Closing Bell - Closing Bell: The Big Battle Over A.I. 4/20/23

Episode Date: April 20, 2023

Alphabet announced what some are calling a major reshuffling. This as it races to fend off Microsoft and others are investing in this new frontier. CNBC’s Steve Kovach weighs in on if this is a sign that Google is going all in on AI.Big Technology’s Alex Kantrowitz gives his expert take on this move and Alphabet shareholder Malcolm Etheridge of CIC Wealth tells us what he is doing with the stock now. Plus, the key levels investors need to be watching, a complete earnings rundown and commentary from market expert Mike Santoli. 

Kelly, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9, right here at the New York Stock Exchange. This make-or-break hour begins with the battle for AI supremacy and the news breaking just a short time ago. Alphabet announcing what some are calling a major reshuffling as it races to fend off Microsoft and others investing billions in this new frontier. Our tech reporter Steve Kovach joining us with the latest, what it all means. Seems to be a sign that Google's going all in here, Steve. Yeah, they've been going all in. And the headline here really is, Scott, Google is taking two AI research groups, DeepMind and Google Brain, and merging them under a new organization called Google DeepMind. Now, DeepMind has done some of the most impressive work in AI, even before we all started

geeking out about ChatGPT last year. It's also an efficiency play. Google has a long history of separate groups working on competing projects. Now they're merging together with more organization. Google Brains leader Jeff Dean will focus on research, while DeepMind's leader Demis Hasbassas will be CEO of the new group focusing on AI products. And even as Google presses forward, CEOs sooner or less try sounding optimistic the company will get it right. Here's what he said on 60 Minutes just this past Sunday. Do you think society is prepared for what's coming?

On one hand, I feel no, because, you know, the pace at which we can think and adapt as societal institutions compared to the pace at which the technology is evolving, there seems to be a mismatch. On the other hand, compared to any other technology, I've seen more people worried about it earlier in its lifecycle. So I feel optimistic. But look, Scott, while we're hearing Google and its rivals like Microsoft ask for regulation to avoid breaking things, it's clearly obvious they're all going to keep developing AI at a rapid pace no matter what, Scott. Yeah, they are. The competition fears, too. It's not just Google. It's not just Microsoft, as we said.

It's Meta. It's Baidu out of China and seemingly everybody else, Steve. Yeah, Alibaba as well. And just not to mention tons of startups getting into this, too. Now, some of their startups will use some of these other tools like OpenAI to kind of inform what they do. But again, it's everyone is going after this, including the biggest companies in the world. Yeah, this seems to be a major move today. How much market share lead does Alphabet actually have in search over the others? We always hear about the huge advantage they do have, but what's the actual numbers we're talking about here? Just a minuscule 93% or so, according to the latest data we have. But look, guess where Bing sits on that, Scott? Just 3%.

So now you know, even though Google shouldn't be scared, the fact that they're making all these moves shows they think Microsoft's early lead here can eat into that market share a little bit. And look, Microsoft is already out there selling its Bing product to advertisers. They think they can make real money on this. Wow. Interesting. Steve, thank you. Steve Kovac, a big announcement a short time ago, initially sending Alphabet shares higher. They've backed off a bit, but they're still in the green today. Let's bring in Alex Kantrowitz now of Big Technology and Malcolm Etheridge of CIC Wealth. Both are CNBC contributors. Malcolm, I'm turning to you first. It was just a few days back where you suggested as an Alphabet shareholder you were going to sell because you

thought the company was weak on AI and ceding too much ground to the likes of Microsoft and others. Yes, Scott. And I would say that the market agrees with me just looking at Google share price today and the fact that this was, I imagine, meant to be a monumental announcement. Right. We're merging our two biggest AI labs so that these folks can work cross collaboratively and share information and everything else. And the market responded with a big old yawn. And so I think that the market is confirming what I was concerned about, which is that either way, Alphabet's ultimately going to lose this chatbot war they found themselves in, whether they're extremely distracted for years trying to compete

with whatever Microsoft is doing on the other side of the fence, or they end up bleeding tens of billions of dollars to win it. And so I just don't see where as a shareholder in Alphabet, this turns out to be a winning bet in the near term. So you're still going to be a seller? I am. Interesting, Alex, when you hear an Alphabet shareholder make those suggestions, I mean, what is this news today? Do you think, say about that company's efforts and interest in winning what may not be a winner-take-all game, but winner-take-most? Absolutely. It shows that Google's been caught off guard, and there's no doubt about that. You speak to people inside the company. They were unprepared for this moment,

and what you're seeing right now is a scramble. Wait a second. We have two research organizations that are working on similar problems. Let's bring them together. You do that when you are shocked, when the system shocks you into having to make moves. And so that's what's happening now. Now, as for whether this is the end of the race or whether Google's already lost the chatbot war, I think it's way, way too early to say that. And I think that, you know, the fact that they have these two research organizations and are combining them shows you that they're going to give it their best shot and really punch back hard against Microsoft. I was expecting you, Malcolm, today to come on and say, you know what, this is exactly what I wanted to hear from Sundar Pichai and Alphabet. Let everybody know that we are going all in and I think we're going to win. Well, what do they win though, Scott? So if we just think about this for a moment, right, Google's both a proper noun and a verb, right? So like you and Kovac were just talking about, they already own 93 percent of the search market.

And so they don't really have anything to win if you think about mathematically where they can go with this. Right. So if if Google does commit the resources necessary to become the dominant player in generative AI search and get to that singular search response as the thing that we're all looking for with chat GPT, for example, what do they win? Because now they've cannibalized their only business, which is to bring you 10, 20, 30 pages full of links where some of it is the answer to the question you asked. Some of it is ads and the rest is somewhere in between. That business is the only business that Google is in when it's all said and done. And so if they do work really, really hard and

spend tens of billions of dollars to get you one answer to your search query, suddenly they're out of business. You've heard Steve Kovac, who led into our segment here, suggest how the lead that Alphabet has in search is so substantial, if not insurmountable. Do you see it that way? Well, one interesting thing that happened is once Bing chat came out, actually Google gained share in the search market. So people were like, oh, this technology is cool and interesting. No, we still really like Google.

But I do think there's a good point that if we end up interacting with computers this way, and there's a chance that we will, and Malcolm's making a good point that if we end up interacting with computers this way, and there's a chance that we will, and Malcolm's making a great point here, which is that you can't really put ads next to a chatbot conversation in the same way you could next to search. Search sort of depends on you not having the answer. Chatbots want to tell you the answer. And it takes a little bit of the magic out of it if they say, you know, here is something that you might want to see.

By the way, go check out the Taco Bell. I don't want to use that anymore. So there's a threat there. So who, if not Alphabet, Malcolm, who are you investing in to take advantage, capitalize, whatever words you want to use on the AI boom? I'm not prepared to give you as direct an answer to the direct question that you just asked me there, Scott. But I do think that there's a number of companies that are right now basically building products to make themselves an attractive acquisition target for somebody who does actually have the capital to deploy to go after something like this, because it's so expensive to run one of these large language models and have the data set necessary to return a meaningful answer, that there's very few companies that can actually participate, let alone compete in this space.

And so I think somebody like a C3 AI, for example, I don't own them personally, but I'm looking at them as an example of a company that they've basically built themselves into being an attractive acquisition target for somebody like Microsoft or Google or Salesforce, maybe even if they're allowed to ever buy anything else again, to come in and say, we can bring that into our ecosystem and help to build our moat around our competition. We mentioned the competition. Speaking of how fierce it is, whether it's Microsoft or Alphabet, Meta, Baidu, and you can go down the list and come up with five at least other names. I asked ChatGPT, by the way, before this segment, if this is a winner-take-all game. I was just curious as to what it would spit out.

And here's what it said. And we made a full screen to show you. While there may be some winner-take-all dynamics in certain areas of AI, the overall landscape is complex and dynamic. And there are many opportunities for different players to succeed and contribute to the development of AI. As we said, you don't see it. Do you see it at all as even a winner-take-most? Or is there enough of a playing field for all of the major players to get whatever they need to get out of it?

I do think everybody can benefit from it. But I also think we can see some real shifts here. Because what you have, if we move to this interaction layer with computers where we talk to them in our language, not by like typing in keywords in Google, you start to have different business model emerge. So you have, of course you have ads, which is a possibility, but now you have APIs and who's in good position there. Microsoft is in really good position there to provide the API to allow other people to build on top of it. And then we saw OpenAI release plugins where companies like Kayak can enter into the chat and let you book directly from there. So you actually have a licensing fee or a sort of a

toll for a company that wants to participate in a popular chatbot. That means we're going to see a reshuffling. I don't think it's going to be the end of like one winner take all moment, but can we see big momentum shift, for instance, from a Google to a Microsoft? Absolutely. You heard Pichai on 60 Minutes talk about the promise and the pitfalls of both. And I'm just curious as to, you know, the CEOs, the leaders within technology that you're talking to, how they're addressing both the good of AI versus the unknowns of AI. Well, first of all, I would say that every CEO I speak with, they can't stop talking

about AI. This is the only thing they want to talk about. I've been reporting on tech for a long time. I've never seen a moment like this, not even with mobile. This is definitely unique. So that's one thing I would say. In terms of what, the hype? They all believe that this is going to transform the way that people are interacting with their

technologies and the way that they're building technologies. So that's the first thing. And then the second thing, they all recognize the dangers. But I think we've gone through this. We've gone through this moment with big tech. Are we going to regulate them? Are we not? We haven't done anything. And I think a lot of people are just despondent and are saying there's no stopping this wave of technology. It's going forward. Let's figure out the best way to mitigate the downsides. But are we going to rein it in? Are we going to regulate AI and make people stop developing? I don't think there's any hope that that's going to happen.

Do we even know how we would regulate AI? Forget regulating it. How are you going to figure out exactly what to regulate? That's a great point. And our legislators, our federal government is so far behind in terms of understanding this technology. I mean, even the technologists don't fully understand what's going on. They can't explain to you what's happening inside some image generation technology, for instance. So now are we going to ask Congress to put common sense regulation on top of this technology that makes sense and doesn't destroy innovation? While, by the way, China is full steam ahead on this type of technology, I think it makes it extremely tricky to try to put rules and regulation around AI. Malcolm, you feel like there's too much hype here. I mean, just pull up shares of NVIDIA,

for example, which have just absolutely skyrocketed in part because of AI. Is there too much hype around some of these stocks and the movements that they've seen? I don't necessarily think that there's too much hype around a company like NVIDIA, who's proven that they actually do have a meaningful business underpinning that share price. I do think, though, there's going to be tons of companies that end up being the FTX, so to speak, of this AI arms race, where just because they changed their domain name to.ai, people are willing to throw dollars in them. We may even see the resurgence of the SPAC craze to some degree because there's so many folks out there

in Silicon Valley right now trying to create that new company that basically just takes ChatGPT 4 or whatever new iteration they're working on now, throws a thin layer of code on top of it and is now selling it as the next best whatever. And that's the concern that I have is that we're gonna get a lot of hype that ends up fizzling out, but there will be meaningful change that comes

from a company like Microsoft who can do something as simple as use AI to help fix my broken Excel tables. That's something I end up spending time once a week working on that if they have to charge me a few dollars more to embed that into the software, I would pay up for that so it just depends on who is actually providing it but i think there's going to be a lot of companies that end up not really producing anything who end up on the exchange and people bid up those prices

the same way we did with you know the semi rolling down a hill from nicola that we found that wasn't really doing anything yeah i've heard some people say we were actually wrong about Web3, that it wasn't crypto, blockchain and all that. It's actually AI. And now we're realizing it now. We were talking about AI first, right? And then we went through the pandemic and the zero interest rate moment

and all this money flooding in. And that led to this Web3 craze. And it's funny because I speak with AI researchers who I was speaking with in 2015 and 2016. And they're like, well, that was a distraction. Now we're back talking about what matters. And if you think about what the foundational change will be in technology in the next 10, 20 years, it's not going to be blockchain or cryptocurrency.

We're looking at it right here. It's artificial intelligence. And that's what we're starting to see today is these movements and machinations to try to get that lead. You know who else wants to have a piece of this pie? And I want your take on it. Elon Musk, when he talks about truth GPT, which what do you make of his entree here? I think he kind of has his hands a little bit full right now. He's doing rockets. He's doing Twitter. He's doing Tesla. He's digging holes. He's trying to plug brain implants into people's skulls. And now he wants to build an AI. So I think Elon's just a little bit spread too thin.

I actually think that the point that he's making about AI is interesting, right? Because AI is going to take political stances. What I'm talking about is chatbots, right? They are trained with political beliefs, and you see them spit it out. ChatGPT, for instance, does. And so this fight over AI politics, AI ethics is going to be huge as we move forward. But do I think that Elon Musk is going to be the person to solve this issue? I don't know. I kind of think his hands are full at this point. He's a master multitasker, as they say. Alex, thank you for being here. Malcolm,

thank you as well as we continue to follow this interesting story. Let's get to our Twitter question of the day. We want to know who do you think is going to win the battle for AI? Is it Alphabet, Microsoft Meta, or NVIDIA? Maybe it's all the above. Head to at CNBC closing bell on Twitter to vote. We'll share the results later on in the hour. We do have a sell-off, which is intensifying as we speak. We see the Dow at the lows of the day, now down by 200 points as we just get started here. Up next, we'll talk about weighing recession risks. We'll get a little deeper into this sell-off with an all-star panel next. All right, welcome back. 40 minutes to go in the trading day.

We're tracking all of the biggest movers as we head into the close. Pippa Stevens back with that. Pippa? Hey, Scott. Original banks are slumping today, giving back some of yesterday's gains, although the group's still higher on the week. Now, earnings reports so far show that deposits are stabilizing, which is a cause of relief for investors. The deposit inflows suggest that individual and business customers have grown comfortable with the banks again after a wave of withdrawals led, of course, to the failures of

Silicon Valley Bank and Signature Bank in March of course, to the failures of Silicon Valley Bank and Signature Bank in March. And remember, the future of some of these regional banks seemed seriously in doubt just a month ago. And the builders are riding a hot streak with the home construction ETF ticker ITB hitting a 15-month high today. Market sentiment for new homes rose in April for a fourth straight month, with lower yields also lending support. Now, we did hear from D.R. Horton this morning with the company beating top and bottom line estimates. The CEO said the spring selling season is off to an encouraging start. That stock, along with shares of Lenar and Pulte Group, all hitting multi-year highs today. Scott? All right, Pippa. Thank you, Pippa Stevens. We'll see in a bit. A weaker day for stocks as earnings and economic data disappoint. Let's bring in Joe Terranova now

of Virtus and Alicia Levine of BNY Mellon Wealth Management. Joe, of course, CNBC contributor. Tough day. I mean, the earnings not great and the data's just bad. Wait, I mean, I don't know. We don't sugarcoat it. It's just bad data today. It's recessionary. That's exactly what it is. Philly Fed is minus 31. The last times that Philly Fed was minus 31, 2020, 2008, 2001, 1991. I told you I was concerned about this week. The rhetoric that we heard from the Federal Reserve means they do not understand the environment that we're in right now. Auto loans, delinquencies are beginning to rise.

What's the most important payment that you have? It's your car payment. We saw it represented today in the statistics for housing. We see it universally. The economy right now, leading indicators, negative territory. The economy as we sit here today is probably in a recession. Is it statistically in a recession? Maybe it's not.

But it sure feels like for consumers that that's exactly where we are. Look at the market. Where's oil? Oil is a dollar and a half above the level before the announcement of OPEC. That's on demand concerns. Look at gold. If we have a chart of gold this week, you'll see that you had a significant dip down to 1980. They came in, they bought it. Why? Because it's the

disinflationary proxy and the two years moving down again. We've got a problem economically. Energy's weak. Alicia Tech is weak today. Discretionary is weak. What do we make of it? So we're slow walking to the recession. It's not the boom that we thought it might be during the banking incident. I'm going to call it an incident and not a crisis because so far it's not a crisis. But we're slow walking because of the contraction of credit. And the sectors that have got us to this point with the S&P up 8 percent and NASDAQ up 16 percent are really the sectors that are next up for some weakness here. Because ultimately, you cannot have a contraction of credit in small, medium-sized banks and

not have it affect the real economy. Now, I still think the Fed hikes in May. It's all, you know, the market's giving it to them at this point. It's 90%, 88% chance they're going to do it. Not giving them anything more than that, though, right? If you look at the bond market. Not giving them any more than that. But if there's a sort of linear progression downward in real activity, the Fed is not going to cut because this is what they wanted and they're going to get it. Tesla's been a drag all day. It's got 10%. How much of an issue is

that? On a number of different levels. I mean, it's a $500 billion market cap company. So it's weighing on the NASDAQ. It weighs on sentiment in some regard. Now you have worries about price wars in autos. You look at Ford and General Motors. We could throw those up, too. It's not just a Tesla story today as it relates to that. Demand fall off. You try and raise demand. You cut prices. So this is my concern. My concern is exactly what you're talking about. And I'm talking towards what's the earnings effect goes beyond Tesla. Look at AT&T today. AT&T is telling you that there is economic weakness when it's down 12 percent. Now, listen, you could say, well, what about D.R. Horton? OK, D.R. Horton, it's it's it's a momentum play. It's low inventory. But the concern that

you have right now as an investor, I've said this all week to you, the economic weakness that we're experiencing now was discounted by the market in the fall. That takes you to where you sit approaching forty two hundred. What is not discounted is a U-shaped earnings recession. We are in the midst of the second consecutive quarter where you're going to see negative earnings growth. The calendar quarter that we're in right now will by far be the most intense contraction in earnings growth of the three consecutive earnings quarters that are going to be negative. We know there's going to be three in a row. You're in that. What happens from there? That's what the market has to price out,

because the expectation is that you'll begin to come out of it. You'll get mid-single-digit growth. And then on the other side, in Q4, you're going to get the double-digit growth. Well, we really need to see that. And that's what I think the complexity right now is in the market, is figuring out what the shape, what the alphabetical letter for the earnings recession is going to be. There are others who would suggest Alicia Joe's wrong. He's wrong on earnings. He's wrong on the economy. He's wrong on everything else that sounds negative because this is the trough. This is as weak as the economy is going to get. I heard that today on the Halftime Report. I mean, people who are running money for people are suggesting, some are, that it's not nearly as dire

as the most negative of people would have you believe. Because it's not going to be a step function down. I agree with Joe in that this is all about margins. So the Tesla story is not just about Tesla. It's the margin story, which is really what's weighing on earnings this year. You know, in the end, the S&P at this price is trading at 20 times 2023 earnings that are still not believable. So you're in a very expensive place. And the question you ask is, how do you

get above 4,200? Well, the only way to get above 4,200, this is the trough quarter. And I don't think you can say this is the trough quarter on earnings here. There's a lot to go. There is still too much excess in the system. Inflation, the core, is still at 5.6%. The Fed's going to be there unless there's an actual crisis. I don't know. What about big tech? Is big tech going to save the day next week in terms of earnings? I don't think it's going to save the day.

It's moved so much at this point that it actually has to be, you know, the rocket ship blasting into space at this point. The tech brought us here. The dispersion between how tech's performed and how the rest of the market has performed is almost unsustainable because it's historically very wide. And I would say next week you're going to get more of that reversion to the mean. I would be surprised if Apple microsoft and some other mega cap names don't save the tape maybe they don't save the day but they will save the tape and they will position the market to go back towards that 4 200 level so as negative as you sound you still think we're pushed going to push higher listen i'm negative on i'm negative on the economic

environment i'm negative on the credibility of the Federal Reserve. And I am concerned about forward-looking earnings. I'm concerned about that. I think the market has discounted the economic weakness already. I don't think we need to discount further in price much more economic weakness. What we have to focus on now is, to your point, the margin contraction and a more prolonged earnings recession. So I believe next week, yes, the mega caps, Apple, Microsoft, the AI story, the services revenue that could lift the market to 4,200. And volatility is telling you that. Volatility is ridiculously cheap. And what is it allowing you to do?

It's letting you buy the insurance. And generally, the market doesn't let you buy the insurance right before a big precipitous fall. If it's letting you buy the insurance, that generally means there's more upside potential. All right, guys. Thank you. Alisa, thank you. Joe, I'll see you in the market zone a little bit later. Up next, a break in the bounce. Top technician Jonathan Krinsky is with us.

He'll break down the charts flagging a key level he says every investor needs to have on their radar. Closing bell back up to this. We're back. A number of earnings misses and weaker economic data weighing on stocks all day long today. And our next guest believes the charts are signaling a break in the market's recent uptrend. Joining us now, Jonathan Krinsky. He is BTIG's chief market technician. It's good to see you on a day where right now, as we have this conversation, S&P and Nasdaq are around session lows. What's coming next? Yeah, you know, Scott, it's been a frustrating tape, I think, for bulls and bears over the last few weeks. And we've been in this

kind of short term trading range within a bigger trading range. Right. So the big trading range is thirty eight hundred to forty two hundred on the S&P. And then the last few weeks have kind of been in this forty seventy to forty one sixty range. But, you know, to us, it's not a market necessarily that you want to be so focused on the levels, right? And I think if you look at the systematic community, that's kind of an example of that where, you know, depending on who you ask, they were short, you know, a couple hundred billion dollars worth of futures down at 3,800. And by latest estimates, they're now pretty much the inverse of that and completely net long at the top end of the range.

So it's a market that we continue to feel the macro is kind of driving things. And for now, equity volatility and equity prices are kind of ignoring a lot of the macro signs. So to us, the risk reward continues to point to the downside. And despite the fact that the broad-based S&P 500 may not be showing it, you know, you can look at any number of metrics. The ECOID S&P, for instance, is down about 6% from February highs. You know, the weak parts of the market remain weak, whether it's small caps, banks, et cetera. So really, it's just those, you know, the large cap tech names and even discretionary names, which we're seeing today

with Tesla, that have been kind of the holdouts. And ultimately, we think that's what drives the index lower here. I mean, we've seen this movie before in terms of, you know, where the breadth of the market is or where the weakness lies and the data is not good. And the markets remained, you know, to some people, shockingly resilient. Not to you? Again, it really is a function of where you're looking. The retail ETF, for instance, is down 15% from the February highs. You can go down the list. I think most people, if their portfolio is largely S&P 100 or NASDAQ, then it feels okay here.

But I think for people that have been kind of more diversified, it's a bit of a different story. And really, you know, the question is, what's going to drive those mega cap tech names lower? And, you know, again, we're not fundamental analysts, but I think the reaction to earnings will be telling. It's been a little bit mixed, but obviously Tesla, Netflix are a bit on the weaker side. You know, we also think if you look at the high-yield market, there's been this kind of big discussion why equity volatility is so low, but there's been a high correlation between equity vol and high-yield CDS, and that's started to diverge recently where high-yield CDS has actually been moving higher,

and so we think that's another indication that maybe equities are not seeing what the credit markets are starting to see. Speaking of equity volatility, you referenced it. So I want you to go deeper on that for me. The VIX is what you're referring to was 16 and change. Now it's 17 and it's up a decent amount today. What's the right number, do you think? Where do you see the VIX going? Well, again, the VIX is simply a function of the current trading environment. We know that the S&P 500 has been pretty range-bound, so in some ways that makes sense.

We'd also highlight, though, that the VIX often doesn't care until it cares. And if we go back to some examples you know we hate to go back to 2008 but may of 08 the vix was had a 15 handle that was two months after bear sterns went under um you know quickly rise rose from there and then i think the biggest kind of um example is august of 08 we had issues with fanny freddy aig. Late August 2008, SpotVix had an 18 handle, and three weeks later, it was, I think, above 80. It can happen quickly. We also think there's an interesting dichotomy going on right now between CDS on the United States, which is now higher than it's been even at the peak of the 2011 debt ceiling debate. So the market is overly concerned

about the U.S. defaulting, which has never happened and probably will never happen. And it's showing very little concern about equity downside, which happens all the time and is very likely to happen. So there's a lot of interesting things going on here. If not, you know, five alarm thing at this point, it's certainly going to be as it inches closer. October lows in play or not? You know, look, it's been a constant question. We still think that's in play. Obviously, you've got to break the trading range, which is 3,800 first. We were just highlighted, you know, we're now at six months removed from the October lows.

I think some people are saying, given that it's gone on that long, we haven't broken the lows, that's kind of reason to be optimistic. At the same time, if you look historically, it's a pretty weak six-month bounce. You know, typically this six months into a new bull, you'd be a bit stronger. So you can kind of see it both ways. We think it's still in play. It's probably an issue for the back half of this year, though. It's funny. I mean, others would look at it and say, yeah, you're six months from below. That's enough distance and time to say you're not going back. So I guess I guess it depends on, you know, half full, half empty, whatever perspective you want to see. Jonathan, thank you. That's Jonathan Krinsky, BTIG, joining us here on Closing Bell.

Up next, we're tracking the biggest movers as As we do head into the close, we have about 25 minutes or so to go. Pippa Stevens standing by with that for us. Pippa? Yes, Scott. Well, a telecom giant is down double digits, plus a check on trucks, trains and freight coming up next. 20 minutes to go before the closing bell. Pippa Stevens has the key stocks we are watching today. Pippa. Hey, Scott. Well, a rough day for shares of AT&T, down more than 10%. Earnings came in above estimates, although revenue did miss expectations. Although what's really weighing on the stock here is a slowdown in that post-paid subscriber growth.

CEO John Stanky said they are seeing impacts from lower-income consumers cutting back. We will hear from Verizon and T-Mobile next week. Now turning to the transports, also in focus today, Union Pacific reporting a mixed quarter this morning. Customer volumes were down, with the company also saying higher costs, as well as disruption from weather events impacting results. Now after the bell today, we'll hear from truckers CSX and Night Swift. Volumes will also be in focus after fellow trucker J.B. Hunt missed earnings estimates earlier this week.

Their volumes were down in what executives called a freight recession, saying that the goods economy needs to improve. Scott. All right, Pippa, thank you. Let's send it now to Christina Parts and Novelos is here with a look at Taiwan Semi. Better than feared? Well, we can start by saying they've at least dispelled some rumors that we talked about earlier. We talked in the week. I mean, you were watching this, you know, wondering whether this was going to be a cut in some of their business, right? Right. A lot of people were, especially given that Apple is one of their biggest customers.

And that was exactly what didn't happen. They didn't cut their capital expenditures. And part of that was on today's earnings call, the company reiterated its full year guidance, actually stating that the range is going to be $32 to $36 billion. That includes the $40 billion plant in Arizona that is supposed to open in 2024, if TSMC agrees to the Chipsack stipulations. But the promise to spend comes despite this persistent slump in demand for electronics. TSMC warning that demand for PC and smartphones would remain soft, calling for a bottom in the

second quarter of this year, which is already typically slow. And we are starting to see what they are saying is a gradual recovery in the second half driven by new products like the three nanometer chips for the new iPhone 15. The company's still guiding lower, though, for Q2. And there's a few reasons for that. That's the lower than expected China reopening recovery, continued PC and smartphone weakness we just talked about. And then auto spend that remains steady and did see sequential growth, although there's still some concerns. And I know you talked about, and then auto spend that remains steady and did see sequential growth, although there's still some concerns, and I know you talked about that with many traders throughout the week and stuff. Is that going to be the next bucket to fall?

You can't, and you've made this point so well, you just cannot judge all these together in the same basket. It's PCs, what you just said, still weak. Correct. Judge Intel however you want to. Which is our next Thursday. Autos, slowing, NXPI, Texas Instruments on semi. Well, autos is still strong for a day. Stable, but slower.

Exactly, slower. So then because this entire correction has been so prolonged, that's where the questions are, is it going to happen to auto and is it going to be much longer now because we were wrong about the pc bottom and it seems with lamb asml giving mixed signals they said that earlier this week that there's still a lot of confusion on the timing of this correction and when it will improve lamb up six and a third percent christina thank you that's christina parts of nevel is right here post nine last chance to weigh in on our twitter question we asked who's gonna win the battle for AI? Is it Alphabet, Microsoft, Meta, or a chip stock by the name of NVIDIA?

You can head to at CNBC Closing Bell on Twitter. We bring you the results after this break. All right, the results of our Twitter question. We asked, who's going to win the battle for AI? You think Microsoft. I mean, it's close. Microsoft, 36.6. NVIDIA, 30.1.

Alphabet, top of our show. We mentioned that reshuffling, if you want to call it that, 27%. And Meta at 6. Up next, your earnings playbook. We're breaking down the big names after the bell how one shareholder is trading a key stock reporting tomorrow morning the big set up when we take you inside the market zone. We're now in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down the crucial moments of the trading day.

Joe Ternova is back with us laying out how he is playing P&G ahead of its earnings tomorrow morning. And Frank Holland on what to expect from CSX reporting in overtime. Right around the corner. Mike Santoli, you first. Tech's weak. Energy's weak. Discretionary's weak. Earnings weren't great. The data was kind of weak. So not a lot of mystery about it. We did talk in midday about how the market's rotation and resilience

has really been the story in the face of what had been a pretty cautious headline backdrop. So you got some wear and tear on it. I've been more focused as we've hit sort of stall speed and resistance levels the S. and P. of what the nature of. A pullback is going to look like. Is it just going to be kind of this routine

retracement remember we got an eight percent. Rally rebounding off of the mid March lows. We're kind of just surrendering a little bit of that right now we're at around Monday's low level in the S&P. So it feels like something's going on because it's been so, so calm in a tight, tight range.

It's unclear to me that anything new is going on except for, you know, maybe it's time for another little bit of a growth scare. We got some soft patch suggestive data and we're sort of living through it. But it's really not consistent. You still see services spending pretty strong. American Express had nothing alarming to say about the consumer. So it's all a lot of give and take in the cyclical picture. And maybe we're just going to be in this kind of pattern until May 3rd. You know, all the Fed speak hasn't really done much lately.

And it really doesn't matter until the chair himself speaks. Well, that's for sure. In terms of what the Fed's likely to do, I mean, I could say we're going to go beyond May 3rd. There's not going to be a clinching argument to the deep recession or just the slowdown debate. Well, this could be a word to be like, we're done. Yeah, well, that could be fine.

But then we still have to figure out, did you go too far before you finished? So I do think net-net, you can say, we have a dovish pivot or at least a pause, more likely a pause than anything else, coming sooner than we thought we would a couple of months ago. Because of the bank issue. Mostly because of the bank issue. And tightening credit. And all the rest of that.

Now, what did that buy you? We don't know just yet. So I do think you still have to kind of fight it out. And there has been it's been this sort of low volume churn in the market. People already have been relatively disbelieving or cautious about the market, even as hedge funds have felt forced to participate. So I think some of that's getting shaken out now. All right. So, Joe, we said tomorrow morning, Procter & Gamble. What are we thinking here? Personal care? This is important. They have to they have to restore margins to where they were before the pandemic. That's going to be critical. It's a stock that trades at 26 times. Obviously, it's in the JOTI ETF. It's been there for the better part of the last five quarters. But the expectations for tomorrow are pretty high.

They've got a very high bar to exceed. They're going to have to come in with revenue growth and really raise towards the upper end of guidance. Right now, it's flat for 2023 to maybe plus 4 percent. You want to see that move to maybe plus 4 percent to plus 6 percent. So the onus is on P&G in kind of a show-me state. There's other areas in consumer staples like Hershey and Church and Dwight, which are giving you better near-term revenue growth than P&G. But collectively, we own 11 consumer staples.

That seems to be the right place to be over the last 18 months. Mike, Staples, 26 times is not cheap for P&G. No, it's not. I mean, it's not, you know, kind of out of the range, but it's at the upper end of the range for what it is typically traded for. And I think it's a very similar story. Look, it has an Apple multiple and it's got the quality premium that is afforded to Apple as well. Totally different in other ways, except it's also a low top line growth story right now. So, yes, it is all about how much they can sidestep the cost side while, you know, kind of finishing up on the on the price increases on the product. So, you know, I do think it is, again, kind of the the reason you pay to have a boring but stable story. See if they can redeem that. You'll get, Joe, too quickly, a good read

on consumer trade down, just what they are seeing from the consumer in real time. Yeah, listen, again, so this is just my personal opinion and that's what makes a market. But I've already resigned myself to the fact that we're weakening. That's in fact what we're doing. And, you know, I cited the before auto delinquencies beginning to rise. That's a critical element. That's telling you how stressed the consumer ultimately is. So the Federal Reserve's got on May on May 3rd, whether they pause or not, if they do pause, it'll probably be the most hawkish pause in the history of monetary policy, because they're basically like your parents, going to let you out from punishment,

but scold you and tell you that if you do it again, the punishment's going to be far worse than anything you've ever felt. Yeah. All right. Well, we're going to see there. Joe, thank you. Frank Holland, CSX, good checkup on rail. We know that trucking is a little weak, so I'm really interested in what this company has to say. All right, let's start with the basics, Scott. Revenues are forecast to increase by 5%, profit by 10%. So really the key area that investors want to watch here

is the merchandise segment. That's where CSX gets more than half of its revenue, and it also is the area where they have their higher margin freight. That includes chemicals and food products. So earlier today, Union Pacific says shipments of chemicals were lower because of a slowdown in industrial activity. They also say grain shipments were soft

because of lower exports. So that's an issue right there that you have to watch when it comes to this report. Another area to watch is coal. So CSX gets about 15% of its revenues from coal. We had an unseasonably warm winter on the East Coast and even in the South and the Midwest. This is an East Coast oriented and Midwest and South rail.

So you should expect lower coal volumes. However, they didn't have the negative impact from weather that Union Pacific had. They had mudslides and snowstorms and everything's out there on the West Coast. The other thing to watch here is operating ratio. That's an efficiency metric. It's always key. The lower, the better when it comes to this one. So the estimate of 62.9 would be a 50 point basis increase from what it had just a year ago. So that's the signs that

investors are expecting a more efficient railroad, a year of efficiency for tech. But I think it's just a year of efficiency when it comes to transports as well. A year of efficiency seemingly everywhere. Frank, I'll let you bounce and get ready for that report in just a couple minutes' time. That's Frank Holland for us. Mike, I turn back to you as you heard the two-minute warning there.

You mentioned this on the halftime conversation we had, the difference between where rail is, where freight is. J.B. Hunt came out in the last couple of days and said, we're in a freight recession. Exactly, where airlines are too, which is a totally different dynamic. I did see some numbers earlier that the volume of freight

that is sort of in motion is at a relatively healthy level. It's back to maybe 2018, 2019, but the number of trucks on the road, license to carry freight is way up. So you have another one of these indigestion points in the market or in the economy that's been hard to pull apart from the straight old, are we just slowing and descending into recession? I do think that what they have to say commentary wise about their pipeline down the road is going to matter. It's a very noisy setup because, again, you've come from such high levels of activity, both in the goods demand and everything else, that you're coming off of it. The Philly Fed, awful number, but, again, it's a PMI-type dispersion index sort of thing,

this month worse than last month kind of thing. So it's not going to be a comfortable call or a high conviction call to say we're going to be able to skirt the slowdown risk and we're just going to muddle through. On the other hand, the banks seem to say we're not panicking yet in terms of what their customer activity looks like. Still in that buying the dip idea, right? I mean, the Dow again again, was down 200. Now it's down a little more than 100. Buying it until we're not. I'll see you tomorrow, Mike.

Thank you. All of you as well. You have some big earnings coming up. Morgan and John, pick up that story right now in OT.