Closing Bell - Closing Bell: The Tech Takedown… and Turnaround 2/9/26

Episode Date: February 9, 2026

Solus Asset Management’s Dan Greehaus and iCapital’s Sonali Basak tell us whether this rebound should be believed. Plus, Bill Miller IV tells us where he sees bitcoin bottoming out. And, have we reached peak uncertainty in public software stocks? Vista Equity Partners’ Ashley MacNeill gives her take. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Thanks guys. Welcome to closing bell. I'm Scott Wobner live from Post 9 here at the New York Stock Exchange. This maker breakout begins with what else. The AI trade, it has surged back over the past couple of days. Now we'll ask our experts over this final stretch whether it's a rebound to believe in. Let's take a look at the scorecard here with 60 to go. In regulation, the Dow is above 50K. The equal weight S&P 500 hitting a record high. You saw the NASDAQ at the top of the stack because tech is leading it there today. Nvidia, Microsoft, and Meta are all nicely higher yet again just after Friday's big burst, beating up software stocks. They're catching a bid too.

And we'll have a special report coming up and speak to star analyst Dan Ives, who just lifted two names on his coverage list today. It takes us to our talk of the tape. The tech takedown and now turn around. Let's bring in our panel, Solace alternative assets. Dan Greenhouse and I Capital, Shanali Bassix. Great to have you both with us. Shanali, you take a look at what's happening in the market today.

I mean, last week was so interesting, really bust up of a bunch of stocks in tech, and then Friday's big rebounds and followed through today. What do we make of it? One of the first things we did last week was take a look at what was in all the ETS that were selling off with everything you saw in software, and we started to parse through the noise, and you can easily see that there would be winners and losers, and by the way, there are a lot of crypto companies in there, too. And so you take a look at it in its entirety. There are bargains out there in the software space.

There are real opportunities here. You wonder what M&A looks like on the other end of this sell-off. And again, we don't think that it's going to be a clean trade. It will be choppy. You have to be selective. But there will be winners through this. The money continues to flow away from tech proportionally, right? It's going more towards areas outside of tech than it used to go in.

Deutsche Bank, sector funds excluding tech, have seen a record $62 billion in inflows in the first five weeks of the year. That's more than they saw in all of 2025. In all of 25 has been eclipsed already in the first five weeks of the year to funds excluding tech. What does that tell you? Well, listen, I mean, you see it in the price performance that the rallies broadening out. Since earnings season began, it's not tech, obviously. It's energy. It's consumer staples.

I think there's question about how sustainable some of this is. In the case of energy, some of this, of course, is geopolitical risk premium that's working its way in. and Staples has just been left for dead for so long, perhaps. But there are some commentary from some of the Staples companies that lower prices might engender better consumer behavior. But you see it in the performance you mentioned the RSP. You can look at individual stocks like Tapestry, Consumer Focused, Cisco, SYY, the food company, that's restaurants, train technologies.

The regional banks have done very well. So what you're seeing here is, as you mentioned, a pretty broad broadening out, if you will, for lack of a better word. You're talking about, you're telling me exactly why the RSP, the equal weight S&P, is up 5.6% year to date versus an S&P market cap weighted. That is only up 1.6. It gets there because of the kinds of things you're talking about. Yeah, that's right.

And for a long time I had argued on the show that it would be very difficult for the market to hold up if the Mag 7 and the AI trade, if you will, dive. Now, to be clear, software. It's really interesting. I'm not sure in my career I've ever seen an industry as large as software, sell off as hard as it has, and the broader market hold up. So that's pretty interesting. But the point I was going to make is we've argued repeatedly, mathematically, it would be difficult for the market to do exactly what it's doing if the Mag 7 and AI sold up. I think Google is doing a lot of work here, meta as well, holding up when Tesla and Microsoft and the like are having some trouble.

I mean, so that that tells you that the bones of this market. market are strong enough to keep us standing, if not running forward, despite some little ailments here and there that we might feel from the mega caps. No, I think that's right. I'm not sure I would, not that you meant to do this, I'm not sure I would call what's going on the software a little element. Obviously there's, at least for a lot of people, some systemic and concern. But what- I was talking even more about the mega caps, the fact that they have proven that

they don't need to lead for this market to continue to hit record highs, for the Dow to hit 50K, etc., right? That's fair. Yeah, and again, I mean, listen, again, Google meta holding up pretty well, and that's ameliorating some of the mag-7 damage, if you will. But yes, it's been very impressive the way the market has held up in the face. So, Al-E, Ed Yardinney says he could see Dow 70K by 2029. Irrespective of that, if you look at the nearer term, what he sees,

the fact that the quote-unquote delivery side of the economy, the transports, is confirming that the production side of the economy, the industrials, suggests that the market currently views the 2026 growth story as fundamentally solid. I couldn't disagree with that for a second. We're actually looking at a re-acceleration of this economy. Now, this is going to be a critical week. We have a lot of macroeconomic data coming out, but we can't ignore that GDP has been holding up.

And on the heels of that, so have earnings, corporate earnings. Now we can debate all day how much AI is going to make an impact. moving forward, will it be inflationary before it becomes deflationary? But broadly speaking, with rates where they are, the economy and earnings have held up. And certainly, that does set the stage for a reacceleration. I think now that you've gotten past all of the mega caps except for NVIDIA and you still have to wait, the focus is going to be pretty squarely, I think, now on the economy. Shanali's point, jobs report, right?

We get that this week. Feels like some in the administration on this network are already sort of conditioning investors for, hey, could be a little weak, but don't read too much into that because there are a lot of other good things happening, and there are reasons behind a potential weakness related to productivity gains and et cetera. But the backdrop of what Yardinni says, is it as hard to argue with as Shanali says it is? No, with the caveat that I have no idea where the Dow Jones is trading. The number itself is irrelevant. But the methodology behind it, delivery side plus the production side, we're fundamentally

solid as a result of both of those living up to where they would need to be. Yeah, my argument for two years has been that the worries about the economy are probably misplaced based largely on the strength I was seeing and still see in the consumer, and you hear that again from earnings season. So I think the idea that the real economy, if you will, and will base that off of the transports in the case of the stock market. Sure. You look at the chart of CSX, Southwest after reporting, shot straight up, and the commentary from a lot of those companies tell me that the economy is doing fine. And as Chenali mentioned, we're going to get retail sales this week, CPI, the jobs report.

We know the job story is meaningfully slowed down. Private sector job creation last year was sub 100,000 on average. So if it comes into 20,000 or 50,000, that larger story remains intact. But the one final point I want to make is Shanali brought up what companies are talking about during earnings season. I'm hearing from a lot of companies about AI being put to use. Bank of America talked about the number of people they employ for coding being down. PPPG talked about designing a new product. So did Cody.

A couple of people talking about marketing campaigns. MGM talked about reducing check-in times, which increases productivity in consumer engagement and enjoyment. Obviously, met as the poster child for engagement. So I'm already hearing that that secondary argument, that productivity is going to offset some of the slower labor market. That seems to already be happening. Maybe not enough, but it seems to already be happening.

Too much being made or too much angst, Shanali overall, the hyper-scaler spending, because I asked Jensen Wong about that on Friday when he was with me, and he said it was appropriate and sustainable. Look at this morning. Look at Alphabet, trying to raise $15 billion with $100 billion in orders and bringing in $20 billion instead. Clearly, the capital markets are wide open. Now, our investors getting a reasonable return. We know credit spreads are really tight, but the money is out there, Scott. And I think that that's an important element of this, that the money keeps on going towards this thesis.

Now, what the ROI will be of that spend is still yet to play out, and that's where the caution therein lies. You want to give me something quick on that, too, the idea of, you know, the market got really upset about the spending last week yet again and what Jensen said to me out in California. By the way, what a great interview with Jensen. You're a real pro. Thank you.

Really great. But to the point, I keep making the same point time and time again. As long as the things that Shinali just mentioned are happening, this is going to keep going on. There's going to be selloffs on a given a headline. The operative sentence, the operative two words in your sentence was yet again. We've seen this story. The market gets momentary angst. But we're spending $700 billion on building out data centers, chips, et cetera, et cetera.

It's not as big a GDP boost as some people argue. Could be inflationary. Could be inflationary. So there's more to the story. But generally speaking, as long as that's ongoing, how does this possibly end? All right. James last words. We will leave it there.

Yeah, exactly. Remember that you said that. Dan Greenhouse, ladies and gentlemen. Chenali, thanks. Cinelli Basque, joining us here again. We are closely watching software stocks. As we mentioned at the very top of our program, Sima Modi is here with more on what is happening there today because Seema, they need to be watched every day.

They do, Scott, a much needed rebound helped in part by Open AIs' latest comments on re-accelerating growth right now. The rally being led by Oracle following a big upgrade to buy at D.A. Davidson, the analyst there is citing Open AI, Open AI, but also saying Oracle's core products, which is the database, cannot be vibe-coded away. A different story there from Monday.com. Weaker revenue outlook, co-CEO Roy Mann, said the company is no longer providing long-term for 2027 financial targets due to the, quote, evolving nature of the AI landscape. So underscoring the challenges and crafting a long-term vision when AI is developing as such a rapid pace. That's stock down 22%. It's also prompting management changes, AI in general, workday, surprising the street, swapping out its current CEO.

for its co-founder and Neil Booth Street, RBC Capital Analyst cheering the move saying battle-tested management team is essential, yet shares are falling about 5%. So there's still some names not joining in today, Scott. Yeah, OK, Seema, thanks so much for that. That is Seema Modi, of course. I also asked NVIDIA CEO Jensen Wong out in California about the software sell-off. Here's what he said. We are addressing the largest software opportunity in history. For the very first time, software is not just a tool.

tools like Excel. Now software uses tools. So these AIs use Excel. And so I think the the opportunity for this new new era of software is incredible. Okay, Jensen Wong and meet with me last week. Dan Ives is here, star analyst of Wedbush. I mentioned the top of the program that you moved a couple of really beaten down names into your AI 20, that being Salesforce and service now. What do you make of what Jensen said amidst all of this skepticism about that space. I think the hearts and lungs of the AI revolution will be in software. Now look, right now it's data center build out, GPUs. I mean, you're still in the early days of this, what's going to be a 10-year build-out. But software is going to be key of the use cases. I mean, it goes to our point. If you look at Palantir and ultimately followed

by Snowflake and Mongo, in my opinion, to say Salesforce and service now are structurally broken companies. To me, look, in my career, I think it's the most disconnected call that I've ever seen, investors, thinking that software is not going to play a huge part of the AI revolution. It will. That's not to say that certain ones aren't being disintermediated in a extraordinarily large way, or there's a belief, if they're not today, that they will be tomorrow, right? as Brad Gersner was telling me, you're not selling these stocks because you are so upset with what's happening today, but you now more than ever need to see some justification for the multiples that these stocks have commanded. Let's take that.

What's the P.E. of Salesforce and Service Now. Can we show that? There it is. So, okay, Salesforce is down to 15. The forward on service is almost 25. Is that justified? It's my view that like the monization, because like when I look at the revenue for Service Now or Salesforce, I could argue there's 20, 30 percent incremental revenue from where they are today.

We're talking, you know, ultimately tens of billions of dollars when it comes to Salesforce that are not factored in to the valuation. Because I get in the near term, it's a headwind. Bending off, I think would be the first one to admit it. But to say that Salesforce and Service Now, given how integrated they are in it, enterprises in the stack, you look at the hundred thousands of customers as these use cases play. You haven't seen it today, but in the next six, nine, twelve, eighteen months, I think what Jensen talked about is exactly right. You cannot paint all of them with the same rush. You can't just say an SMB pure play is they're going to be impacted as much as a sales force

in Adobe, a workday. I mean, not everything has traded miserably, but obviously so many have. I mean, when you look at all these companies, how do you know what justifies a higher multiple versus ones that don't? We showed a pretty good discrepancy in the forward P.E.s of both of these names, which have equally gotten hammered. You can maybe, can you look at a sales force and say, okay, at 15 times earnings, that stock has corrected enough that it looks attractive, but just because you can make that case for one doesn't necessarily mean you can make it for the other, but you are. Because I view it is, No, look, Sales Force is the one,

if there's one name that's been so dislocated relative to what I believe would the opportunity would be, it's Salesforce. And I can also argue some of the cybersecurity names like Powell Alto and Crowdstrike. When I look at Service Now, betting against McDermott has been the wrong move. If you look at that install base,

I can say they were early on in terms of AI, and now they're really sort of being viewed as they're going to be disintermediated. But Scott, like I've talked to what, 40, 50, CTOs, CSOs, IT managers over the last week to make sure, the stress has to make sure that I'm not looking at wrong. And I feel further conviction in this sort of... Can you just those, those, that's like asking people on the football team, hey, how's the

team? Everybody's like, hey, we're great. Everything's great. Can you trust that you're getting the best opinions on what's really happening by asking the people who are at the companies where their stocks are declining? Aren't they all trying to... Well, I'm talking about the buyers. I mean, the buyers of Salesforce, the buyers of service now, the buyers of cybersecurity.

And I feel I come away viewing this as, I mean, I'd say it's a generational type of opportunity in terms of what's happening in software. Okay. Let me ask you this. Microsoft got downgraded today by Melius, which says, quote, Sotcha lost the AI narrative. I know you're going to counter that. But doesn't the stock kind of worry that Mellius is right? Yeah, and Ben and analysts, you know, who have huge respect for. But is there a...

But... But the AI revolution is not going to be successful unless Microsoft's successful because of how integrated they are in enterprises, in Azure, in the backyard of, you know, ultimately really the core enterprises movement to AI. Have they hit some sort of perception soft spot here relative to Azure, relative to cap-backs in terms of not all being allocated? to Azure, yeah, but I think this is one where when I look at Microsoft, I think it's stock that has a five in front of it and six in front of it over the next 12, 18, 24 months.

I just think near term right now it's a guilty to proven innocent. Well, I mean, how do they prove themselves to be innocent? Mellius suggests today that they need to increase their CAPEX markedly. That's the word that they use, not me, to keep pace with what Google and Amazon are doing. So their free cash flow, at least in the near term, is going to take a big hit. Isn't the market aren't investors going to have a problem with that? I think investors clearly, you've seen that since the quarter, right, in terms of the sell-off. My view is when it comes to my rate, they're not going to have to increase cap-x maybe to the level that they're talking about,

as well as also when it comes to the enterprise, the monetization, they've only monetized 5% of their enterprise customers. That's why I'll bet on the Della and Redmond to navigate this. Look, right now, there's obviously very negative sentiment, and I get the call. All right, Dan. Thanks for being here. It's Dan. Ives joining us right here. Private credit, meantime, also getting caught up in the software down draft. And we did hear from one of the biggest CEOs in that business today. Leslie Picker joining us now with more there. Hey, Les. Hey, yes, Scott. Apollo's shares are somewhat higher after reporting fourth quarter earnings that Goldman analysts describe as a, quote, strong quarter with little to pick at. As with its peers, though, Apollo's call was overtaken by questions and commentary about software. CEO Mark Rowan describing the firm's exposure to, be essentially negligible while saying he thinks the market's, quote, overreaction to software is extreme. If you were aggressive at a point in time when valuations were very high and not a lot of diligence was being done and people were expecting growth forever, you're playing defense now.

I assure you, we are on offense and software will be a very attractive sector, albeit not at the valuation levels and with the kind of underwriting. That has been done previously. President Jim Zeltar later added that the firm's estimates that software represents about 40% of all sponsor-backed private credit and 30% of PE deployment for more than a decade. Zelter said software represents less than 2% of Apollo's total AUM, which is much less than their peers. Although, as you heard from that Rowan commentary, they may be opportunistic down the road if valuation gets to an attractive level, Scott. Yeah, we'll see. interesting and important to keep following that.

Les thank you, as you always do, Leslie Picker. We are getting some news on Target. Courtney Reagan has that for us. Hi, Court. Yeah, hi, Scott. So Target is making a big investment in its stores payroll. So according to a memo just sent to Target employees from Chief Stores Officer Adrian Costanzo and chief supply chain officer, Gretchen McCarthy, the retailer is putting, quote, significantly

more payroll into stores. Not getting a dollar figure, but I'm told more details will be shared at Target's upcoming financial community meeting, that's on March 3rd. So the investment will mostly be made in additional labor and hours and new guest experience training for every team member at every store. However, it does come at the expense of eliminating 400 roles in supply chain and 100 regional office rolls, so 500 total. One of new CEO Michael Fidelke's key priorities is a more consistent guest experience, which obviously seems like they are starting with the stores. Scott? Okay, court, thank you. Courtney Reagan. We're just getting started here. Coming up next,

trading the crypto crush. Bill Miller the 4th will be right here, sit next to me to tell us where he sees Bitcoin bottoming out. He has a number in mind. He'll tell you next. Bitcoin under 70K as that trade has unraveled lately, although it's back above it now. It's at 71 too. So we'll keep an eye on that. Mackenzie Segalis has more for us. Hi, Mac. Hey, Scott. So Bitcoin testing that 70K leveled today, though investors are Still on edge after last week's sell-off when implied volatility spiked above 97% the sharpest intraday surge since the 2022 FTX unwind. Now, there are early signs of dip buying.

Spot Bitcoin ETFs pulled in more than 300 million net on Friday, suggesting some institutions are cautiously stepping back in. But the bounce hasn't sparked real conviction. As one analyst put it, there's still no rush to buy this move. And with Bitcoin failing to behave like a safe haven through all this geopolitical stress, the digital gold story isn't showing up. And the setup, it looks fragile as well. As we've been seeing, thinner liquidity can turn small flows into big moves fast like Friday snap from 60K back towards 70. Scott?

Mack, thank you. We will follow that. Our next guest continues to be a big believer in crypto, joined here on set by Bill Miller, the fourth Miller-value partner, CIO, and chairman. It's good to have you in the house. It's great to be here, thanks. All right. So you just heard the report. I mean, you see what's happened here. Where is the bottom? That's how I teased it. You have a number in mind. What is it? I actually think there's a reasonable chance we saw the bottom last week at 60,000. There's a couple of reasons for that. First and foremost, $60,000 is the cash production cost for a new Bitcoin. So what happens is when you get below that, the weak miners start going out of business. They shut down, and they're the main source of marginal selling pressures.

So when the weak hands are out, okay, you have a less selling pressure and it's likely to put in the bottom. The second reason is Bitcoin trades on global liquidity. And if you look at when it peaked in the fall, it just so happened to be the exact same time that the Fed noticed huge stresses in short-term funding markets that effectively created an entire 180 on monetary policy. So if you look at what the Fed was doing in the fall, they were allowing $50 billion a month to go off of their balance sheet. Just drain away.

Now, what happened in December? They did a complete $180 on that. And what they're doing is buying $40 billion net a month. So you've seen a net swing in liquidity from the world's largest liquidity provider to the tune of $90 billion a month. So you have this huge floor of liquidity, right, that just came in. You've got the cash production costs there. And there's another technical element here, which is if you look at historical bottoms in Bitcoin, they've often happened when the percent of the supply in loss exceeds the percent of the supply in profit.

And $60,000 is right around where that happens. So you have a whole bunch of factors converging around $60. Okay, it's funny you mentioned the Fed because Fed, Governor Waller speaking at an event today out in La Jolla in California said the following that, quote, unquote, some crypto euphoria that came in with Trump is fading, that those are the words he used, that risk positions caused mainstream firms to sell crypto, and that clarity on crypto seems to be stalled in Congress. What do you make of what the Fed Governor is saying? Well, I think he has a good point in that euphoria tends to be the highest at the top, unfortunately,

and sentiment tends to be lowest at the bottom, which you just heard from the report earlier. That's what we're seeing right now. So I think it's a good time to buy. So are we, have we done anything to dispel the most bullish aspects of what the evangelists have suggested to us for the better part of the last few years? Store of value, digital gold, replace the dollar, but I could go on and on and on. I mean, it seems like we've one by one just knocked all those down. Is that true?

Well, what I think is interesting about the whole store of value argument. is that a lot of people view the dollar is a store of value, but reality is, monetary policymakers want it to decline in value by 2% a year. So they're explicitly saying it's going to go down by 2% historically a lot more over a long period of time, but that's a store of value. I think something where you have a fixed supply, you have energy required to create new units, is a much better form of a capital accounting system. And so if you look at where gold is today, if people viewed it as digital gold, which

they don't yet, and I think that's where the opportunity is because it's functionally superior to gold. But why would they ever? Why would they ever? And isn't gold and the activity and that chart that we just showed you suggesting that that's where people think gold is in gold? That's where the risk hedge is in gold. That's where the inflation hedge is in gold.

That's what countries are buying in global central bank, gold. Sovereigns are gold. Right. Well, it has been for the past year or two, for sure. But if you look at it over a long period of time, you zoom out, Bitcoin has crushed gold. But the reality is, if you look at it on a quantitative basis, its correlation with gold over the past decade on a weekly basis is 0.09. So there's effectively no correlation with gold. Bitcoin will continue to go up as long as people do the work on it.

They understand what they own, and they come around to actually educating themselves on why it's important to own something. You want to give me a quick thought on what you think of the markets, generally speaking, where we are here, Dow 50K, equal weight, record high? Yeah, I think we have a long way to go higher. I think you're going to continue to see broadening, continue to like small cap value relative to the hyperscalers. You look at some of these cap X numbers that are coming out of Amazon, Google, through the roof, right? And so the big argument in the past has been, yeah, these guys deserve these huge multiples because they're growing faster than everyone else. and they have huge incremental free cash flow margins. Well, not anymore because they're stepping up their catbacks.

There's going to be no free cash flow from a lot of these guys. I know, but Jensen Wong made the point with me last week out in California that if you're looking at that way, you're looking at it the wrong way because you're going to spend and then you're going to get all the free cash flow that the bears are worried about is being deteriorated by the pickup in spending. You don't buy that? Well, there's actually a really good study that Bain did a couple months ago where they found that to justify all of the CAPEX dollars going into AI,

you would need to generate in the next five years. Within five years, you need to find more annual revenues than the combined revenues of Google, Amazon, Microsoft, Meta, and the other guys as well, and Nvidia. And so that just has to be coming out of nowhere, right? And so it remains to be seen whether or not it's going to happen. It's good to see in person. We'll talk to you again soon.

Thanks, Bill Miller, the fourth. Up next, Super Size Betts, Contessa Brewer, following the big money numbers. And she got some new ones related to last night's big game. One by, of course, Seattle. The bell back after this. All right, welcome back. Super Bowl bets hitting record highs this year. Contessa Brewer is here with all the details.

Me, he had some really big numbers earlier. It kind of surprised me on the growth that everybody's seeing. I mean, there's been so much attention on prediction markets, especially, right? But it turns out what's boring for fans, is super for sports books. If you think about the game this way, parlays typically focus on star players, scoring touchdowns,

and surpassing yards expectations. Instead, what you had in this game was a lot of low points, lots of field goals, and likely a lot of busted parleyes. Fanatics, in fact, told us they materially overperformed on parleyes. Draft Kings and Fandul have not yet characterized the action from the big game,

although Draft Kings has earnings this week. But Draft Kings especially, it's seen a run of sporting events with fan favorites winning. And then they have to go onto their earnings and say, oh, gosh, this really hit the bottom line. So we'll wait and see what they have to say on Thursday about Super Bowl results. In the meantime, their prediction market platform is going to be under the spotlight. New partnership with crypto.com. And then you have FanDuel and Fanatics both entering the prediction game as well. Kalshi saw trading volumes at nearly 20 times.

last year's Super Bowl, according to Piper Sandler. It did hit some technical issues, though, with deposit delays because there was so much traffic yesterday leading up into the game. CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment. That's the disclosure. I think it's worth watching how many new people who don't bet on sports go on to Kalshi and place a first sport.

A lot of the surveys that I saw had to do with people for the first time putting money on the game. The volume wars, if you want to call it that, are going to be really interesting over the next year. Won't that cause the draft kings and the fan duels to increase what are already really, really high customer acquisition costs, I think you guys call them? Yeah, so those they call them cacks. I hate that. The customer acquisition costs have come way down. I know, but aren't they going to have to go back up? That's an interesting point. What they say, like Fantle has not really invested anything on customer acquisition for the prediction platform. They say it's coming from states where sports gambling isn't legal.

So there's a big yen for it. Like California, right? Yes, yes, California. Where the Super Bowl just was. So frustrating for them. Guess where the Super Bowl is next year? Where is it? California.

Yeah, L.A., right? Got back in L.A. Boy, L.A. got lucky with the number of Super Bowls they're hosting. Are the tribes going to revisit trying to get this in the books? Does it really cannibalize sports books? It doesn't look like that right now. Good stuff, as always. Contessa, thanks.

Contessa Brewer up. Next, have we reached peak uncertainty in software stocks? Feels like it's Ashley McNeil. She'll tell us more next. Have we reached peak uncertainty in public software stocks? Let's ask our next guest, the Vista Equity Partners, Ashley McNeil. It's good to see you again. You too.

That is what you suggest. Why do you think we have finally reached that? Well, I don't know if it's that we've finally reached that. I mean, software's had periods of dislocation like this before. In fact, I think since software's existence, we've had around nine of these in the public market, all coming in around a value compression of about 30%, which is where we sit today. So it's not that this is going to be over. It's more that we've reached a moment of peak uncertainty where people are looking for data points

of AI implementation within the software and are struggling to find them. there's real fears around sort of where the terminal value for software ends up being given all of the dislocation. And I just don't think that people have the ability to zero in and figure that out. I want you to listen to what Brad Gersner told me out in California last week and get your reaction to it. Here's Brad. I'm not penalizing them because they're missing their numbers today. I'm just putting it in the too hard bucket because I can't predict those future numbers. So the only way that reverses got is those companies have to,

accelerate their core revenues and show that they are beneficiaries of AI. The companies that do that, Databricks is accelerating their core revenues. I think this quarter, they grew over 60%. Snowflake, Click House, these are companies that are accelerating their core revenues because AI relies on them. I think they'll do fine, but application software, where I can't see into the future, they're going to have lower multiples. Show me, right?

I mean, this is the messy middle part. This is part of the J-Curb where we move from the AI enablers, the hypers, into the AI adopters. And we're seeing software sort of come into sort of three buckets. You know, the first bucket being software becomes the agentic enterprise solution. It is embedded. It is the layer that embeds that intelligence across the organization. And then there's going to be workflows that don't need agentification,

that don't need that intelligence layer. And those are software companies that become your rule of 40. going to rule of 60 or 70 because they're embedding AI within their own organizations. And then there is a bucket of workflows that are generic or commoditized or ultimately the software company has not innovated fast enough to keep up with the pace of change. And yes, that is companies that are going to see declining revenues. If we're witnessing this taking place in the public markets, where you guys, Vista Equity, you guys play huge in private markets, where the majority of software companies exist. If multiples are correcting to the degree that they are now,

and if you believe Brad will continue to do until you can get some show me behind it, what are they doing in the private market? Well, the uniqueness of the private market is the ability to incorporate this change without having to be in the public eye. Without the scrutiny. Without the scrutiny. At Vista, we have 90 portfolio companies. We have a third of them are deploying agentic solutions or agents out in the field, and you're able to collect data and trial and air from those deployments to understand which workflows really benefit from the contextualization of this intelligent layer, this thinking layer, and which ones ultimately don't need to be agendified and can continue to provide services without needing these changes.

You talk about what you call competitive differentiators for Agentic Enterprise Solutions. First on the list is context moat. I feel like moat is the most critical word today and maybe the hardest to figure out. Because what we thought could be the moat has been busted to some degree. Now there is no moat. Maybe there is, but we're not sure anymore who has the moat. Is that true? I think the way I think about it is that like we are going through a seismic shift in softening.

It's similar to what happened in 2014 when we saw software having to adapt for moving on-prem within an organization to the cloud. And that's similar to what we're going through now. The incumbency moat, I think, is being overlooked in this most recent market pullback. And that cumacy mode comes in three parts. First is like the contextualization of the data. Data is a transitory mode, meaning your customers own it and you have domain and sovereignty over it as a software company.

Your ability to contextualize that data, say, here's what? what the data means and here's how you need to augment your workflow, it benefits you if you are a trusted partner, which if you've collaborated with these enterprises for the better part of 25 years. And I'm talking about hospitals, insurance companies, government agencies, these are highly regulated industries that can't take the chance of the agent only getting it 93% right. It is a deterministic outcome. They must get it right. And that is where software, the incumbent software, provides that certainty. And then finally, it's a the platform. If you look at these very large software companies and some of them that Brad

even mentioned, they're embedded within an organization at several different parts. They have several different features and products within an organization. Adding the agentic layer to those different, they will understand how to add those into each of the different workflows. I feel like we get smarter on the topic every time we talk to you. Thanks for being here. Anytime. Thank you. Satchel McNeil with Vista Equity Partners. Up next, we run you through what to watch for when on Semi reports top of the hour. We'll do that in the market zone, and that's next.

All right, welcome back. We are in the closing bell market zone. Mike Santoli and Truist, Keith Lerner, here to break down these crucial moments of the trading day. Plus, Brandon Gomez on what has shares of him and hers tanking today. And Christina Parts and Nelves is standing by with what to watch for from On Semis report in O.T. Michael, to you first. What are your thoughts? I mean, the market is trying to make the case that it's back in rhythm a little bit.

Maybe, you know, kind of overdid it in terms of walking away from some of the mega cap names. It really is Nvidia, Microsoft, Broadcom, protecting the S&P today, although it still is, again, broad enough that it sort of earns the market a little bit of legitimacy for this move. We still remain stuck in this zone in the S&P. The VIX has had a nice spike peak from last week's, you know, a little bit of a shakeout, and that often shows you the market has found its footing again after it sort of goes up and mostly gives up that gain. So I think it's all to the good.

I still think, you know, we kind of are lucky to have gotten to this point five weeks into the year without too much more payback at the index level. But I guess that speaks to the underlying resilience. I mean, and, you know, resiliency of tech and these mega caps, which are getting some nice follow through today, Mike. They are getting follow through. I still think that there was enough of a retreat in most of those names that you're still in kind of snapback mode. You don't really know if the stories are truly believed again with high conviction. You look at things like Invidia, great two days still kind of stuck right in the middle of this multi-month range. So I think it's positive that, again, the market is trying to rebalance itself again a little bit.

But I'm not sure that we're back to the days, you know, when we just sort of, you know, allow those stocks to carry things higher. All right. I suspect we will hear much more about this top of the hour with you and Mel. And we look forward to that in overtime. Mike, thank you. Brandon Gomez. Tell me more. What's going on here with Hems and hers? Hey, yeah, Scott.

Always an update. Hymns tanking after Novo Nordisk filed a lawsuit against the company asking the court to permanently ban HMS from selling compounded versions of its drug, citing patent infringement. Now, HIMS did pull the drug already over the weekend after HHS on Friday referred to the DOJ to investigate the company. HHS General Counsel joined me earlier today with a clear message for the industry. If you're in the market of providing health care solutions to the public, do so in a transparent way that the American public can, rely upon. If you don't do that, we're watching and we will make referrals as appropriate. Novo shares higher on the crackdown. And despite the FDA saying one of Novo's TV ads for its new obesity pill includes false or misleading claims, Scott, a sensitive market story right here.

Yeah, no doubt about that. Brandon, thank you very much for that. All right, Christina, on Semby. What do we need to know here? Well, this story here is really just playing defense while waiting for an automotive recovery that, I dare I say, keeps not showing up. Analyst, I do expect a modest beat for this company, but the real question is when management sees demand actually turning. There were recent results from peers like NXP semiconductors and Texas Instruments that offered some hope, but Texas Instrument Strength is really coming from data centers and industrial areas where On pretty much has a little bit less exposure. What On does have is massive auto exposure. Over half their revenue and that market is, it comes from, I should say, auto and that market is still,

market is still digesting inventory. Management keeps talking about, quote, stabilization, not necessarily recovery. The longer-term story, though, is solid. They're building chips for EVs, self-driving technology, and AI data centers, but that growth is still a couple of years out. Until we see auto demand actually recover,

not just stabilize. This stock could remain in a wait-and-see mode, with shares up about 5% just in the past month, 21% year-to-date. All right, Christina, thank you very much for that. Christina Parts of Novelas. All right, Keith, you tell me, after last week, how do you feel now coming into this new week? I mean, you've got a lot to think about.

Dow holding above 50K, equal weight hitting its own record high. But at the same time, now you have the mega caps and tech coming back. Yeah, well, I think the underlying action is positive. Scott, if you brought that out, we're seeing global markets break out to new highs, the EPI index, Japan making new highs, emerging markets making new highs. And I think it's a healthy sign that after last week where we saw the index, industrials and transpose make new highs. We're seeing some money come back into the technology sector.

The technology sector is bouncing off that 200-day moving average. And, Scott, let's remember how much this sector has been re-rated by moving sideways because the earnings momentum for this sector is still the strongest among all the sectors in the S&P. You like the small in the mids, though, still. I mean, even with this move, would you still lean more heavily there rather than into where the rebound has taken place? I think on a short-term basis that tech likely has more upside, but I'll message this year after being primarily focused on tech and communications last year. We still like those areas, but I think with small caps and mid-caps, they may be due for

a digestion, but they're coming off 20-year relative lows. So ultimately, they have more to go as this economy shows an uptick. So, Scott, I don't think it has to be either or. I think it has both short-term. I think tech has a little bit more upside. Why did you upgrade the emerging markets as we look towards outside the U.S. US. Well, when we upgraded emerging markets in recent weeks, it's had a nice run over the last year, but since 2007, it's only up about 15%. So what do we see recently? We saw our breakout

of this big sideways range at the same time in our work, which really changes, the earning trends have started to move up in a meaningful way. So the bottom line, Scott, is, you know, we've had a nice run, but upside potential remains, given how much they've underperform over this long period. Now we have prices in gear and we have earnings in gear. At the same time, relative valuations are still relatively attractive. Put that together, we should have a more constructive view of emerging markets. One of your more recent moves was downgrading gold. How much conviction do you have by that call? Was it more just simply a tactical thing you did because you feel like we maybe have peaked for a bit or what?

It's a ladder. We downgraded that Thursday right before that 10% sell-off there on Friday. And in our work, we just got very extended. Gold was about 40% above its 200-day moving average. That's the most since the 1980s. We just think it needs time to digest and really chop around structurally. I think some of the drivers are still there, but nothing goes up in a straight line, Scott. I just think it needs more time to rest here. It's interesting how we've bounced back.

I mean, the market probably would have had every reason to maybe give a little back today after such a strong move on Friday, and it just didn't happen. We'll have to see where Keith earnings continue to come in, and we still have a lot to get to. Even though we have finished, except for Nvidia the MegaCaps, we'll talk to you soon. It's Keith Lerner with Truist joining us right now. So the bell's going to ring.

We start a new week, and we're going to finish the first day of it into green. Cross the board. Again, Dow holds it above 50K, the equal weight S&P. It's a new record high, and I send it into a red end. over time with Melissa and Mike.