Closing Bell - Closing Bell: Time to Protect Some Profits? 5/30/23

Episode Date: May 30, 2023

Nvidia joined the trillion dollar club today – the first chip stock to reach that milestone. So, what’s next for that stock? Is it time to take and protect some profits? Top analyst Stacy Rasgon and shareholder Bryn Talkington of Requsite Capital give their expert takes. Plus, Lauren Goodwin from New York Life Investment Management is raising the red flag on what she sees as the next threat to stocks. Plus, the key metrics and themes to watch when HP, HPE and Box report after the bell.

Kelly thanks so much welcome to closing bell I'm Scott Wapner live from post 9 at the New York Stock Exchange this make or break hour begins with the mania around AI stocks many including Nvidia hitting new highs yet again today this is questions intensify over whether it is all too much too soon and a bubble found a burst we discussed that with our panel of experts in just a moment we're also of course of course, watching for any developments out of Washington right there at the Capitol, where the House Rules Committee is now meeting on that debt ceiling deal reached over the weekend. In the meantime, here is your scorecard with 60 minutes to go in regulation, a relatively tight range for stocks today. The Nasdaq once again, where the action has been throughout much of the day, Meta and Microsoft, Apple and AMD among the standouts there. Tough to get much going elsewhere, though, as energy and staples lag. It leads us to our talk of the tape. The Trillion Dollar Club getting a new member today. NVIDIA becoming the first ever chip stock to reach that milestone. An astounding run for a stock that has just simply soared.

What now, though, is the question? Is it time to take and protect some profits? Let's ask requisite capitals. Bryn Talkington, who owns the stock, also a CNBC contributor. Bryn, welcome. It's nice to see you. How are you thinking about this? Are you tempted to take some chips off the table and have you? I have not. I haven't positioned appropriately.

And I think that, as I said last week, NVIDIA was under-owned going into earnings. And boy, did we see how under-owned it was, because you have just seen such a massive pile-in of investors who haven't owned NVIDIA, which has been a publicly traded company for 23 years. So I do think, though, the move in general has gone so fast. And I think it's gotten too fast, too quick, because Jensen said Scott on the call, but he thinks over the next 10 years, not over the next two, he thinks that data centers essentially

are gonna be recycled and reclaimed using accelerated computing. But that's 10 years out. And I think ChatGPT captured all of our imaginations of what AI could do. It clearly captured NVIDIA's market cap. But I think how companies monetize, how much double ordering was done with NVIDIA, we just won't know. And so I do think the frenzy will happen.

But once again, as we know, frenzies last way longer than all of us ever expect. I just love to try and get into the mind of an investor. I think our viewers would really like to channel the same. I want you to listen to what Josh Brown, a longtime NVIDIA investor, told us today on Halftime Report as he said he trimmed a quarter of his position. Listen.

Basically, you have arguably the best stock in the world, but it's 46% above its 50-day moving average. That's the sixth highest reading ever. And you just have to say to yourself, how likely is it for there to be strong gains in the very short term from here? It's not impossible, but the likelihood of a reversal grows. So explain to me, you know, give me the psyche of somebody who loves the stock while at the same time suggesting, yeah, there's a bubble. How can one exist at the same time? It's about managing your position, right? As I said in the beginning. So he still has 75 percent of the of the position. He sold 25. And so I think that long-term investors think that way just because

it's so amazing what's happened. But if you look back, since NVIDIA has been a publicly traded company, there have been eight years where it's had a return of over 100%. And in fact, in 2001 and 2016, the stock was up 300 and like 216 percent respectively. So we're still not even at those levels yet. And so I think this is what's hard to be a long term investor in a company is you have to know how to size the position because so few people own the long get that long term return of stocks because they just can't believe it's going to continue to continue to go on. Yeah. Let's bring in Stacey Roskahn now of Bernstein's, one of the top chip analysts on the street to join the conversation. And we've been with him. We've been with you, Stacey, every step of the way here before earnings,

after earnings. And now we'll take the pulse of this whole thing yet again. Is the pulse speeding too fast? Do we do we need to slow things down? Look, yeah. So there's going to be a controversy right now that the significant upside we're seeing right now is that I think you were kind of getting at. Is it a pull forward like from next year or is it not? I don't I don't think we know yet. That being said, I think it's definitely not a pull forward to the next few quarters. Like they're clearly having upside to demand. They're clearly having upside to demand in the second half.

They just guided 11 billion for Q2. Knowing NVIDIA, they probably think they can beat that number. I would not be surprised to see numbers continue to go up in the near to medium term. And then, look, even if we get a pull forward in digestion, undoubtedly it will happen at some point. This is a company. Their business does have digestion cycles. We've seen them before. We will see it again.

But I think it's hard to argue that the opportunity in front of them is not large and that we are not early. We are clearly early. This has just begun. I think the opportunity is enormous. I think we are at a paradigm shift in terms of how data centers and other things are architected. And if you're looking out three years, five years, ten years, I remain convinced that the upside is still considerably, like, much more in front of us than it is behind us. Over the next year, you're, Nate, the next year, I guess we'll worry about next year when we get into next year,

but at least the next several quarters, my guess is numbers go higher, right, not lower. I think what just astounds me and others is how the guide could be so far beyond what even the very best on Wall Street expected. And I put you in that category. You've been one of the top-rated chip analysts for as long as I can remember. So how does everybody seemingly get blown away and blindsided? Look, it was a big number. And you have to remember, like if you were for example if you're looking for like wafer starts or something in taiwan as an indicator it's not

that many waivers these piece of these things are really high it's not that many units like relative to say like something in like the smartphone space you know we sell what do we do like a billion one or a billion two smartphones every year what does nvidia do in terms of unit volumes for data is there a hundred thousand a month two hundred thousand a month something like that it's not that many so the incremental like in the supply chain for that kind of stuff and maybe that starts to pick up more in the second half but but but initially that incremental is not that big and that's probably part of it um we all knew that they were going to have upside like we knew that but just the magnitude of it like it doesn't take a lot of wafers for example to drive that much revenue just because

the asps the prices on these things are so high let's bring in another contributor of ours uh if we could stacy adam parker i think somebody you know quite well of trivariant research uh hey stacy who used to be for all of those of you who don't know, at Bernstein as a chip analyst. Adam was my direct predecessor, actually, so yes. Well, we're fortunate to have both of you today along with Bryn. So, you know, Adam, when you look at this as now sort of the innocent bystander of sorts, what is your view? I mean, there's a couple of things on the macro sidestander of sorts. What is your view? I mean, there's a couple of things on the macro side that weren't mentioned.

You know, just that IT budgets aren't going up, the economy's slowing. And so I think what caught people off guard is just the magnitude of the shift toward AI. Stacey's point's spot on. He probably has a better number than me. But I think it's something like 30 times the price for one of these GPUs than it is for x86 servers. So this point's spot on. You just don't have the same number of units, and the pricing is huge. You know, I think there'll probably be supply constraints, too, and that may be another issue.

It is a little interesting to not have gotten some word out of Taiwan, because in my whole, I guess, 25 years of paying attention to semis, I've never seen a revenue guide with that much upside as NVIDIA. You know, going from whatever it was, 7.15 billion consensus or whatever to 11, it's just the magnitude's massive. So in my meetings, I'm doing mostly with CIOs and generalist PMs. They're just trying to figure out AI from sort of the broader perspective, which stocks are going to benefit, which might get destroyed, which maybe are impregnable. How do I think about valuations in that context? But I'm kind of with Stacey there and then Bryn too, that I don't think you want to value it on 2023 or 2024 free cashflow. I think

it probably, I mean, you know, we wrote this several weeks ago when it was only 700 billion cap, but who knows? It could be worth 2 trillion was the number we threw out there. So Stacey, are you now rethinking the way that you're thinking about everything in your coverage universe and the potential if there's a legitimate AI use to it and what it means to the way you need to think and model your numbers? So, clearly, lots of names have been running on AI hope, right? People have been looking for not just the ones who might win in the same ways that NVIDIA could win, but also the peripheral, the derivative plays around that in things like networking and memory and Semicap. And so, if nothing else, I think

every Semicom, frankly, probably every company outside of Semis, too, is going to try to construct an AI story, whether or not they have one. And I think thinking through the relevance and validity of those narratives is going to be important. And look maybe it's possible some names that you know there is an AI story that that that people weren't

thinking of and maybe it's possible. That some names are better that are getting an AI type valuation maybe the story's not as strong as people think. So that'll be the. The controversies that. I think we'll need to be thinking about as we

go through the rest of the year. Like, the market's clearly identifying winners and losers right now, and are those stories, like, actually, like, valid or are they not? Yeah, I think when you're a portfolio manager, you're just trying to find things that have a chance to have upward earnings revisions in the next 6 to 12 months. And in a market and economy that's eroding, that's hard. We know the overall 2024 estimates for the S&P 500 are too high. So it's not surprising people want to be associated with an AI story where there's upward revisions. I think if, and Stacey probably talks to a lot more people like this than I do, if you're trading 20 longs, 20 shorts, market neutral, just in semis,

then you've got to figure out, well, maybe AMD's revenue is more Q4 and into next year, and Marvell's is a little bit later in the future, and NVIDIA's now. So you have that pair of trade. I mean, there's lots of different things. But if you're a generalist PM looking back, you need beneficiary exposure to AI. But see, Bryn, you're the one now as the investor of our group here who really has to decipher what's legit, what's not, what's the next big thing, what's the next still good thing, but not as fast grower.

Are you feeling the pressure at this moment to do just that? No, because it's always about what multiple do you think the market is going to pay for X or Y? All right, we lost. I thought I lost my own audio, but apparently you guys can't hear Bryn either. So we'll try and get and get her back. If we if we say where we are, Adam, at this moment in the market, right, each incremental day that we say, OK, new high Microsoft, new high meta, new high Meta, new high NVIDIA? Does it make you more nervous? A little bit. You know, I just, you know, I'm not really sure.

You know, we started the year saying bullish first half, bearish second half, just because everyone was saying the opposite. And, you know, you saw my note from yesterday. I'm kind of just really uncertain about the next 10% move. I'm not sure if we get to 4,600 or 3,800. It's just there's, It's hard to be as bullish on the macro outlook now as it was a few months ago, because you've got notable people saying they're more optimistic. I think the Fed's going to be more hawkish than what's in the price.

And so I'm just sort of more balanced and trying to find places where there's up revisions. Now, yes, we're doing a lot of work on AI and trying to figure out the beneficiaries. But I think we're also trying to figure out, are there things where expectations could be too low that have been beaten up? Energy, metals, things that are probably impregnable to AI in the long term. So I'm sort of focused both on beneficiaries and those that really can't be disrupted. As Bryn, who we have your audio back, I'm told, again, this idea of the investor class trying to decipher at this moment, you know, kind of cut through the noise, break through the hype and decide what has the correct growth trajectory to justify whatever valuation some of these stocks are now at today and may ultimately trade to in what feels like really near future. Right. I mean, just look at the Q's, the top holdings in the Q's are going to be the beneficiaries,

Meta, Google, Nvidia, Apple, Microsoft. I mean, so it's like once again, these companies are going to continue to grow. I know how Microsoft is going to monetize it. These big companies are going to make AI embedded in their companies and make it stickier for us as the users and then charge more for that. So right now, I think the direct way to go is NVIDIA and Microsoft. But to Stacey's point, we are in early, early innings where there'll be lots of new winners that we're not even talking about today. Yeah. So, Stacey, as you as you look at your coverage universe, I don't even know, frankly, if you if you cover Marvell or a name like that. I know you do AMD. So when you see some of these others who are along for the ride, so to speak, you know,

who are the ones that we really need to pay attention to that we're not talking about every single day? Yeah, so the one of my coverage that I think deserves more, maybe it's getting a little bit of attention, finally, is Broadcom. So Broadcom is benefiting a couple of different ways. They're benefiting, all the hyperscalers doing their own chip design. Broadcom actually does that, they call it ASIC. It's a custom chip. They do the chip design for that. And they also benefited from the networking side which is another hugely important part of this as you're putting all of this stuff together um broadcom just based on what they said last quarter three months ago they were effectively calling for these ai revenues across um chip design work and networking

to be close to 15 of their semiconductor revenues this year. And that was three months ago. Presumably, whatever they saw three months ago is higher now, I would guess. Broadcom reports earnings on Thursday, so we'll see what they have to say about that. But I think that's one of those less appreciated AI stories. It's not directly in compute, but it's other... They're not selling like compute chips, but it's other things that are equally important. And frankly, they've got a bigger percentage of their revenue for AI than Marvell or AMD or any of these others are going to have this year. Yeah. Stacey, I appreciate you being with us once again. I look forward to our

continuing conversation on that as I continue with Bryn and Adam for the remainder of this moment. You say the picture is increasingly negative for equities more broadly. Maybe, yeah. Does the AI story, though, sort of mitigate some of the negativity? Do you realize that we're on the cusp of this incredible new technological advance? It's enabled investors in some degree to, for lack of a better thing, hide out in some of these mega cap techs

and play some defense and where the real offense of the future is going to be? I think there's two things. I mean, you know, in late March, we wrote a note, we talked about in the year, why is the market up so much? Is it all the Fed? And we said, you know, no, it's not all the Fed. There's a lot of stuff going on in AI. And obviously, we got a pretty big quarter on that. Now everyone's talking about it. I think the main implication I'm focused on is valuation and how that might not be an effective predictor of return Because if you're sitting there saying I want to buy cheap stocks and short expensive ones What you're really doing is you're shorting those that have a higher probability being disrupted and you're longing those that are either impregnable or beneficiary

So I think we could be in this thing where everyone wants to talk about valuation But that might not be a great way to pick stocks now Maybe within beneficiaries you'd say I will AMD and Marvell look like the same valuations as Nvidia, there's upper revisions now so I'll long AMD and be a little bit more negative, sorry long Nvidia and be a little more negative on AMD and Marvell, just very short-term. Something like that within beneficiaries or within, but I don't think you want to be long Chegg and short Nvidia because that, you know, because it's cheap, right? One's disrupted and one is a benefit. So I think the valuation thing is what

generalist PMs are really trying to figure out. And sort of the more macro, yeah, you're right. AI is a beneficiary. But I think growth is going to be lower because of the regional bank stuff. The Fed is going to be more hawkish. And so I think you probably have to think through bond yields have backed up. I mean, the recluse premium isn't compelling. So I'm a little bit more don't know if the next 10 percent moves up or down than I was at the beginning of the year.

You raise a good point, though, and we can end on it, Bryn, with you. This idea of kind of rethinking how you think about valuation in general and what you what you thought might be a little too rich or, you know, ridiculously absurd. Maybe it turns out it's not. I think that investors that anchor on PEs are always going to miss it because when you look back decades of data, Scott, one-year forward returns and current PEs have zero correlation. And so that's where people anchoring of just buying cheap stocks, you need a catalyst. And right now the catalyst is in growth and within growth is in AI. So I think

continue to look for good companies, good sectors, and the rest will work, but do not anchor on multiples to construct your portfolio. Real quick. Yeah, I know. I agree with Brina. Actually, for very fast growing stocks, you'd want to do the opposite. You want to buy the expensive and short the cheap for that 10% that's fastest growing. So she's spot on there for the growth stocks. All right. Real good stuff, guys. I appreciate it.

Adam, thank you. Yep. Great to see you guys. Thank you as well. Let's get to our Twitter question of the day. We want to know which AI stock are you most bullish on right now. Is it NVIDIA, Microsoft, Alphabet, or Meta? You can head to at CNBC closing bell on Twitter.

Share the results a little bit later on in the hour. In the meantime, we get a check on some top stocks to watch as we head into the close. Christina Parts of Novalos is here with that. Christina. Well, Ford stock could be headed for some more upside. That's according to Jeffries after the bank upgraded the automaker to buy from hold with a price target of $16 a share. The firm said Ford's recent investor event proved Ford could close the gap with its rivals by, quote, going back to the basics of focusing on its strengths.

Shares are 4.5 or about 4.2 percent higher right now. Sticking with autos, shares of Tesla are also higher after Elon Musk makes his first visit to China in three years. His visit highlights the importance of the world's biggest electric car market, which is Tesla's second largest market after the U.S., and how Beijing wants to open or show it's open to foreign business. Barclays analysts also say the stock is well positioned for more gains. Shares are almost 4 percent higher right now, Scott. All right, Christina, we'll see you in just a bit. Thank you, Christina Partsenevelos. We're just getting started here.

Up next, trading new market risks. Lauren Goodwin from New York Life Investment is raising the red flag on what she says is a new selling risk for stocks. She'll explain. And later, energy stocks under pressure yet again. We'll tell you what's sending them lower today live from the New York Stock Exchange. We are you're watching Closing Bell on CNBC. Welcome back. We're following a developing story out of Washington. The House meeting on the debt ceiling is now underway. Our Eamon Javers live in Washington with the very latest. Eamon. Hey there, Scott. Take a look at live pictures now of the House Rules Committee meeting right now. This is the first step for any piece of legislation on the Hill before it can go to the floor for a vote.

You see that they are meeting now. Republicans control this committee by a nine to four margin. So Speaker Kevin McCarthy should have home court advantage here. But there's been a lot of discontent among the most conservative members of the House Freedom Caucus about this debt deal. So we're watching this meeting to see if any of that spills over into this committee. Some of the unhappy members have talked about the possibility of forcing McCarthy out of the speakership. It's not clear if that's going to really amount to anything serious or if it's just political venting for now. Just a few moments ago, Speaker McCarthy spoke to that criticism. And what he said was, in essence, we didn't get outsmarted by the Democrats.

What is clear here is that McCarthy is going to need Democratic votes to pass the bill on the floor as early as tomorrow. So we're going to watch and see whether we get any indication here that the deal is in trouble on the Hill. Back over to you, Scott. All right, Eamon, thank you. We'll watch that very carefully. Eamon Javers in Washington for us. Our next guest says resolution in the debt ceiling deal could create new risk for equities. Let's bring in Lauren Goodwin of New York Life Investment Management. Welcome. Good to see you again. What's the new risk? Well, it's not even a new risk. It's just one that we have to grapple with now, which is that one of the major supports for the market over the last five months has been the draining of the Treasury's general account to pay the Treasury's bills,

to keep the economy running. Now, as we raise the debt ceiling, and I do believe that's going to take place this week, the Treasury has to rebuild that general account. There's about $500 billion that have drained over the last five months. And by the Treasury's own estimates, about $1.25 trillion that need to be raised in T-bills until the end of the year. That's a lot of supply and a lot of incremental supply over what would normally be raised that now the market has to grapple with. It's a risk for rates and for equities. You don't think that it will be better absorbed, for lack of a better word, than some are suggesting, who have raised the same issue,

by the way, that you have over the course of the last couple of weeks? I think it depends on who is buying these T-bills and how much supply is necessary. We've seen, for example, money market funds see a huge amount of flows over the last four or five months at the same time as this Treasury general account has been losing or pushing liquidity into the economy. If that supply is gobbled up, then great. We have a market that handles it well. But the sheer volume, nearly double the pace in the second half of the year as normal, it's noteworthy for the markets. Does it make you broadly more negative than you were before? I think it's, no, it doesn't make me more negative. It's just an interesting trigger point in the areas of the market where we could see some weakness. When I look at what could

specifically trigger a sell-off here in the second half of the year, this is one of the items. But probably the more important fundamental economic ones are if we start to see unemployment claims rising and a second quarter of negative earnings growth. Those are signals that we're headed closer into recession. I think those are very clear market signals. Do you think the Fed's done? It's looking a lot more difficult here in the last couple of days with the just consumer spending from April up eight tenths of a percent. That is an astonishing number. And while the economic dominoes, so to speak, tend to topple the same way once the Fed starts raising interest rates, there's just a lot of

support for the economy up there. I think the Fed could be done here. But if we have a higher than expected jobs report out of Friday, it's increasingly likely that we will still see another rate hike in June. See, at what point do we, though, suggest and say, you know what, this good data is good. It's actually good. And it changes my perspective on what I thought was going to happen, whether I thought there was going to be a mild recession or a deeper recession. But the longer that the data remains supportive of the economy, isn't that good rather than a negative? Everybody takes it as good news is bad news because it reengages the Fed at a time when we're thinking they're done. That's exactly it, though.

The good news is only good news if we can see the resumption of spending and the persistence of economic activity with inflation at more normal levels. Even though the disinflationary process has been intact for the last couple of months, inflation is still way above target. And the Fed, whether you agree with them or not, I happen to agree with them on this point, that when inflation is strong in the economy, it hurts normal people more than even the short-term impacts of a recession in the medium term. And so we have to see those inflationary figures come down before good news is just good news. I mean, Richmond Fed President Barkin today said interest rates are, quote, in restrictive territory. I mean, you can read into anything that they say and make your own conclusion. But the implication would be that we're there. We're there.

Now, we may stay there for a longer time than you think, but we're there and we don't necessarily have to raise more. And if inflation comes down and the economy remains strong, that's the perfect scenario, is it not? I'm sympathetic with that perspective that the Fed could pause here. I think the Fed's been pretty consistent over the last nine, even 12 months, saying that five, five and a quarter is where we could stop, hold and let the long and variable lags of monetary policy do their work. Now, the fact that we're still seeing strong consumer spending, a strong labor market, that's typical of an economic cycle. That is the last set of dominoes to fall as the economic cycle sort of turns over. So I think they could wait. What's going to be challenging for them is the persistence of this data. If they do continue to hike,

that's when I think that actually the risk of a sharper, more severe recession increases. I think we have a jobs report Friday. So the data is going to come fast and furious. It's good to see you again. Thanks for having me. Lauren Goodwin joining us here post nine once again. Up next, five star stock advice. Capital Wealth Planning's Kevin Simpson is back.

He's breaking down his latest trades for us as well. He's going to reveal the one tech name he is pulling back on. Plus, an interview you won't want to miss. Black Rocks Rick Reeder, he will join us tomorrow right here on Closing Bell at 3 o'clock Eastern time. We have a lot to talk to Rick Reeder about. Looking forward to that tomorrow. We're right back. Well, we've been watching the market today and the Dow is off the worst levels of the day. It's still off about 53. It's really been, yet again, a Nasdaq story.

Nasdaq's up one half of 1%. NVIDIA has been the story again. Another new high today before, you know, let's call it a midday pullback just a bit as we continue to watch this market trade and head towards the end here. Still above 4,200 on the S&P 500 with just less than 30 minutes or so to go. The Nasdaq 100, a number of mega caps hitting their highest levels in more than a year today. That's been part of the story. The tech sentiment driven by AI gaining more steam.

But our next guest is using this rally as an opportunity to take some profits. Joining us now is Kevin Simpson of Capital Wealth Planning. How are you? It's good to see you. Hey, Scott. How are you? Good, thank you. So you trimmed some profits. Joining us now is Kevin Simpson of Capital Wealth Planning. How are you? It's good to see you. Hey, Scott, how are you? Good, thank you. So you trimmed some Microsoft. I said to Bryn at the top of our show, like trying to get inside the mind of an investor who's watching this all unfold, new highs for Meta, new highs for Microsoft, new highs for NVIDIA, et cetera, et cetera. At what point do you decide I need to take some profits like you did with Microsoft? Well, I mean, I think anytime you're seeing a move like this and these stocks, Scott, they're going to the moon. You've got to you've got to right size the position. So we come

at everything with a rules based approach, looking at things from a risk management perspective. We like to keep a maximum of a five percent weighting in any one name. So you've got Microsoft up 36, 37% year to date. It gives us an opportunity to sell into that strength, put some dry powder on the sidelines. We still love the company. We still have a 5% allocation, but the multiples do get a little bit stretched and heck, everything having to do with AI is pushing these things higher and higher. So we've also seen vol increase into the space and we've been able to write calls on Microsoft last week, did pretty well with that trade. And even a few minutes ago, we wrote calls for June on Microsoft again, looking to capitalize on that volatility. So we still like the name, but we're taking profits into the strength.

You think it's a bubble, all this stuff that's going on in the market around AI and all these stocks? You've seen a lot of markets, right? Does this feel that way to you? Well, I think it's starting to, and that's the problem because you've got legitimate companies that are making money and you can invest in them and you can own them. And we own Apple and we own Microsoft and we're going to continue to hold on to them. NVIDIA is not in our space. It's not in our universe. But boy, what a run that's had. But if you think back to 1999, the dotcom bubble, if you think back more recently to 2020, sitting around in May, all of the stocks that were going to be COVID stocks, all of the work at home companies, no one wanted to miss them. Meme stocks, it gets to be the same thing. So what I'm concerned about is that a bubble could happen if we start to see companies that are non-profitable just taking advantage of investors looking to get caught up in the hype.

Well, let me ask you this. So what you just said of NVIDIA, quote, not in our universe. Why not? I mean, is it just too rich? And isn't that the whole point in some respects of writing the covered calls that you do? Again, I just bring it back to Bryn. She employs the same kind of strategy in many ways that you do. She can own NVIDIA. She writes covered calls against it. Why not you? Yeah, Bryn has a great strategy as well. Ours has to be a dividend

focused company. And the dividend on NVIDIA is just so inconsequential and the dividend growth isn't there. Every stock that we invest in has to pay a dividend and has to have a very strong dividend growth. So I'm hoping that at some point these stocks become part of our universe. And they can be candidates because specifically to your

point Scott. They're unbelievable companies to write covered calls on. And if I was a shareholder in Nvidia. I would trim the position I take some profits. I'd be writing covered calls. And I would be using the- put strategy to lock in some of these profits that we've enjoyed. Again, I'm a Microsoft Apple guy, but NVIDIA can be done the same way. You can look

at the trade the same exact way as professional portfolio managers. We don't get the luxury of hyping any one thing. I can't just run into AI because it sounds cool. We've done the same thing for 20 years, but I think it's easy to get caught up in it. And I would caution people just to be careful. No, you know what? And I'm glad you reminded me and our viewers of the specifics of your strategy in terms of it having to have a dividend. We showed, you know, the next to no dividend, obviously, that NVIDIA pays when we put it on the screen. So thank you for doing that. Also, you sold calls on Dow, Dow Inc.

Yeah, well, aside from these handful of stocks that have been going to the moon, the rest of the market's just been trudging along in a purgatory, and we've been trying to tread water. The Dow position has an amazing dividend. So we sold calls on it. We're taking advantage of trying to make some money, get paid while we wait in the flat market. AI stocks excluded. The stock also went ex-dividend today. So we picked up another 75 cents on it. But this is a stock that really has been just languishing and anything having to do with health care, industrials, energy, all the things that dividend managers like us are invested in. They have not enjoyed the rally so far. So we've been looking to generate cash flow. We talk a lot about dividends,

but really dialing in to see what that translates into a portfolio is important. That 75 cent dividend we're going to get, it matters on an annualized basis. It's over a 5% cash flow. The covered calls that we've been writing on Dow, even a boring stock like that, cent dividend we're going to get it matters on an annualized basis it's over a five percent cash flow the covered calls that we've been writing on dow even a boring stock like that eight percent annualized premiums the one that we wrote today for microsoft i mean that's incredibly rich it's over a ten percent annualized premium and that'll expire on june 16th so even in a market that's somewhat bifurcated between hot ai and the rest of the world, there's things that you can be doing to take advantage of it. And we're long, long term investors.

So to your point, you know, we've seen a lot of hype things in our day, but we're enjoying exposure and we're going to continue to do it with Microsoft and Apple. I'm going to ask you to be real quick on this. I noticed you trimmed SLB. Also, are you turning cold on energy? No, we've had pretty good weighting in Chevron, SLB, and Marathon Petroleum. Again, it's just right-sizing the position. We want to have a little cash, a little dry powder. I'm sure that everything's going to go smoothly in Washington. There's no chance that there won't be any contention or chin-wagging and posturing. So just in the off chance that they mess this thing up, we want to have a little dry powder in our pocket for the next couple of weeks.

Got you. We'll talk to you soon, Kev. Thanks as always. Thank you. All right. Talk to you again, Kevin Simpson. Up next, we're tracking the biggest movers as we head into the close. Christina Partsinevelos is back with that. Christina.

Well, Scott, energy names are getting slammed ahead of an important meeting this weekend. And an analyst suggests that if crypto climbs 10% in market cap, then this one stock could move about 8 percent higher. I'll have the names right after this short break. We've got just about 15 minutes to go before the closing bell. Let's get back to Christina Parts in Novelos now for a look at the stocks as she is watching. Christina.

Well, if you believe in crypto's rise, then you should believe in Coinbase. That's the message from Atlantic equity analysts after they upgraded coin to overweight with a price target of $70. So it's about 23% upside. The stock is trading right now at $60.87, already 7% higher today. They like management's pricing power in its trading business, resulting in higher retail trading volume. The stock is up 71, almost 72% year to date. Oil fell below that $70 a barrel threshold for the first time in a month on mixed messages from major producers ahead of the OPEC Plus meeting this weekend, all while Russia continues

to send record amounts of oil to China. And there's also concerns of further rate hikes by the Fed, which is also weighing on the sector. That's why the S&P energy sector is about 1% lower today and about 9% lower in the month. So it's the worst performing sector on the S&P 500. Names like Cotera, Devon Energy, Marathon Oil are all among the weakest links right now. You can see on your screen Marathon down about almost 2%, Devon almost 3%, Cotera about 3%. And Dominion Energy, we have the wrong one up there. Well, it was trading at lows not seen in over a decade.

Scott. Okay. Christina, thank you. Last chance to weigh in on our Twitter question. We asked which AI stock are you most bullish on, NVIDIA, Microsoft, Alphabet, or Meta? Head to at CNBC Closing Bell on Twitter. The results are right after this break. To the results now of our

Twitter question, we asked which AI stock are you most bullish on, NVIDIA, Microsoft, Alphabet, or Meta? Well, go figure. NVIDIA is the winner, nearly 44% of the vote. Up next, we have your earnings rundown, HP, HPE, and box all out with results in OT. Counting it down with the key metrics you need to look out for 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. Plus, Bank of America's Marcy McGregor is back with her market forecast for the summer. Frank Holland looking ahead to key tech earnings out in overtime today. Mike, I begin with you. I mean, if it's cyclically sensitive, it's not doing well. It's getting drowned out. And

you heard from our poll. It's all about Nvidia. I mean, it's the one what you would call affirmative story out there where something is actually progressing. It's positive. We can seize on a trend. The rest of it is just exactly how much have we priced in already and how are we going to sell? But I would say I was looking at, you know, the equal way to consumer discretionary industrials, transports all have the same look to them. They're kind of sideways heavy, but they're above the March lows. They're kind of hanging in there. And that's what the overall market is doing right now. I'm definitely on alert for some of the most overheated names in the crosshairs of the AI traders.

NVIDIA down 4 to 5 percent off the high intraday. Yes, it is. We see a reversal in Broadcom. So who knows if the fever breaks in the short term and AI, C3 AI, the stock, up 30 percent into earnings tomorrow. Let's see if that's a decisive one one way or the other. And then to me, it's all about what the rest of the market does. The rest of the market's been kind of doing no better than hanging in there. And you still have more new lows than new highs. But it has netted out into this slow grind to a marginal pop above what we thought was the ceiling of the market at 4,200.

Marcy McGregor with us with her summer forecast from Bank of America, of course. So the rest of the market that Mike is speaking to just now, where do you see it going this summer? I see a market that's really struggling to break out of this trading range in a decisive way. And I think Mike has a great point. It's about conviction or lack of conviction. When I think about the summer, you have an economy that's continuing to slow. I think data is going to confirm that as we get into the heat of the summer. And I think you're going to have a market where you really want to be diversified.

You really want to be balanced and tilt up in quality because there's so many unknowns out there with an economy slowing that we have like very likely the debt ceiling deal behind us. But that might remove liquidity from this market. So I think you get choppiness this summer, but I see it as a buying opportunity. If you have call it a two to three year time horizon, have excess cash, I would be buying on volatility. See, I go back to this. It's like glass half empty versus glass half full. Half empty says economy continuing to slow. Half full says economy remaining pretty firm. Absolutely. And that's exactly what's happening here.

It's almost like we're seeing these rolling recessions, first in housing, then manufacturing. But you have the consumer and the labor market that have been really resilient. Our internal data says the consumer purse strings are tightening up, especially in higher income consumers, but it's not falling off the cliff. And I think that gives me a lot of conviction in our view that this is likely to be a mild recession. I keep calling it a reset because the Fed is trying to slow the economy down. They will get their way. But I just don't see this being more than a reset when we get to the back half of this year. What do you make of the AI trade? Have we gotten too top heavy?

Does it matter to you or not? When I see this market which is certainly more concentrated typically bull markets are fairly concentrated when the index is up year to date. But this market it is really concentrated relative to

history. The top ten names are responsible for a hundred percent of the gains this year of course I want to see a market that broadens out to tell me a little bit about market health. That will get me a little bit more positive. In the meantime, I actually see this flight to

mega tech as another kind of search for quality, you know, for the standout names in an uncertain world. So long term, I without a doubt think this AI moment is like the iPhone. It's like the Internet moment. It's going to be transformative. But this is a long-term theme, not a trade in my view. All right, Marcy, good to talk to you. Thank you for that. Frank Holland's watching some pretty important earnings after the bell in what we call overtime, HP, HPE, and Box. Frank.

Yeah, you know, a lot to look at here. We're going to look at three very different parts of the tech universe. HP Inc., ticker HPQ, that's hardware. HP Enterprises, ticker HPE, that's software. Then we have Box, a storage player, ticker's just Box. As you can see here on the chart, all three are lagging behind the broader tech rally that's been largely focused on AI. So let's start with HPQ.

The key metric there will be full-year guidance. It was reaffirmed last quarter at $320 to $360 a share. It was first issued back in October as we saw steep declines in PC shipments. However, today, J.P. Morgan upgraded HPQ, forecasting a 21% increase in the second half of the year over the first half of the year when it comes to PC shipments. The CFO of Lenovo, that's the world's largest PC maker, also told me on Worldwide Exchange he expects a big second half rebound when it comes to PC shipments. The CFO of Lenovo, that's the world's largest PC maker, also told me on Worldwide Exchange he expects a big second half rebound when it comes to PC shipments. All right, turning our attention now to HP Enterprises, ticker HPE. Compute is the key segment there. Morgan Stanley upgraded HPE today as a beneficiary of the macro trend of return to

work. Compute's where it gets about 45% of revenue, and the performance here was going to answer a lot of questions about IT spending outside of AI. Remember though, HPE also has a segment focused on AI and high performance computing. Investors looking for any news about deals demand there. All right, last but not least is Box, that's storage. Two questions, will AI disrupt this business and demand? Billings for Box give investors just a sense of demand. It's not the whole story. Estimates have that number rising about 5% year over year. A lot of questions about the future of storage with AI and the willingness of companies to spend on storage in this environment with so much disruption right now, Scott. Mike, how are you thinking about this? I mean, PCs bottoming, if we get a clue, IT spend, as Frank said, get some good clues here. Yes, although the starting point is very different from a lot of the stuff we're talking about, which is these are companies, HP and HPE, priced for very little growth, if any, seven to nine times earnings. It's all value. Any kind of accelerant to growth is probably going to be considered a bonus as opposed to assumed.

So a different starting point but definitely interesting. I think it would be particularly fascinating to see if let's say HPE can catch the AI tailwind which again is going to feed that idea that traders are just grasping for any way to seize on this trend and maybe stretching a little too far in trying to impute an AT AI story into into where there isn't one. Well that's going to be the big thing now for every single earnings report as it relates to tech or anything else. How many times you say A.I. or try and convince the analyst community and the investor community that you are a player in A.I. in any substance? And the question is, to what degree any of that is just additive or if we're talking about roughly the same size pie and it's the AI that's pulling budget away from from other things, that's probably going to be an issue for some of the software companies here. But it is funny because every single thing you bring up comes with a yeah. But right. Even coming into this year, everyone was leaning toward it's a recession. We got hot January data to say, oh, that's bad news. The Fed's not done. Right.

We get the the the credit crunch and and obviously it's bad news, but it doesn't seem like it's actually blowing up into anything. We get a maybe more dovish Fed than we anticipated. And and that seems like more of a bad news story because we're waiting for the credit impact. And then fascinatingly, debt ceiling. It's a big overhang. We get through it immediately. Everyone says, oh, watch out. Massive Treasury issuance. Yields are going up. My only point here is this is a pretty battle-tested market. We've been dealing for a year and a half with people expecting bad things. And they haven't all come to pass, at least not in a way that has shocked the market below, you know, where we got to certainly last October. Hey, jobs Friday.

Don't forget about that, too. We've got more data right in front of us, too, in this holiday shortening week. All right, there's the bell. S&P looks like it's going to hold on to 4,200. Dow's going to be modestly negative into the close. I'll send it into overtime with Morgan and John. I'll see you tomorrow. We'll be right back.