Closing Bell - Closing Bell: What’s Riding on Big Tech’s Big Reports? 10/29/24

Episode Date: October 29, 2024

Solus’ Dan Greenhaus, Payne Capital’s Courtney Garcia and BMO’s Brian Belski break down how they’re navigating a mega week for the mega caps. Plus, GeneDX CEO Katherine Stueland joins us to discuss her company’s big earnings beat.  And, we reveal what to watch when Chipotle and AMD report results in Overtime. 

Welcome to Closing Bell. I'm Scott Wapner live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the first mega cap to report earnings alphabet in just about an hour. We'll ask our experts what's at stake for that stock for the stock market as well. Let's take a look at the scorecard here with 60 minutes to go in regulation. For the most part, it's been a mixed day. Stocks did get a little bit of a boost on a strong treasury auction. That took the edge off yields a little bit, which is helping just a bit as well. Take a look at homebuilders. They're weaker after D.R. Horton's results.

There's Pulte and Toll also down today. Ford's guidance, a big drag on that stock and the autos in general. GM, Tesla also lower. How about Broadcom, though? Jumping on a report that OpenAI will build its first chip with that company in Taiwan Semi. Nice gain for Broadcom there. Just take us to our talk of the tape, all that is riding on big tech's big reports. Let's bring in Dan Greenhouse of Solus Alternative Asset Management with me here at Post 9.

It's good to see you. Thank you, sir. So Strategas today says this is a make or break week. Is that how you see it? Is that how investors should view it? I feel like we've had several make or break weeks this year, and they've all made it. And I imagine this one will be much of the same. I mean, listen, obviously, this is an important week. You get the jobs report on Friday, although I'm sure much of that will be and should be discounted. But more

pressingly for markets, you get obviously large cap earnings beginning with Google. And I think the interesting thing with Google is a lot of the Mag 7, if you will, have done OK. Apple have done well. Not this one. Not lately. Not this one. That's right. And it plays into the broadening trade.

But for Google, I think that obviously they're arguably the most interesting from a macro standpoint of all of them, owing to the number of issues that they're dealing with, particularly regulatory and the threats to search. How high is the bar, do you think, given the underperformance of this stock? I don't think the bar is particularly high, but I also think they better not have meaningful weakness in the search business. And as I've said a hundred times, I'm not a particularly large tech investor, but if I know they better not have particular weakness in the search business then the broader markets certainly do and I think that's that's an area obviously that that everyone's going to be watching the other area of the market that everybody has been watching is

the treasury market because the backup in yields it doesn't it doesn't seem to be a huge issue yet for stocks is that is that fair no and if it isn't what is that why is it why would to be a huge issue yet for stocks. Is that fair? No. And if it isn't, what is that? Why would it be a big issue? Why would it have been a big issue? A backup in yields? Well, the 10 years up, let's call it 70 basis points from the Fed meeting and the S&P 500,

both equal and market cap weighted index, are sitting effectively at all time highs. So that tells me, forget my opinion, so far it obviously hasn't been a problem. What's interesting is if you had told people on the day of the Fed meeting the 10-year is going to go up 70 basis points, where abroad equity is going to be, I don't think many people would have said at all-time highs. Well, it's been a problem. I think you could make somewhat of an argument for the broadening trade, right? I mean, it's a problem for small caps. I would take the other side of that. With the cap-

You think it's good for small caps? Well, hold on. As I've argued all year long, I don't think the broadening trade means small caps. No, I don't think it does either, but that's an area that has been hit with the backup in yield. Sure, deservedly so because of floating rates, et cetera, et cetera, that we've discussed ad nauseum. But mid-caps are basically at an all all time high. And as I've said a thousand times, the average viewer out there cannot name five stocks in the Russell 2000. You can name a thousand stocks in the way people invest these days. They're they're they're buying broad indices. They're maybe they're stock picking less than they they were. So it's all relevant. It all matters. I mean, if you keep hearing about this broadening trade coming,

hey, it's time to lighten up a little bit on mega cap tech and go to the smallest areas of the market now that we think the Fed's cutting, the economy's still strong. Well, you said this hasn't played out. They said two things there. One is we keep hearing about the broadening trade and the other you've got to go to small caps. And I think that's two different things. My point has been and remains the issue isn't you need to go into small caps. It's that other areas, other sectors, other industries, other cap sizes, particularly mid caps, can do well in a broadening environment. And again, you've seen that. The market's at an all-time high. And we mentioned Google's basically flat. Microsoft has not traded particularly well. Tesla is pretty volatile, but has been flat for some time now. Yeah, but Meta and NVIDIA have

picked up the slack from those companies. No, without a doubt. But if I had told you that three of the six or three of the seven or four of the seven, I forget the exact number, would be basically flat all year, or at least, let's say, flat since the spring, where would the market be? I don't think most people would say at all-time highs. And yet, a number of other sectors, we've talked about utilities, industrials, et cetera, have picked up the slack. And so you've absolutely unquestionably, unequivocally seen the broadening. It just hasn't come in this one area that people keep pointing to as if that's the only definition of market broadening is if the small caps rally. I have disagreed with that.

These earnings come at an interesting time if you're trying to game out the market going forward, because you do have that event called the election a week from today. We do. Normally, you'd say, OK, the next few weeks of trade could be driven by what happens with the mega cap results this week for obvious reasons. But this time, it's potentially different. You get the jobs report, as you said, but then you got the election. Yeah. And the potential messiness around the election.

When are we going to know the winner? Are we going to know on election night? Are we going to know the next day? We will not know on election night. are we going to know the winner? Are we going to know on election night? Are we going to know the next day? Are we going to know the next week? Right. The market, the market, I guess my point is the market's patience might be tested in the next 10 days. So to wade into politics for a moment, you will not know election night. You will probably know within 48 hours with some conclusivity, some definitiveness, who the president will be. The House races are going to take some time because of California and New York's reliance on mail-in ballots. And there's a bunch of districts upstate New York

and some parts of California where it's going to take much longer to count the votes. Pennsylvania obviously cannot start counting mail-in ballots until 7 a.m. on Election Day. So there are statewide rules that are going to drag this out. But I think within 48 hours, you'll have a pretty good idea who the president's going to be. That's not to say that there won't be any events thereafter, but I think you'll have a good idea who the president will be. And to your point, the TCGA is an enormous overhang for markets. The IRA, the Inflation Reduction Act, is an enormous overhang economically. What happens with, the Inflation Reduction Act, is an enormous overhang economically. What happens with these respective policies hangs in the balance, obviously.

Yeah, all right. Let's focus a little more heavily on Alphabet for a minute because it is the first of the Mag 7s, the rest of the Mag 7 that reports this week. I want to say Tesla is part of that. Fine. Obviously, for mega cap tech, this is where it all begins. Deirdre Bosa is watching that for us today. I mean, I have key questions. I'm sure they're, you know, the same as the ones you're pondering. And the market needs answers to,

right? What are they spending and when are they going to monetize what they're spending? That's exactly it, Scott. There's a lot of questions. So it's a bit of an uphill battle for Alphabet tonight. It'll have to show investors that it can shed some light on its many legal battles, new competition in a Gen AI world spending, and a timeline for returns on all that spending. Last quarter, remember, CEO Sunder Pichai, he said that the risk of underinvesting is dramatically greater than the risk of overinvesting. And over the quarter, we didn't see any signs of that slowing. In fact, the nuclear energy deal with Kairos Power suggests that Google is getting ready to build out more data centers well into the 2030s. Now, Alphabet is also the first

hyperscaler to report earnings and could give us some hints about how investors are feeling about the trade-off between CapEx and returns. It could be becoming a double-edged sword for all of them. Google, Amazon, and Microsoft, they're spending big, so investors will worry about returns. But if they scale back, investors might fear that demand is falling, so they have to thread that needle. Some interesting executive moves to this quarter that we might hear some more sound on or color from on the call tonight, Anat Ashkenazi. She's moved into the CFO role. Ruth Porat is now CIO. They've also streamlined AI leadership under Demis Hassabis, moving Prabhakar Raghavan to chief technology officer. The key question, Scott, as I know you know, will all of these moves be enough? Does it mean that

Alphabet, Google can move faster to compete with the scrappy startups that are right on their tail, like OpenAI, like Perplexity? Yeah, I mean, how are you thinking about that? The idea that, you know, and it's issues that have been raised, of course, by very astute investors, the degree to which Alphabet could lose market share in search to some of the upstarts and then some of the other hyperscalers themselves. Alphabet has had arguably one of the greatest business models of all time over the last few decades. It's had dominance in search. It's been making billions, tens of billions,

hundreds of billions of dollars in advertising. That is now all up in the air. This is one of the greatest innovators' dilemmas we've ever seen in technology. So I think the question is, can Google get out of its own way? I mean, it wrote the seminal Transformers paper. It was in position to essentially create chat GBT before OpenAI did. As this race continues to heat up, become more competitive, move into the agent space,

is Google going to be able to lead the way? Is it going to be able to sort of potentially even sacrifice that existing amazing business for what's next? We're getting an indication that it is, but it's not going to happen all at once. So what we really want to hear tonight is urgency on the part of Sundar Pichai and his team. We'll see you in OT. Dee, thanks so much. That's Deirdre Bosa. Let's bring in Courtney Garcia now of Payne Capital Management and Brian Belsky of BMO Capital Markets. Courtney is a CNBC contributor. We will begin with you, of course. Nice to see you.

Your firm has exposure via ETFs to this name. How should we be thinking about its importance coming into tonight? It's hugely important, right? I mean, I think the MAG7, there's been just so much concentration there with all of this excitement over artificial intelligence. But you've seen since July, it's down about 11% when you look at Alphabet, because there's concerns, whether it's the regulatory concerns, whether they're looked at as a monopoly. But mainly when it comes to AI, this is probably a bigger competitor

than they've really ever had, as opposed to like a Yahoo. And it's really going to cannibalize a lot of their market share. So we need to see what is that going to do to their search advertising and how are they going to monetize that, right? It's a huge expense for them at this point in time but i think a lot of that's been discounted that's why it's been down so much over the last couple months and you're actually saying it's now priced lower than its historical averages when you look at the pe ratios which is where yes i think there's a lot of headline risk but you might be able to scoop this up as an opportunity i think you actually

might start to see some of this re-rotation back into the MAG-7. A lot of money has rotated out. I don't think that trade is going away anytime in the near future. And especially if you see growth pick up here, especially post-election, you may see a lot of that money flow back in. Bri, you think too much is being discounted, right? That too much worry is baked into this stock at this point. Courtney, you know, said it perfectly. And she's right about the historical average of P. It's like at 19 now. The five-year average, I know, said it perfectly. And she's right about the historical average of P.E.

It's like at 19 now. The five-year average, I think, is around 23. So it is trading now at a discount to its historical P.E., at least over the last five years. But you say it's overdoing it. Yeah, we agree with that, especially from the discount perspective. The stock is underperforming the S&P 500 by 200 basis points. Whoop-de-doo. It's up 22%. The market's up 24%. I think Deidre nailed it, though.

Can Google get out of its own way, number one? And number two, on the regulation side, remember, this really was on the forefront during the second quarter and really hurt the stock. The stock has rallied forcefully as of late. And when we talk to our institutional accounts, the number one thing that comes up is regulation, regulation, regulation. So I think they can, will, and should be very clear tonight

in terms of what the stumbling blocks are. Remember, Google is foundational technology for generation, for Gen AI. And we think it's been there, it was the first one there, and we think it's going to continue to lead the first one there. And we think it's going to continue to lead overall. What about the idea that Courtney put forth that there's going to be a re-rotation into the mega caps? Maybe we're at the stages of seeing that now, especially as you've gotten the backup in yields. If there's a bit of a more defensive posture coming into the market, that's where it would show up yet again I agree with

that and you said something amazingly interesting today on the halftime show and he said that over the last three weeks we've seen all of this again I didn't hear you good job Brian was not working right in my ear say that again hello hello hello hello I thought that was really telling Scott you need to talk more about that because when I go in and talk to accounts are all nervous to worry about the election, and they're mad they've missed this recent upside. So what do people do to help Courtney out in terms of what her call was?

What do people do when they're worried, right? They go back to liquidity. What are the most liquid stocks in the marketplace? Well, it's these big technology names. You know that I call them the consumer staples. They're the new consumer staples. We've owned Google for 12 years in one portfolio. We think people are going to continue to be rotating back into that until, as Dan says, you know, we're worried about the election night. I think that

will be kind of the theme over the next week or so. You know, on the regulatory front, and this is not at all a worry for investors in the short term, but if we use Microsoft as a barometer here, Microsoft traded very well in the late 90s while the antitrust litigation was being pursued. But Bill Gates himself has said famously that it basically took Microsoft's eye off the ball, and he correctly or incorrectly attributes some of those dealings with missing what became the smartphone revolution. I don't know. I feel like Microsoft shares did nothing for at least a decade, if not longer.

Quite some time. And I think one thing to consider here is whether or not in the near term, there's no threat of a breakup or anything like that. But perhaps it does preoccupy management. And if something else were to come down the pike, like we've talked about how Google seems to be behind the eight ball every time someone else comes out with something and then Google has to respond. Maybe there's something there to the idea that they're a little busy as opposed to being more proactive.

These stocks obviously haven't traded like a monolith anymore. They've sort of differentiated themselves from each other. But what about the idea that Courtney said about a re-rotation back into this group, which has been leading again? I think a lot of it hinges on Google tonight. I don't know whether people are going to rotate back in or not. As a non-large cap tech investor, I'm perfectly fine with how things are. Maybe you need to rotate in. Not what we do. But that said, I think a lot hinges on tonight's report. I mean, part of the problem, again, is that Google is under attack here on these multiple fronts. And if they suggest that there's some weakness here, I mean, listen, Deirdre and Josh

had a good debate on the show the other day about the entryway to the internet, if you will. And I think Deirdre was arguing that Google is how everybody has searched forever. And Josh's point was ultimately it's whatever Apple tells them to do. And I think there's something there. And if, listen, chat GPT, perplexity, et cetera, are de minimis sources of search compared to traditional search in the moment. But if for some reason we have that wrong and those other alternatives, instead of doing the search machine, you're looking at the answer machine, as some people have called it, then there's a big problem here for Google, and I think it's going to be a big problem for the trade.

What about, Courtney, the idea that people are talking about now? Forget small caps. You don't necessarily need just large caps, mid caps. Getting a lot of love. Tony Pasquarello sitting here yesterday. Goldman Sachs says forget small caps. You want to look at mid cap stocks. Brian's going to talk about that in a minute. Do you like those?

We do. I mean, you want to be properly diversified here, right? Because there's obviously a risk of inflation kicking back in. That's why you're starting to see some of the longer term yields rising. You think we continue to see growth doing well, which could actually benefit some things like your large caps. Absolutely. You need mid caps in there. They tend to get a lot less love. I think it's always going to be in the large and the small cap space there. But they've been doing very well and I would not be surprised to see them do so. I don't know the exposure. I don't know why. No one knows who's in this Russell 2000. We're not we're not talking about

the Russell 2000. We're talking about mid-caps now. I understand. Courtney correctly pointed out it's either large or small is most of the conversation. And just for the hundredth time, nobody knows what's in the small caps. Mid-caps are a whole bunch of names you know. Abercrombie, a whole bunch of retailers that people are familiar with. It's just ridiculous that we spend so much time on small caps when mid-caps are right there at all-time highs and doing phenomenally well. Brian?

Dan, how to make friends and influence people. I don't think any smaller mid-cap manager is going to call you anytime soon. I mean, that alone should make me want to buy things. I mean, listen, if you're a stock picker and you're not going again and you want to beat the index, small mid-cap is a fantastic index to beat right now, especially considering it's up 15%. We run a fund that's up 26% on just small mid-cap, looking at the 1,000 stocks in the S&P 1,500. That's number one. You don't want to buy when everyone else is buying.

You want to be before that, and that's why I think you've seen value. I mean, if everybody else is right, you do. Well, hold on, Scott. In dividend growth, remember, Scotty, in the third quarter, it was the first time in two years that the top 10 stocks in the S&P 500 underperformed. And no one said that was going to happen. Now we've seen this near-term rotation, as Courtney keeps talking about. But I think if you want to invest, you want to be positioning for what's coming. And what's coming is a broadening out, a normalization of returns.

And a more normalized market includes all the stocks in the stock market. And I think that's where we're going for the next three to five years. Oh, a normalization of returns. Court, I've got some people over the last couple of weeks talking about lower than normal returns over the next couple of years, at least because we're valuations of the overall market are. Then you have the prospect of higher for longer interest rates because of a hyper focus, which might come on the deficit. Yeah. And I mean, I do think there are concerns when it comes to the deficit, what that's going to mean for growth in the long run.

But I think at least short term, you are seeing nominal growth is expected to be increasing, which is a positive for the markets. And if that's the reason that yields are rising, that is going to be a positive for the stock market. So I am not of the belief that we're going to see these like muted returns for the next decade. I know there have been calls out for that, but I think there might be a change in which areas of the market that's going to happen in. Like as much as we're in the MAG-7, I don't think I want to be chasing those returns. I don't think they're going to have the same kind of outperformance the next decade they have in the past. But the overall markets might be a change in leadership, but I think they'll likely continue in the upward direction. You want to weigh in on that issue, too?

Sure. That's why I'm here, to weigh in. Do you feel like we're set up for below-average returns over the next, I don't know, three to five years? I got a chance to take a look at the Goldman report, and a key hinge on which they are making this argument is the level of concentration in the market. And the idea, as any number of people have posited, is that if those mega cap tech names can't continue to grow at the rate that they have been growing, which almost surely is what's going to happen, then that mathematically is going to depress the broader index. And there's only so much Lindy and One Oak can do to compensate on the other end. And so if you do have something of a decline of those names,

then mathematically it's going to be troubled. Is it going to last 10 years? Is the annualized return going to be 3%? I mean, I don't know. Those are obviously, with the benefit of hindsight, often not accurate. I always refer to the new normal when we were supposed to have below normal equity returns

in the 2010s, and they ended up being meaningfully above. But I think there's a threat here. I think there is a threat. If something goes wrong with the AI trade, and you have all those stocks sell off in a meaningful way, re-rate from 30 or 40 times down to 10, 15, 20, 25 times, then it's just going to be very hard mathematically for the broader market to pick up. But for investors over the long term, which is not what I do, but I'm sure a lot of the people Courtney talks to are going to be concerned about this, for investors over the long term, which is not what I do, but I'm sure a lot of the people Courtney talks to are going to be concerned about this. For investors over the long term, that's going to be a phenomenal buying opportunity because that money flow, that cash flow, that dispersion is going to start to arise to a greater degree. And you're not going to be solely reliant on seven names to generate returns.

You're going to have 107 or 207 names. Brian, I mean, you sound like you just patently disagree with any calls that we're going to have below average returns in the next few years because the price of where this market is selling at. Listen, Scott, I actually agree with the premise of now you're talking about Costin's report at Goldman Sachs that we're not going to be up as much. I mean, I didn't say I didn't I didn't say whose report it was. I mean, he he suggested certainly that. But others have, too. It's not like he's by himself saying, hey, you could have below average returns moving forward because the market's very expensive and there are some other issues that need to be dealt with. Well, remember, valuation on the

market side is one of the worst predictors of future performance. That's number one. And in this premise of as math makes sense and it's common sense. We have to kind of, again, normalize, which has been kind of our broader theme, what are the normal returns? Let's talk 10% to 12% equity performance, 10% to 15% earnings growth, 3% to 4% 10-year treasury. And I believe that more money is going to continue to come out of cash, private equity, and fixed income into equity, Scott, because we have the best market in the world,

the most visible market in the world, the most discernible earnings in the world. And I think rotations continue to come back to the United States. And that's why we're going to continue to outperform. Court, I'll give you the last quick word on that on that topic. Yeah. And I think this is just something that you want to make sure that you are properly invested here and you want to make sure you stay diversified. There's a lot that can change here. We have the election next week. We're going into the year, though, regardless of the election, where profits are actually expected to accelerate. We have GDP that's growing. We have the labor market that's strong. All this is really leading to a good end of the year here. And I think you want to make sure you're well positioned. We leave it there, everybody. Thank you, Dan,

Courtney and Brian. Thank you very much. We may have you back now. He was on the fence. We'll have to see. Let's send it to Pippa Stevens for a look at the biggest names moving into the close. Pippa? Hey, Scott. Shares of Tenet Healthcare on track for their best day in four years after the healthcare services company raised its guidance for the rest of the year off the back of strong inpatient volumes for the quarter,

with the company saying it expects demand to continue through the rest of the year. And shares of D.R. Horton are falling after the home builder reported earnings that were below expectations. The company is saying that rate volatility is causing some buyers to stay on the sidelines, especially in the near term, though shares down 8 percent. Scott. All right, Pippa. Thank you, Pippa stevens we're just getting started up next shares of gene dx surging today the ceo joins us following that company's earnings report take a look at those shares up more than 40 percent in today's session alone and later much more on what to expect from mega cap tech earnings this week we're live with the new york stock exchange you're watching the bell on cnbc back shares of geneX soaring more than 40% today to a 52-week high after reporting Q3 earnings, which beat expectations. The company also seeing its first profitable quarter in its history, raising full-year guidance as well.

Joining me here at Post 9 is GeneDX CEO, Catherine Stoolin. Welcome. It's nice to meet you and have you on our show. I'm looking at an analyst report, which really says you guys knocked it out of the park. Reaches orbit, smashes numbers, achieves profitability ahead of schedule. They have a $95 price target. We saw what your stock is doing today. How'd you do this? So I think what investors are realizing is that you can drive really good patient care and drive a really good business and be able to achieve profitability all at the same time. I think for many years there's been this tension between can you put patient care at the same level as profitability?

And we're proving day in and day out that you can. For those who don't know anything about the business, what are your primary objectives? Yeah, most people don't know GDX has actually been around for about 24 years. So we were spun out of the National Institutes of Health and the mission really was to diagnose any genetic disease as early as possible using information that resides within each one of us, a genome sequencing product. So we go deep into the genome to be able to identify whether or not there's an underlying cause of disease. We're able to clearly and definitively put a diagnosis on that and in the majority of

the work that we do that this is for kids with rare diseases. So think about epilepsy, think about children who are having seizures, think about autism, kids who are missing milestones. So we're able to really go in and provide a definitive diagnosis within just a few weeks, and we're able to do it affordably. Are you exclusive in pediatrics? So today our main focus is in pediatrics. And the reason for that is one in 10 Americans has a rare disease. Half of them are children.

And today they go through a diagnostic odyssey that is about six to eight years before they get the right diagnosis, which is really unconscionable. We can provide that information within weeks, if not days. So we are trying to solve this really devastating health crisis for the children and for the families that are supporting them. There's a higher rate of depression and anxiety for the kids. There's a higher rate of depression and anxiety for the parents. So it's a devastating family health problem. And we have the technology today to be able to put an end to those diagnostic odysseys for so many. The word on the street, I guess, for lack of a better way

of saying it, is that you refocused the business, that you went from thousands and thousands of tests essentially down to less than a handful. Is that correct? And why did you make that transition? So interestingly, GDX was acquired by a company called Semaphore that had gone public via a SPAC. And I became CEO of the combined entity in the spring of 2022. At that point in time, market sentiment changed dramatically from growth at all costs to profitability really is what mattered to investors. So the board gave me a very clear mandate, which was how do you make this company profitable as soon as possible? So we actually looked across the entire portfolio of tests from the parent company as well as from GDX, shut down all of the business lines of the parent company because they were not showing the strength they were highly commoditized markets and what we had in GeneDx was a very differentiated product with a market leadership position 80 percent of whole exome sequencing

comes through GeneDx so we have a competitive advantage that is unparalleled and this very wide open runway to be able to help an ever-growing number of families. When you talk about the ever-growing runway, how big is the market? So we think about the pediatric segment as a $3 billion market opportunity. So $2 billion in the outpatient pediatric setting. So think about a child who has unexplained symptoms. As a parent, you're taking that child to a pediatrician, you're being referred out to a specialist, and that's where we're able to intervene

and provide a diagnosis. The other billion dollar opportunity is in the NICU. So genetic testing is woefully underutilized in the NICU setting. Only about 5% of babies in the NICU have a genetic test. So we're going in with a rapid whole genome and we're able to diagnose within five days and be able to move that baby out of the NICU and hopefully onto a healthier path. Let me ask you lastly, because it's been the topic of the year in the markets,

it's obviously artificial intelligence. I'm curious how you use it, if at all, to either analyze the data from the testing you do or interpret it as well. Absolutely. AI is helping us today really streamline and automate a lot of the processes that we have from the moment that a sample enters the lab to when we get a test report out to a patient. So we're just in the early stages. We think that's going to continue to drive massive efficiency for us as we continue to grow. Yeah. I mean, it's the area that people

are talking about big for AI healthcare. So thanks for being here. Interesting story. We'll continue to follow this talk. Catherine Stoolin, thank you. Thank you. All right. Up next, we're getting you set for Alphabet, the earnings in overtime. Shareholder Doug Clinton standing by. He'll tell us what he's watching for when those results hit the tape. We're back on the bell right after this break. It's a moment of truth for big tech this week. Alphabet kicks things off. Top of the hour in overtime, but there is a busy calendar.

Tomorrow, Thursday as well with Amazon and Apple. Concerns around CapEx and AI monetization weigh on Alphabet shares. Let's bring in a shareholder, Doug Clinton, founder and CEO of Intelligent Alpha. It's good to see you again. Welcome back. Likewise. What's on your mind most?

What do they have to do here to get this stock moving again? Well, I think first of all, they have to get the revenue picture right. I mean, the street's looking for kind of 12%, 13% annual growth for revenue. That has to happen first. And then the second piece of it, Scott, I think is more commentary just about what they're seeing in AI. I think you look at the last couple quarters for Google, the thing that's been lacking, in my view,

is just more information about how customers are really using this search generative experience that they've built into search so far and how that competes with new platforms like Perplexity. Okay, so you think there has not been enough information for shareholders like you on the monetization of the spend and the products in which they have. That's what you're saying. That's right, both engagement and monetization. How often are customers engaging with these products?

We've seen some reports where it's been like maybe seven to 10% of queries. But hearing from Google how that's trending, how they expect it to trend, and then ultimately how they monetize it would be helpful. I mean, I think they're going to be the only of the MAG5 who are reporting this week that are actually going to have a decline, albeit slight, in their CapEx. They're still going to be up like 50 something percent year on year, which is kind of the conundrum. It's like you have no choice. The hyperscalers have no choice

but to spend, especially when you're talking about the prospects of maybe losing market share in their bread and butter to whether it's Microsoft or some of the upstarts like Perplexity and whomever else. So, I mean, for us, we've described this as a Pascalian wager for the mega caps, right? You have to believe in AI. If you are one of these Mag5 companies, you have to invest because the downside, if you miss it, if you miss AI, you don't invest, you get it wrong, it's catastrophic. Google's no longer Google if they don't invest as much as they can here. The bar is highest this week in your estimation for whom?

Probably Meta. If you just think about how the stocks have reacted for this group of companies, Meta's had such a great year. We're looking for kind of 18 to 20% year-over-year revenue growth. It's a big company. I think they'll be fine, but I think that's the one where the bar is really high. Microsoft, I think the bar is a little lower. I think Apple's kind of de-risked. Really? I mean, it's not like, I mean, Apple shares have had a nice move, though. They have, but, you know, I think that what we've seen so far from some of the reports on Apple Intelligence, it's been a little disappointing. Well, I mean, it's a little early in fairness, isn't it?

It's still, and we kind of knew this. If you follow the Apple story, we know that really the big components of Apple Intelligence are coming next year. They're not in this first rollout at 18.1 for iOS. And I think that the combination of sort of some of these disappointing early results, iPhone numbers have been coming down. I think that they're in a better position to just kind of have an okay quarter and be all right. Yeah. I mean, we do need some clarity on the iPhone numbers, which seems to be the focal point of all of the debate. What about the broader idea, which was put forth at the top of our program today, that the mega cap trade's back, and it's going to be back for a variety of reasons? Do you believe that?

We are still believers in AI broadly, so I'd start there. And I think the best way to play AI is through still many of these mega cap companies in the public markets. So we look at our portfolio, for example, in our Livermore ETF, AI is one of our key themes that we look at. TSM, Nvidia, Meta, and Google are all top 10 holdings in that portfolio. And so I think owning these companies

as we continue to see this AI spend makes sense. No one would dispute that. It's the degree to which they're gonna lead the market in the handful of months that lie ahead. Right after taking a bit of a backseat in Q3, it feels like that trade is reemerging. I think it is. And the reason I think it will keep up is I think AI in general took a backseat in Q3. People were sort of digesting and questioning, where's the value?

We keep getting this question, when are we going to start seeing some of the value? I think companies like Meta are starting to tell a story about the value they're seeing applying AI to their company, to their business, with better engagement and with better monetization. So we're getting that value story. I think that's why I can start to work with them. You have both Taiwan Semi and Broadcom

in various holdings, whether it's ETF or Deepwater's holdings. What I find interesting, today's news, I'd love your reaction to it. It feels like an NVIDIA take all world. Today's news with OpenAI, you know, doing its first chip with Broadcom and Taiwan Semi, suggests that there's at least the entertainment of competitors to NVIDIA, maybe not in a grand degree and maybe not today, but there are other players who want a piece of an available pie. Is that fair? I think it is fair.

And the way that we've characterized this, Scott, is if you're an AI company worth over $100 billion, you have to build your own custom silicon. So OpenAI falls in that category. Google's already done it with TPUs. Meta's working on it. Amazon's working on it. I think that if you think about that reality,

that these companies do want to create their own processors, who benefits? It is Broadcom to help design the chips, and then ultimately it's TSM to Fabo. Will you be watching things like tonight, especially as it relates to CapEx, since we're talking about nvidia which doesn't report to like november 20th so you got to wait three three and a half weeks um any capex numbers out of alphabet are going to going to immediately be thought of for nvidia you can't have necessarily a big decrease in capex for any of these companies if you're an

NVIDIA major bull right there's a read-through isn't there there is and I think even more important than what the capex reported numbers will turn out to be this week is their guidance how they talk about capex going forward and going into 2025 I mean we expect these companies to continue to boost their capex spending probably to the tune of high teens, maybe 20s, even 30% in some cases. And so hearing that commentary, I think is really important for an idea. We'll see you soon. Thanks for being here.

Thanks, Scott. Don Clinton with us. Up next, tracking the biggest movers into the close. Pippa Stephens is standing by once again with that. Hi, Pippa. Well, one retailer is falling out of fashion with consumers and investors. The name that's down double digits coming up next. Well, we're 15 from the bell.

We have a new all-time high for the NASDAQ going on right now, 18,746 and change. That's the new all-time intraday high. We're about 100 points right now ahead of the closing high, too. So we'll watch that for the remaining 15 minutes of this program. In the meantime, we get back to Pippa Stevens for the stocks that she is watching. Pippa. Hey, Scott. Well, Ford shares are falling after guiding to the low end of its earnings forecast for the year. That's overshadowing a slight beat on profit and revenue for the quarter. Ford CFO telling CNBC

that higher warranty and inflationary costs weighed on results. And shares of Crocs are plummeting after the footwear company lowered its guidance due to weakness in its Hey Dude brand. Crocs is now expecting revenue to grow just 3 percent for the full year compared to a prior guide of between 3 and 5 percent. The stock is on pace for its worst day in more than four years, down 19%. Scott? All right. Appreciate that, Pippa. Thank you. Still ahead on the bell, AMD also reporting its results in overtime tonight. We'll give you a rundown of what to watch for when those numbers hit the tape when we come back.

Programming notes, CNBC will be live all night long on election night. We'll have the results as they come in. Reaction from the biggest names in business as well. All starts 7 o'clock Eastern from right here at the New York Stock Exchange. Coming up next, Alphabet, AMD, Chipotle among the big names reporting in overtime tonight. We'll give you the key themes and metrics to keep an eye on next. All right, we're now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day,

plus two earnings reports we are watching closely in overtime. Kate Rogers on Chipotle, Seema Modi on AMD. Mike Santoli, beginning with you, let's just pick up where we left off a minute or so ago, this new record high for the NASdaq heading into these big reports. Yeah. And, you know, it's been a long wait, which I think is a net positive. In other words, it hasn't been clicking to new highs, even as the broader market has been. In fact, the Nasdaq 100, which is really the kind of mega cap dominated, concentrated version of it, is still half a percent below its July peak, which, again, it basically means it has reset lower. It's cooled off compared to the

overall market. The equal weighted S&P is up like 8 percent over that period of time. So it's coming back into some kind of an equilibrium. You probably have mostly reasonable expectations for these companies going in. Alphabet, you were talking about it on a relative valuation basis. It's never been cheaper versus the S&P if we're going to anchor to something like that. But it's all probably a constructive thing. I think the broader market is in this kind of churning and waiting around phase. You know, you had two to one negative to positive stocks today in the New York Stock Exchange. We're pretty much flat on a month to date basis of the average stock. So we're resting even

as, again, I keep talking about these pockets of speculation trying to either maneuver toward higher yield story and a reflation trade and or red wave next week. Okay. Kay Rogers to you on Chipotle. So aside from the numbers, the analyst community is going to have to get used to a new voice on the call as well. Yeah, first call for Scott Boatwright. Scott, so analysts are looking for EPS of 25 cents on revenues of $2.82 billion for the third quarter. Same store sales expected to increase by 6.3 percent, as mentioned, the first quarter. The company reports since Brian Nicol departed as CEO for Starbucks, and investors will be hearing from interim CEO Scott Boatwright,

who's been at the company for seven years overseeing the tech pipeline that has helped really propel Chipotle to its recent success. We're going to learn more about how the brand is faring right now with consumers. Remember, it had been gaining in recent quarters with all income cohorts, which is a rarity in this environment. It's also been able to grow traffic as other brands see it fall. Chipotle brought back its fan favorite smoked Smoked Brisket, this quarter. So any commentary around that performance will be key. The stock is up more than 30 percent year to date. And as mentioned, Scott Boatwright will join us next hour to break down the quarter and

much more. Looking forward to talking with him. And we'll bring you any highlights as we get him back over to you. And we look forward to that very much. Kay Rogers, thank you very much. To see Mamodi on AMD. What should we watch out for? Well, Scott, from brisket to chips, this is AMD's moment, right, to prove to Wall Street that while it may be way behind NVIDIA in terms of market share in artificial intelligence

chips, it's making inroads with its latest AI processor that it revealed earlier this month, despite the market skepticism following that announcement. The key question with AMD reports is whether the semiconductor raises its 2024 AI chip sales outlook from $4.5 to $5 billion. That would be a vote of confidence for AMD CEO Lisa Su, who has been defiant in her efforts to steal market share from the big competitor, Nvidia, and win bigger customers in Silicon Valley, including Meta, which recently revealed exclusively using AMD's chip for its Lama 3.1 language model. We're looking at the stock down about 28 percent from its recent high. And don't miss Lisa Su right on Squawk on the Street tomorrow, Scott. Oh, yeah. Big interview. Seema, thank you. Seema Modi. We'll see what those numbers are. Mike,

head back to you. We're heading towards the two minute warning. The other event of this day was a Treasury auction that was strong, and it took a little bit of the boil off yields for a moment. Stock's got a bit of a move after that, too. Yeah, for sure. And we've been waiting for that bid to come into Treasuries because you've obviously gotten pretty rich on the long end of the curve, got some technical resistance, which should be coming in right about now.

So a combination of a very mixed employment picture through the Joltz report and then the decent auction perhaps takes that a little bit away from the edge. I still think if you didn't know there was an election next week, you'd be saying, well, cyclical stocks continue to lead the market. You obviously have the trends are all very positive. Yields maybe are a challenge, but they're still consistent with the soft landing.

What you want is actually the Fed to be going slow in an easing process They're all very positive. Yields maybe are a challenge, but they're still consistent with a soft landing. What you want is actually the Fed to be going slow in an easing process and not necessarily rushing. So all that's fitting together. But you do now, I think, get a little bit of, you know, tightly wound ahead of the election. And as I said, some areas of this market, you look at the little mini blowups in payments with SoFi and PayPal today, and expectations were a little bit off sides, and then home builders. And you have a little bit more of a treacherous state below the surface, even as the indexes are really doing nothing wrong as we go into the hard of earnings season. Yeah, locked and be soothed, maybe, and solved with a good alphabet print that gets that stock moving again.

That'll be one of the key things to watch because it has been the underperformer of the group. It couldn't hurt. And, you know, I think everybody expected a pretty blowout beat rate from companies this quarter because you did have expectations lowered by the consensus. You haven't really gotten that. I mean, it's been fine. And I think in aggregate, by the time we get through next week, it'll look like the numbers are coming through OK.

But, yes, you want the big ones to start pulling their weight. If you have the makings of upper divisions from the likes of an alphabet, two trillion dollar companies actually do a lot toward contributing to that S&P 500 earnings expectation. All right. Well, we'll get all of that, obviously, in overtime. That report, NASDAQ's going to go out with a new closing high today leading into that pivotal report, which happens in moments into overtime with Morgan.