy. But also for the right reasons. We sort of wrote the Fed cut off for a while. We haven't had to think about it. But now we're going to get a PCE.

And it's going to bring that back into focus as to whether maybe July should be a live meeting. Maybe the market's underestimating that. We just don't know. I do not think that July is a live meeting. I don't even think September. And, you know, I've been thinking that perhaps nothing at all this year. And the reason is, is because while we are making progress on inflation and I do expect a decent number on Friday, we are making progress on inflation, and I do expect a decent number on Friday, we are still seeing pretty decent growth. I mean, yeah, sure, we can talk about housing all we want. I know it's very mixed at best.

But you have home prices are higher. That's good for consumer confidence. You have PMIs that are actually both manufacturing and services are both in expansion mode. You still have historically low initial claims. So I add it all up, Scott. And I don't think it's going to be the 3-1 in GDP that Atlanta Tracker is going at right now. I think it's going to be more like 2%. 2% gets me mid-single-digit earnings growth, excuse me, revenue growth, with a little bit of margin help on the inflation front coming down. I think you could see double-digit earnings. And that's what stocks and investors that have invested stocks care the most about. So I think earnings are going to surprise to the upside. And if the Fed comes back into the discussion, it comes back

into the discussion. But it's the data that we have to pay attention to. We have to see where the economy is going to grow. And I think it's going to be two, two and a half percent. And the kinds of stocks, you know, outside of Amazon, let's say, the kinds of stocks that you favor, I'm surprised that, you know, you think those are the kinds of stocks that are going to do well in an environment where you think there aren't going to be any rate cuts. And I mean, let's be honest, the economy is slowing from where it was. And there are some significant signs that the consumer is, too. From data that I saw today about, you know, dining out less and things of the sort, that how is the cyclical trade going to work so well if you don't get any rate cuts and the economy's

already starting to show some signs of cracks. Well, sure. In the third quarter, we grew four point nine percent. So if we just go back to two, two and a half percent, that's still above trend. But certainly it is slowing. But it's not recession in my mind. Number one. Number two, I think not my entire portfolio is cyclicals, but that's where I see the value, especially in the financials, especially in the industrials. We talk about onshoring all the time. We talk about the very strong backlogs that these companies are building that really haven't even been recognized yet. I think energy is sort of interesting, too, as you know. But on the flip side, look what I just added to. I just added to Amazon, right? Well, I said outside of that.

I know that. I got you on that. But you added to Home Depot. You added to Home Depot, too. Outside of that, I've added to a couple of different things. Like we talked about Seagate, right? We talked about Lamb Research. Yeah, I just added to Home Depot because I don't think that a 4% drop yesterday was warranted, and I don't think it's totally underperformed. I do think we are at a trough in or the low point in housing, especially since the 30-year fix has gone from 7.8% last October. Right now, it's at 6.9%. I think it's going to continue to come down because I think interest rates are going to come down gradually. They're going to stay elevated, but they're going to come down gradually. This company is the best in the business, trading at a four-year discount to

its average. It's easy comparisons. They just made an acquisition. So they feel good about their business overall. And I think it's just going to take a little bit of time. But I do think housing is certainly an area that I still remain very positive about. You would take the other side of that trade as well? Well, look, I mean, it depends on the time horizon we're talking about here. You think about housing over time. It's in a structurally a good story. This is a country, a lot of 30 year olds, not enough, not enough homes available. My point is just to say that that things are moderating here from what had been a very strong environment that had some that had some power to it from all the stimulus that we provided.

My point is this. If these kinds of stocks aren't working all that well, when the economy is doing very well. Right. Why in a slowdown? Why in a slowdown or even a slightly more moderate growth environment are they all of a sudden going to start doing well? Right. And the expectation would have to be, again, what we talked about last year, the six rate cuts. Without rate cuts on top of that. So you would need rate cuts without the recession, right? That is a good place for markets historically. That is a good place for cyclicals.

And you would need the expectation of that right now where we are slowing and investors not expecting a lot from the Fed. I think that, you know, in many ways that, you know, the mega cap story continues. All right. Well, certainly continuing today in terms of the stocks that we talked about at the very top with Amazon as Steph buys more of it, two trillion in market cap. Guys, thanks so much. Max, we'll talk to you soon. Steph, of course, you as well. And Brian, thanks for being here at Post 9. We do have some news out of the CDC. Angelica Peebles is here with those breaking details.

What are we learning? Hey, Scott. Yeah, we are getting new RSV vaccine recommendations out of the CDC's vaccine advisors. They're now recommending that everyone 75 and up get an RSV vaccine if they have not already. Now, they're saying that people between the ages of 60 and 74 should get one only if they're at high risk of serious illness. And this is a change from last year when the CDC said that everyone 60 and up should consider getting it in conversation with their doctor. And it sounds like it's a little bit of a nuance here, but they're trying to make

it so that people who are at the highest risk actually get this vaccine. And they're saying that they found that this is the most cost effective because these shots are about $300 a person. And it's interesting because there was some talk about maybe moving it down to 50 to 59. But here we are seeing 60 still as the floor. Now, remember, there are going to be three RSV vaccines available. There's one from Pfizer, GSK and now Moderna. And we are seeing Moderna shares down sharply today because they presented some new data showing that their vaccine doesn't look to be as effective as the other ones after about a year and a half. So we'll keep an eye on this and come back to you with anything else. Scott. All right. Now, we appreciate that update. Angelica Peebles, thanks so much for

that. Let's send it now to Pippa Stevens for a look at the biggest names moving into the close today. Pippa. Hey, Scott. General Mills is lower after a mixed Q4 report. The Cheerios maker posted a bigger than expected drop in quarterly sales, hurt by lower demand for its snack bars and pet food, as well as higher input costs. EPS did beat the street, but the company's annual profit forecast is below estimates due to cost pressures. And Albemarle is the second best performer in the S&P 500 today, up about 7 percent, after telling Reuters it's planning more lithium auctions in an effort to increase

pricing transparency, the company losing half its value in the last year amid a collapse in lithium prices. Scott? All right, Pippa, appreciate it. Pippa Stevens, we're just getting started. Up next, navigating the tech trade. NASDAQ having a strong run. It's trying for its best month of the year.

Deepwater Asset Management's Doug Clinton is here with his playbook for that sector and the names he's betting on right now after this break. Live at the New York Stock Exchange, you're watching closing bell on cnbc welcome back big tech trying to close out the first half of 2024 on a high note. NASDAQ 100 is on pace for its best month of the year, and three of the mega caps hitting record highs today. Joining me now for a look at the second half setup is Doug Clinton of Deepwater Asset Management. It's good to have you back.

Good to be back, Scott. So what do we make of, let's start with NVIDIA first. Okay, as I said, it's dominating the conversation. I'm sure people are getting tired of talking about it, but it's impossible to avoid. What do we make of the stock price action of late? What does it tell you? I think it's a healthy reaction to what has been a parabolic move. I mean, you can't help but look at the chart. You look at the stock up over 100 percent year to date, and it's now one of those trillion dollar companies that you just talked about, Scott. I think it's healthy that we're seeing these drawdowns of 10%, 15%.

And if you actually look back at the dot-com boom, you look back at another era where we did have this technologically-driven bull market, you had several periods where the market pulled back 10%, 15%, even 20%, 25%. And I think that's part of the adjustment as fast money comes into some of these names, not really caring that much about the actual earnings growth, the actual product, caring more about the momentum. And then they wash out. I think we're going to see more of those things happen in this AI tech boom, which we still think is going to last for another few years. It's funny you talk about, you know, market volatility in those periods of time. We've had next to no market volatility, right? I think I saw the stat was something like 330 some odd days since the S&P has had a one day move of 2% or more down. I mean, does that shock you? We've been spoiled, I think, so far by the AI trade. It's felt too easy, I think, in a sense.

And I do think we're due maybe for a readjustment period where people start to think about, and we've seen more talk about this, is the CapEx that's going into AI right now over $100 billion a year, close to $200 billion into these chips and building out data centers. Can we get economic value from that in the future? That discussion feels like it's heating up right now. We still think the answer is yes, but I do think there's a timeline mismatch that we have to manage as investors. I don't think you're going to see the return on this huge CapEx expenditure that we're having in AI right now next year or even the year after. I think it's a three to five year picture that you have to get comfortable with for these hyperscalers and others who are building out these data centers

to really make their money back on these NVIDIA chips. Do you think there's too much euphoria in the market around all of this? I mean, I had Eric Jackson on the program yesterday who said the market cap of NVIDIA could go to $6 trillion. It could trade at $250 a share. So essentially a double in every way, shape and form from here. And the valuation will go over 70. I don't think there's too much euphoria about AI in general. I think for NVIDIA, that feels like a more aggressive price target as I hear it. I think if that's supported by earnings, that could happen.

I don't know that I see earnings where we might double again in terms of what's being spent on chips in the next year or so. I think that might be something that's more reasonable. You look out two or three years, that feels more probable. But I think AI broadly, again, Micron talked about this actually last quarter, where they're in the heart of it. They said, we feel that we are in the early innings of a multi-year growth phase here driven by AI. And I still think that's true. I still think you want to be exposed to AI hardware in the public markets. In a deep water, we also invest in the private markets. I think you can find good AI software companies in the private markets to invest in as well if you have exposure to that. I don't want to blast through Micron too quickly. I mean, you own the stock, correct? They're going to report in overtime.

Chips have been dicey lately, right? We're not just talking about NVIDIA. You look at the price action in the SMH and a lot of names within it. They haven't traded all that well. How important is this tonight? I think it will be potentially a volatile move for Micron. And again, I think about it in timescales. In the shorter term, because we just talked about some of this fast money that I think

has gotten really excited about the AI trade, I think it's hard to predict if Micron will be able to deliver enough that that fast money investor will want to stay in the stock and bid it up tomorrow. If you're a longer oriented investor, as we are, I still think that we agree with Micron. We're in this early innings phase. We think they're still going to see increasing volumes and pricing for the next several quarters. And as they continue to see those better volumes and pricings, I think the stock can still work. Doug, we will see what happens.

We'll talk to you on the other side of it. That's Doug Clinton from Deepwater. We'll see you soon. Up next, we're tracking the action in hedge funds. Despite some poor returns, Citi's Mithra Warrior is flagging some reasons to be bullish on this base. She'll join me here with her take next. Closing Bell's coming right back. Welcome back. S&P 500 and NASDAQ looking to close out the first half of the year with solid gains. The hedge fund market not enjoying the same strength.

Here to share how that space is looking heading into the second half, Smith Rewarrier joins me here at Post 9. Cities North America head of capital introduction. Welcome back. Thank you so much. Great to be here. So it's not all roses and lollipops in hedge fund land. Why? Well, they're outperforming cash and risk-free

rates, but they're not outperforming the S&P. Look at the market. It's just gone up. You hire hedge fund for both long and short. And meme stocks came back in the spring, and they continue to be a threat. So those two headwinds are really having people take stock of what's happening in the hedge fund performance space and what they need to do in the second half. They probably, I would guess, and I'd love your insight on this, are suffering maybe more than anybody else from the great divergence we've seen from index level to the individual stock level. Right. Because if you're a fund and you're not overly exposed to or heavily exposed to the mega cap trade. What results are you showing? Yeah, I think that is the question is what is the value of stock picking in a market where it's really about the Magnificent Seven and very narrow breadth. One thing that I think there is some

optimism about is that there's going to be some volatility in the fourth quarter of an election. There's the Fed that's always looming. And so I think people are saying that in an environment of volatility, you see some dislocation. Stock picking can become exciting again. Well, I mean, traditionally, that's when hedge funds are supposed to do their best. They may not get all of the upside, but they certainly are supposed to protect you from some of the downside that could come from increased volatility. And we've seen that. I think in May, particularly with the meme stocks, what you saw is hedge funds that had diversified portfolios, that had tight risk management, continued to do well.

So I think when looking at the story of hedge fund performance, it's not just about the upside. It's also the downside protection, which will become much more relevant in the second half. How do you think AI is playing a role in terms of strategies, not using it to pick stocks, but the kinds of stocks that you want to pick, the kind of funds that are going to be coming around? What did I read that one of the most famed investors

is starting an AI-focused fund. So is that going to become the norm? I think AI as a theme is certainly something you can't ignore. Look at sectors beyond just tech, right? You've got biotech, energy, even in the commodity space, you're seeing the influence of AI. So whether it's incorporating AI into your underwriting process or the influence of AI on the names that you own, it's something that you can't ignore and it's pervasive and everyone's taking a look at it. What do you see in terms of multi-strategy? What's the performance looking like? What do you anticipate it's going to be over the second half?

So I think the multi-strategies, it's going to be a story of uncorrelated returns and protection to the downside. You're not looking for them this year to be your double baggers, capital compounders. You're looking for them to be your steady eddies. And they're raising capital. The bigger ones are getting bigger. You mentioned the meme stocks returning. What do you think the impact is to this point on short funds? When people ask you, are short funds still relevant in today's market, how do you answer that question? I think for short-only funds, you have to take a look at the concentration in your portfolio. One of the things, the short-only funds of the past were either activists or highly concentrated. Now the ones that if you want to survive, you have to have a reasonable diversification of your short portfolio, and you have to have some ledges to the long side. So I think it's more of a long short story

than a short only story. Speaking of activists, has the activist pool, has it shrunk? Is it going, you hear about some of the same funds doing the same types of things, but I don't feel like it's anywhere near where it was, I don't know, five, ten years ago when I was covering activist investors every single day. Yeah, I think it's episodic and opportunistic. And it's also a function of the market, right? You're not seeing valuations be as depressed as they once were at one point in time for it to be really meaningful to run a campaign. And that's the most important thing, right? How much can you compress that spread?

That's got to be an important consideration for being an activist. It's good talking to you. Thanks for being here. Fantastic. That's Mithra Warrior from Citi joining us. Up next, we're tracking the biggest movers as we head into the close. Pippa Stevens is standing by once again with that. Hey, Pippa. Hey, Scott.

One discretionary name is popping on a possible takeover. We've got all the details coming up next. About 17 minutes till the closing bell. Back to Pippa Stevens now for a look at the stocks. She's watching. Pippa? Hey, Scott. Well, shares of Paychex are tumbling and pacing for the worst day of the year,

despite beating on the top and bottom line in the fourth quarter. Guidance, though, was light, and management noted softer closing rates. And Whirlpool is in the green, pacing for its best day in more than four years after Reuters reported Bosch is considering making an offer for the company. RBC noting Whirlpool has faced significant challenges amid depressed discretionary spending. Whirlpool said they do not comment on market rumors or speculation. Shares up almost 16 percent. Scott? All right, Pippa, thank you. Pippa Stevens still ahead. EV makers shifting into high gear. Shares of Tesla and Rivian are popping in today's session.

We'll tell you what's behind those moves. Bell's coming right back. In today's diverse workforce, the LGBTQ plus community brings in a unique blend of creativity and resilience. By embracing visibility, companies can unlock this potential. At the same time, the LGBTQ plus employees can thrive by creating community within the organization, advocating for inclusive policies, and focusing on self-development. It's a win-win. All right, up next, we're getting you set up for earnings and overtime. Mike Brown reporting top of the hour.

We're going to run you through the key things to watch for, that and much more when we take you inside the Market Zone next. We're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Phil LeBeau on the rally in Rivian and Tesla shares today. And Sima Modi with the highlights from NVIDIA's shareholder meeting. And also a look ahead to Micron. It's going to report earnings in overtime.

Mike, I begin with you. It definitely feels like now we're going to wait and we're going to see what happens with PCE on Friday morning before we start putting chips on the table again. It feels that way. It feels that the default mode of the market is just general, surface-level, calm, allowing things to move around underneath but not really getting rattled. Today's interesting because backing off of NVIDIA and that it's not really small caps in the majority of other stocks that are taking up the slack. It's the other big

ones. Yeah. Apple's up 2%. It's basically non-semi mega cap. Amazon 4%. And so it again reinforces this idea that people are happy to maintain general exposures out there to the market as we sit near all time highs. Worth mentioning, the closing high in the S&P was the day before NVIDIA peaked. So it wasn't as if we're ignoring everything. It's just there's just enough demand or lack of people wanting to get out for macro reasons that we're fine on a market wide basis. Mindful of a two week high in 10 year Treasury yields today. Mindful of the fact that the U.S. dollar index is pushing the upper end of this one year range. Again, not because of anything alarming going on, but just because around the edges, you're taking back some

of that confidence in the disinflation story in the absence of any real evidence. It's just one of those things that we're getting antsy ahead of the event. I mean, just so people know what we're talking about, right? Ten year, 431. Yes. Dollar yen, 160. Yeah. I mean, obviously that's driven. That's driving a lot of the strength in the U.S. dollar indexyen 160? Yeah, I mean, obviously that's driven, that's driving a lot of the strength in the U.S. dollar index is the weakening of the yen. So, you know, again, we've dealt with levels up here before without too much trouble, but it shows you things are kind of shifting below the market's feet, but it's still keeping its balance. I want to comment, too, on this Amazon 2 trillion. We're talking about all these milestones that mega cap techs

are hitting. Well, add that one. A little bit desensitized to the numbers, actually, a little bit. Not in a bad way. I feel as if it's kind of like, why shouldn't Amazon be at 2 trillion if we have three, $3 trillion market cap companies out there as we do? It is interesting how it's one of those, well, we haven't bought this one in a while. I mean, it really doesn't seem as if there's a heck of a lot else going on except for a general friendly environment and the fact that you have the stair-step action with some of the other ones getting a little extended relative to Amazon. I mentioned like the last leg has felt kind of stealthy because we've been talking about everything else except Amazon. So welcome to the $2 trillion club. Phil LeBeau, talk to us of the rally in Rivian and Tesla.

You know, Scott, this is a case where the VW deal announced yesterday afternoon. Rivian has addressed one of the big overhangs on the stock, which was how much capital it has, does it have enough to get to the R2 models in 2026. That's why the stock is surging today. $5 billion potentially will be invested by VW into Rivian between now and 2026. That should tide them over to R2 production. By the way, as you take a look at shares of VW and Rivian in the last year, they're also forming a joint venture here. It's not just like VW's like, hey, we're interested in investing in Rivian. They want something. What do they want? Rivian software stack expertise, especially when it comes to EVs. That's why they have struck this

deal. Also take a look at shares of Tesla. Stiefel out initiating coverage today with a buy rating price target of $265. They're bullish on the prospects for Model 3 and Model Y sales over the next couple of years. Scott, back to you. Phil, I appreciate that. Mike, Tesla's up 8% this week. Yeah, Tesla's another one where it is more the laggard effect, I think, and maybe we already kind of priced in the EV slowdown we've been talking about for months. It's interesting on the Rivian move because there's a little relief here. Obviously, now it has enough capital to attempt to prove that it actually can get up towards scale. We're talking about, I think, $55,000, $57,000 in terms of new production volume this year for Rivian.

So it's clearly way behind. It was a $23 stock at the beginning of the year. So there's room for everybody to argue in this price range. Of course, it was well above $100 after it came public. So I do think that we're getting past the, oh, no, you know, EV demand is slipping. And now it's about, you know, what's a proper and rational run rate. Seema, we weren't going to get out of here today without talking about NVIDIA's shareholder meeting. What were the highlights? Well, Scott, this was CEO Jensen Wang's moment to reflect on

the latest product announcements and generate more excitement around its Blackwell graphic processing unit, which he says will likely be the most successful product in the company's history. The Blackwell platform will be adopted by every major cloud service provider, server maker, and leading AI companies, including Amazon, Google, Meta, Microsoft, OpenAI, Tesla, and XAI. And on the topic of competition, Wong talked about owning the data center space and the importance of aligning with countries like Japan and Canada that are developing their own AI capabilities. But as expected, this is a shareholder meeting. There was no new news. The stock did trade down, but is off the lows of the day, Scott. Yeah. Hang with me one second, Seema, before we talk about Micron, because I just wanted to go to you, Mike. You got a nice little move here in the Nasdaq

towards the end. Well, and it is NVIDIA going up a dollar. It's NVIDIA going up. No, but I'm literally looking at NVIDIA threatening to go positive here before we get out of here. You know, so Apple's up 2 percent%. You've got Tesla up 5% today. Now Amazon is above 4%, a gainer as it tops $2 trillion. So this is where the money's going. Doesn't need to see that much of a pullback. It's where it's going, or certainly where it's not leaving. It's a don't short it, don't market type of thing. And everything NVIDIA says today is totally reassuring about the long-term story, but I kind of thought that's what the trillion dollars in added market cap in a month was about, that we just had. What's in the stock at this point if that's not in the stock?

The inevitable question. All right, Seema Modi, tell us about Micron. What should we look forward to in OT? Well, NVIDIA has grabbed much of the spotlight for its role in AI. Companies like Micron, of course, benefiting by providing the memory and storage for those systems. Earnings out soon, a lot of buzz around its high bandwidth memory product developed for AI players, including NVIDIA's H200 GPU. The stock has run up over 60 percent this year. Analysts calling out valuation concerns. Channel checks from Morgan Stanley suggest DRAM volumes are weak, allowing pricing to remain healthy. So that will be a talking point. Sanjay Mahotra, CEO on Mad Money.

Tomorrow, you'll see the stock is higher by around 1% right now, Scott. All right, Seema, appreciate that look ahead. We'll see what happens, and we'll obviously look forward to the CEO as well. You know, look, this is a good moment of truth of sorts for some of these other chip names. Broadcom's not traded well in the last week, down double-digit percentage points. We'll see what happens with Micron, but there are a lot of potential chip stocks hanging in the balance here. Yeah, I mean, obviously, the market has sort of run hot and cold in terms of how much credit to give the rest of the chips complex. Micron in particular, we're obviously talking about memory

and it's kind of a different ballgame. I do think it's still relevant that every bullish thing you say about Nvidia is by definition a little bit negative on the rest. Not that there's not enough room for other players, but you're at a point where if you love it at three point three trillion dollars, you've got to believe it has the better mousetrap for a long time to come and is going to basically serve whatever demand they possibly can. So those are big questions. They're not something we're going to settle anytime soon. But I do feel as if, you know, you can't just sort of across the board say AI investment binge and everybody gets their share.

Well, you know what? Everybody was getting their share. And that is part, you make a really good point. That was how it was. Now, okay, maybe now we're going to really parse who's the real winner. Who's the second or third or fourth players? And then the others aren't going to get the halo as much. That's right.

And is it really also just this kind of front-loaded, urgent boom that doesn't really have multi-year life to it? Who knows? We'll be arguing about it for a long time. All right, so we'll go out green across the board. They're happy here. They're clapping and they're yelling loudly as you can hear. The bell's ringing.

There we go. We're green all the way across the majors. I'll see you tomorrow in the OT with Morgan and John. And don't forget about Mike on there. See you.