Closing Bell - Stocks Bounce Back, Commerce Secretary On Chips & Game Over? 12/8/22

Episode Date: December 8, 2022

The S&P 500 snapping a 5-day losing streak, it's longest since October, as investors hunt for bargains. The FTC suing Microsoft to block its nearly $70B acquisition of video game publisher Activision Blizzard. Former FTC Commissioner Mozelle Thompson explains why this could be a tough fight in court for Microsoft. Lightshed's Brandon Ross discusses what will happen to Activision's stock if this deal is broken up. Commerce Secretary Gina Raimondo discusses how the government is deciding which semiconductor stocks will get money from the Chips Act and whether there are plans to expand China export controls on next generation chips. Etsy CEO Josh Silverman weighs in on the outlook for consumer demand amid increasing fears of a recession.

Stocks are gaining back some ground on the week as the S&P 500 aims to snap a five-day losing streak. This is the make or break hour for your money. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand right now in the market, up about 100 points on the Dow. S&P 500 is up about six-tenths of one percent. What's leading? Technology for a change. Information technology at the top of the market. Thanks to a rally we're seeing in the chips, especially NVIDIA, which is up five and a half percent.

Intuit is higher. NXP, some of the less sexy tech stocks. Microsoft is also higher. What's weighing on the market, though, communication services and energy. Those are the only two sectors that are lower. NASDAQ's up a full percent right now as we're seeing a bounce back in shares, not just of NVIDIA, but Apple, Amazon, Microsoft, Qualcomm and Alphabet. Breaking in the last hour, Activision Blizzard making a move lower on news that the FTC is suing to block Microsoft's acquisition of the gaming giant. We'll talk to former FTC Commissioner Moselle Thompson about that news in just a second. Also ahead on the show this hour, Commerce Secretary Gina Raimondo joins us from the National Competitiveness Forum to talk about competing with China, including this week's big chip news surrounding Taiwan Semiconductors' investment in Arizona. Plus, we'll get a new read on holiday spending and strength of the consumer when we are joined by the CEO of Etsy, Josh Silverman, later this hour. Let's get straight, though, to the breaking news of the afternoon.

Microsoft and Activision, the FTC, now suing officially to block the deal. They're alleging Microsoft would gain control of top video game franchises here and potentially harm competition. Microsoft just putting out a statement from its president, Brad Smith, saying in part, quote, We have been committed since day one to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC. While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court. Joining us now, former FTC Commissioner Moselle Thompson. Not a huge shock, Moselle, because we got rumors that they were going to sue on this deal. And the stock has been trading well below the offer price of 95 for a while now. But what's your reaction

to the FTC making it official? Well, it's not a big surprise in the sense that this FTC has decided to be pretty forward and aggressive with regard to the tech industry. And so bringing the lawsuit in and of itself is not a surprise. Whether they will prevail or not, that's going to be a different question because it's going to depend on how they define the market and how they're going to show how consumers are going to be harmed. It's an uphill battle for them, but I'm not surprised that they decided to bring this lawsuit.

Why? Do you think it's political, or do you think that there's some serious question or cause for concern about this takeover? Well, look, I can't second guess what someone's motives are. It's hard to tell that. All I know is whether a case would be easy or whether it will be a challenge. I think this will be a little bit of a challenge. Don't forget out there who the rivals are. The rival is another big company, Sony, who has a competing platform. And they also have some of the same issues.

So are we saying then that any company that has a big platform will not be able to acquire a game company. I don't know if that's the message they're trying to send, but it's one that you have to ask a question about. Well, there's a statement from the director of the FTC's Bureau of Competition who says that Microsoft has already shown that it can and will withhold content from its gaming rivals, so clearly a concern even though Microsoft says that it is committed to doing the opposite. She says, today we seek to stop Microsoft from gaining control over a leading independent game studio

and using it to harm competition in multiple dynamic and fast-growing gaming markets. Does that say anything about their case? Well, all I know is that the reason I think it's a fairly aggressive position is there are probably any number of ways that they could have tried to mitigate this harm. One, you saw earlier last week when Microsoft said it would essentially license other consoles to have a call of duty. And there are any numbers of different ways they could have handled it. Besides the fact that they didn't want to go that route and go forward with just a lawsuit, says something about where the statement that they want to make.

Well, but also it looks like in the complaint, they're pointing to the 2021 acquisition that Microsoft made of ZeniMax, which I guess is another software gaming maker. And Starfield and Redfall were the games. They made it exclusive to their platforms. So I guess they're questioning the assurances that Microsoft is making here. You know, one of the things you wonder about, though, is does that mean that any company who buys a gaming platform

and they want to make something exclusive for them, then they would be precluded from doing that. I mean, you have to look at what happens in the rest of the industry as well, including what happens with Sony or anyone else. They're exclusive titles to them too. So are we saying that any big company can't do that? Those are some of the questions I'm sure any court's going to ask. Should we not be saying that any big company can't do that? Those are some of the questions I'm sure any court's going to ask. Should we not be saying that? Well, I think it depends. Depends on whether the consumer is actually harmed or not, or whether they're going to get benefit from being on a platform and getting the latest in a particular game. Don't forget that a lot of these games are pretty exclusive in how they sell

so that to the extent that companies want to offer some special incentives, they can. Look, I think that these are some things that you have to look at. But what I'm saying to you is that in order to prevail, it's going to be an uphill battle. Our White House correspondent Kayla Tashi just sent out a list of some of these cases that the Biden administration has lost. In other words, they haven't been that successful when it comes to blocking these mergers. Judge rejecting the FTC's challenge of Illumina's acquisition of Braille. It happened also with Booz Allen Hamilton, purchase of rival defense contractor. There's a list that's longer of the ones that failed in court than the ones that the Biden administration has successfully won.

Well, I do think that... What does that say about their arguments? Well, I think their antitrust position has been pretty aggressive. And they're willing to take chances on losing cases to make a statement about what they think competition should be. But at a certain point, it also begins to harm the agency and its ability to affect the market if it doesn't have credibility. So I think you have to balance those things out from a policy standpoint. I think that the FTC wants to make a statement about big tech, but I'm not sure that in the end, if they're not successful, this is the kind of statement they want to make.

So you think they're just picking the wrong target here, ultimately? Or you think that's what's going to happen? I just think there's a lot of resources and a lot of energy here, and I'm not sure that the statement they're making, if they're not fully successful, will be the market will be in a better place. That's the challenge. Right. Which is the goal as well. Moselle Thompson, we appreciate your insight. Thank you. It's good to have you as someone who is in that seat in the FTC, the former FTC commissioner, Moselle Thompson.

Let's turn to the broader market. Stocks are off their highs, but we are holding on to some gains as we approach the close, Mike, which is a change from the rest of the week. What's on your radar? Yeah, Sarah. And you know, if we if we hold here, we're going to end a five day losing streak to start December. So it really is keeping the the indexes pretty much in neutral. I would say that because we're right here where we traded back into right around November 10th, actually. Remember that CPI day? We got that big rally off the low. That's basically where we jumped up to, and we're sitting right around that level.

It's also just the midway point of the seven- or eight-month range. So it's not necessarily like we're breaking down further. We've used up a lot of the oversold conditions, still in the longer-term downtrend. But the market's seeming like it's got a little bit of footing today. We'll see if it's just countertrend. There seems a lot of kind of beaten-down stocks squeezing a little bit higher. A lot of conversation about the state of the consumer, right? You have another little uptick in weekly and continuing jobless claims, and a lot of talk about utilization of credit in order to sort of bridge spending for consumers. But here from Bank of America, using their own internal customer data show the amount of credit card

limits, the percentage of credit card limits that's being utilized with current balances for different income levels of customer. What you see here is so lowest income customers under 50,000 a year. Yes, trending higher from historic lows in terms of percentage of the credit limit utilized. But here's your pre-pandemic level. It's the case for all income categories. In fact, the sharpest increase in credit card utilization is among upper income, which is sort of a more discretionary thing. The point is a lot of indicators are trending in a weaker direction, but coming off of such strong levels that it's very difficult to conclude that the economy itself is really on the precipice. That's a really interesting chart because a lot of things, when the bears are pointing to the fact that the consumer is starting to really deteriorate

and all these rate hikes are having an impact, they cite credit card debt. Exactly. And it is up in a fairly sharp way from the recent lows. The fact is, when everybody got stimulus checks, one of the first things you did if you had credit card balances, you paid them down. You stopped making the minimum payments and you had enough excess savings. In the wrong direction. And wage growth is good. So all this stuff says there's room before it gets to a real critical spot. Got it.

Mike, thank you. Mike Santoli. Look at Etsy. It's near the top of the S&P 500 today. And the stock has doubled off the lows hit earlier this year. Up next, we'll talk to the CEO, Josh Silverman, about what's driving the strength of late and his early read on holiday spending. You're watching Closing Bell on CNBC with the Dow up 100 points. Etsy shares in the green today. The stock is down more than 40% this year,

but it's also doubled off the lows. And Etsy CEO Josh Silverman joins us now. Josh, the stock has been all over the place. I feel like investors can't figure out if it's a pandemic winner or a long-term secular winner. What are you hearing from the investor crowd? You know, I think there's been a lot of changes across the world through the pandemic, and certainly e-commerce has been affected more

than most. And Etsy grew enormously during the pandemic. And so the question that's been on everyone's mind is how much of those gains are going to stick. And we're really thrilled by the fact that it appears that the vast majority of gains that we got through the pandemic are sticking. For example, in the third quarter, we announced that we did about $2.6 billion of gross merchandise sales. That's up from $1.1 billion of sales in the same third quarter pre-pandemic. So while millions of people had to shop on Etsy during the pandemic because they had very few other choices, it appears that they're coming back again and again now, even though they have every other

choice. Yeah. Remember when you were breaking down the percentage of revenues that came from masks? It feels like a long time ago. Yeah. And masks are an insignificant. I'm sorry. Go ahead. Yeah. No, they're insignificant. I know that that's sort of what I was implying. So the second half of the year, especially here, we've heard and seen softness in e-commerce and Amazon and Shopify and some of the others. How have you maintained the resilience? And are you seeing any sign of that? You know, we shared in our third corner earnings call that actually October was robust for us. And we saw some acceleration in October. And then we shared an outlook for the fourth quarter that said we're going to do between $3.6 and $4 billion of gross merchandise sales,

was our guidance, which we think is really robust, particularly when we compare it to last year, when there were so many supply chain issues that also benefited Etsy and Etsy sellers. So we're comping that. And we gave what we thought was pretty robust guidance. What our research says is, you know, of course, people right now are very value conscious. They also, if they're going to buy fewer things, they want those things to mean more. And Etsy, that's our sweet spot. Etsy has millions of things for sale that have a lot of meaning and are priced at a really fair price. Well, I heard the exact same quote this week from Jenna Drossos, the CEO of Cignet. Fewer things, but more valuable. And they had a really

good quarter as well. So and I know you can't give any read on holiday sales or Cyber Monday or anything like that. You're going to wait for earnings. But how do you compete on Black Friday sales with a Walmart or an Amazon if you don't take inventory? You know, our sellers have a lot of tools. We've invested a lot to give our sellers tools so they can decide to put items on sale and how much they want to put items on sale. And many of our sellers are deciding to do that. But the other thing is that I think people are really realizing that they want to buy things from other humans and that, sure, you can mass produce things abroad in units of 20,000, and it's cheap to mass produce them. But then you've got to

put it on a boat, to put it in a port, to put it on a train, to put it in a van, to send it to your home. And there's three markups along the way or four markups along the way. When a seller makes something just for you, and then she sends it to you, there's no markups between her and you. And so she can make something really beautiful just for you and then she sends it to you, there's no markups between her and you. And so she can make something really beautiful just for you and sell it at a really fair price. Speaking of sellers, how do you keep them happy and on the platform when there are other areas and other places they can go? Competition, they can sell it, they can have their own brand shop on Shopify or third party on Amazon.

How do you retain them and grow them? Sure. Our sellers have many places they can sell. And we had about 2.2 million sellers before the pandemic. We have well over 5 million sellers on Etsy right now. And they're coming and they're staying because Etsy brings them buyers who value what they sell. Millions, in fact, almost 90 million active buyers on the platform right now. And we're investing a lot in marketing. You know, we're really pulling in all the stops to make sure that our sellers have the best holiday season. This is the Super

Bowl for them. And so we're investing in marketing. We've launched an Etsy purchase protection program recently. You know, we've really stepped up customer support. So our sellers are really well supported so they can succeed. I believe you're also in Washington today speaking with members of Congress pushing for small business. What exactly are you asking for?

I was in Washington all day yesterday meeting with members of Congress on both sides, making sure that we do pass legislation that can protect against things like counterfeits and have good intellectual property protection, but do it in a way that also looks after the needs of the smallest sellers and doesn't paint all e-commerce sites

with a very broad brush. Thinking about caregiving, one in five of our sellers says that caregiving is one of the main things, their caregiving responsibilities at home, that stops them from investing more time and energy in growing their business. So we think better federal support for caregiving is actually a great investment in our economy that's going to allow small businesses to grow. So that's another thing I was talking with members of Congress about. Keep us posted. Josh, thank you very much. Good to talk to you. Thank you, Sarah. For an update. Josh Silverman, CEO of Etsy. Still to come, Commerce Secretary Gina Raimondo joins us exclusively to talk about the latest efforts to compete with China. And just following this developing story for you, we just got a letter that Activision CEO Bobby Kodik

shared with his team after the FTC blocked, sued to block the deal, the takeover from Microsoft. In the letter, he says, this sounds alarming, so I want to reinforce my confidence that this deal will close. The allegation that this deal is anti-competitive doesn't align with the facts, and we believe we will win this challenge. We'll talk to an Activision analyst

for his take on where this stock should be trading straight ahead on Closing Bell. Check out today's stealth mover, Hershey, the stock on a sugar high. UBS upgrades Hershey today to buy from neutral, raised its price target to $2.69 from $2.44, implying a nearly 14% upside from its closing price on Wednesday. The analysts here predicting that the candy maker will continue its sweet earnings beats and raise cycle next year, despite what we're seeing, increasing macro headwinds. Stock's been on a roll in 2022, rallying more than 20% this year. Consumer staples as a group are actually down for the year. So it's already been an outperformer. These analysts think the

earnings beats can keep up, especially relative to the group. Up next, Commerce Secretary Gina Raimondo on whether there are any plans to expand China export controls on next generation semiconductors and much more on this relationship when we come back. Dow's up 140, building some momentum into the close. U.S.-China relations have been a huge focus this week after President Biden toured Taiwan Semi's new chip plant in Arizona. The company also announcing a second factory is underway. The announcement is part of the Biden administration's plans to become more self-reliant in chip manufacturing in this country. It's also been making moves to cut off China's access to high-end chip technology as well.

Joining us now to talk about this from the National Competitiveness Forum is the Commerce Secretary, Gina Raimondo. It's great to have you, Madam Secretary. Welcome. Nice to be with you. So clearly you've got a huge job ahead of you right now when it comes to the implementation of the CHIPS Act. Billions and billions of dollars. How are you deciding where that money goes to which companies? Yeah, as you say, it's an enormous undertaking.

And early in the new year, we will be making clearer what the criteria is and which companies would be even eligible. But our goals here are clear, which is to say right now in the United States, we don't manufacture any really leading edge, cutting edge chips. And so and we buy 90 percent from Taiwan. So we need to manufacture enough in the United States of those chips. We also need to expand our production of the more mature chips, the kind that go in cars or medical devices. So the entire point of this program really is around our national security. We're overly dependent on other countries for chips that we need for our economy and military. And our goal is to make sure we invest this money in a way that reshores that supply chain.

And oh, by the way, in the process, I think we will create hundreds and hundreds of thousands of good manufacturing jobs. On the jobs question, the biggest problem I hear from executives who are in this industry, and I was talking to them around this when the Biden toured the new plan in Arizona for Taiwan Semiconductor is talent, people. Do we have these skilled people to operate these advanced semiconductor manufacturing plants? Or in this new Taiwan Semi plan,

are we going to issue visas and bring people from Taiwan? The answer is we need to do both. You know, we need to do both. And we are doing that. I think that the State Department is very focused on making sure that visas are efficient. So in this case, you know, the experts and the engineers from Taiwan can quickly get into the United States to do the work at this new factory. But look, at the end of the day from Taiwan can quickly get into the United States to do the work at this new factory. But look, at the end of the day, we have to do more with workforce training, science and technology teaching. There's no doubt about it. And what we are doing here with the Chips in Science program isn't just incentivizing the creation of a few new

manufacturing facilities. We plan to invest in more research and development, working with universities and community colleges, even high schools and apprenticeship programs. We have to produce vastly more engineers, mathematicians, statisticians, if we're going to, you know, really meet the challenge that we need to and be innovative and productive like we need to. On a related note, I know you're also at Commerce overseeing the China export controls on advanced semi-manufacturing. And in order to make that effective, we need our allies on board as well. Japan appears to be on board. What about the Netherlands?

There's a report just in the last 24 hours, And of course, this is very important with ASML, a key player here, that they too implement the kind of controls that the U.S. is doing to cut China off. Is that happening? You said it perfectly. In order for these to be effective, they need to be done with our allies. Because if the United States controls a product and say the Netherlands doesn't, then China is able to get that product from the Netherlands. So we are working on a daily, weekly basis with the government in the Netherlands and Japan. I'm optimistic that we will find alignment, but they have to go through their own process, you know, their own government processes to get there. What I will say is the reason I'm optimistic, they have the same national security

incentives as we do, right? This isn't about slowing down China's technology broadly. This is very specifically around denying China sophisticated technology that China will use in its military and in its surveillance technology. It's every bit in the interest of the Netherlands, Japan, and all of our allies that that happened, which is why I'm optimistic that we will get there. But they have to do their process. Yeah, no, so it sounds like the Dutch aren't quite on board at this point yet. On the effectiveness question, you know, the CEO of Baidu was asked about this on an earnings call in the last week or two. I just want to share with you, Madam Secretary, what he said about whether this was affecting his company.

Of course, this is one of the biggest technology companies in China. They do AI. They do self-driving cars. Robin Lee, the CEO, said on this question, certainly there are some alternatives to the restricted chips, and we have the technologies to use these alternative chips to achieve almost the same effectiveness and efficiency in our AI cloud and wider AI businesses. He also noted that automotive chips are not on the prohibited list, and finished by saying we think that this actually increases some good market opportunities for the Chinese chip companies and that will eventually benefit from these opportunities. In other words, limited impact and that it's actually going to help Chinese chip companies.

But again, the purpose isn't to slow down China industry or Chinese tech companies. The purpose is to prevent our technology from getting into the hands of the Chinese military. And they do not have this technology. They don't have equivalent technology. The United States and our allies are ahead of them. And we need to maintain our lead. And, you know, President Xi and the Communist Party have been very clear. They have this civil military fusion effort where they want to procure our technology and put it into military uses. And so we have an obligation to prevent that from happening for as long as we can. In terms of their ultimate benefit in the long run,

China's been very clear. President Xi's strategy is crystal clear. He wants to indigenize all technology. He wants to decouple technologically from the United States. So what we need to do, our strategy, our competitiveness strategy with China begins at home. It begins with investing in America. It begins with, like you said, investing in talent, research and development, making more semiconductors right here on our shores. And that ultimately is the way we will compete and out-compete China.

Can you expand those export controls? Is that on the table? If we think we need to, we will. We evaluate it constantly. We're constantly getting information from the intelligence community. And, you know, what we're trying to get away from is kind of the whack-a-mole, you know, putting companies on the entity list one at a time. Instead, we're saying a core part of our strategy, protecting America from China's malign intentions is to deny them certain choke point technologies. And that's what we're doing. And if we have to add more, we will do that.

And finally, Madam Secretary, just a question on the economy, because there's so much talk and it's really heating up this week about how we're going into recession. We're seeing the layoff announcements, particularly in industries like media and technology. I know the administration is saying we're moving into a more stable period of growth, but you speak to businesses and industry

every single day. What are you hearing? Some caution, but a lot of optimism. Clearly, inflation is an issue. And although it's coming down, there's more work to be done. Clearly, you have factors in the world like what's happening in Russia that are, you know, kind of exogenous and cause uncertainty. Most CEOs I talk to, though, tell me that they're doing just fine. They are continuing to hire. Their revenue is, you know, in a place that they're comfortable with. Look, the Fed is raising rates. That is designed to slow the economy. It should not surprise anyone that the economy is slowing. That's the whole point. But if you look at the fundamentals, you know, productivity growth, GDP growth, strong job market, consumer buying.

I can't deny that inflation is an issue and that the economy is slowing. But I'll tell you this. I'd rather be America than any other place in the world right now. As I look at Europe's economy and China's economy, the United States is positioned really from a position of strength to weather whatever might be coming. Secretary Gina Raimondo, thank you so much for your time today from the National Competitiveness Forum. Thanks. Appreciate it. Wall Street is buzzing about Treasury Secretary Janet Yellen signing on to a new place in history. We'll explain when we come right back. Dow's up 130. 23 minutes until the close.

What is Wall Street buzzing about today? Janet Yellen and money. The Treasury Secretary in Fort Worth today at the unveiling of the first banknotes printed with her signature on them, alongside her treasurer, Marilyn Malerba, marking the first time in U.S. history that two women's signatures will be on the dollar bill. Secretary Yellen spoke about the significance.

SEN. MARILYN MALERBA, U.S. Secretary of State for the First Time, U.S. Secretary of State Some will note that this is the first time the signature of a woman Treasury Secretary will be on a U.S. banknote, and the first time the signatures of two women will be on our currency. But really, this is not about me or Treasurer Malerba. To me, these notes represent the hard, ongoing work of the Treasury Department to strengthen the economy and advance our economic standing around the world. And it's also a reminder of the contributions of women who have worked at Treasury and in the economics

profession. She also noted that she practiced her signature after previous Treasury secretaries were mocked for their terrible handwriting. Remember Jack Luce? He revised it before it was actually printed. It was just a series of circles. And then who could forget her predecessor, Steven Mnuchin, whose wife Louise Linton's posing with his sheet of dollar bills went viral. Everyone thought they looked like Bond villains.

Secretary Yellen, I am told in the ceremony today, said, I never thought growing up in Brooklyn I'd ever have my name on the money. Another glass ceiling broken in her long list. When we come back, Chinese tech stocks surging over the last month as China eases COVID restrictions. Up next, we'll discuss whether the comeback is sustainable. That story, plus Salesforce struggling and Activision Blizzard under pressure on this new FTC suit to block its takeover from Microsoft. When we take you inside the market zone, DOW's up 100. We are now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli is here to break down these crucial moments of the trading day.

Plus, Light Shed's Brandon Ross on Activision Blizzard and Frank Holland here to talk Salesforce. We'll kick it off broadly, though, because, Mike, we're seeing an up day for the first time all week, for the first time in five days. It looks like we're going to break the streak. The S&P is up about a half a percent. We built on that strength into the close. You have most sectors higher. The only ones lower, energy, communication services and financials. And the chips are really leading. What's causing the strength or is it just after a lot of selling? I think it's a little bit of a bounce in things that have been hit the hardest. It looks like the rule today, if you look at broadly across tech, except for Tesla, has been bouncing hardest. That's been the epicenter of the declines. Also got just a little bit of a uptick in bond yields.

And so they looked a little bit stretched in the short term to the downside. So I think a lot of countertrend stuff. The one that you haven't really seen is crude oil, which, you know, rally attempt earlier didn't really take hold. So that remains kind of this disinflationary, maybe slower growth story. But the rest of the market has been OK with it today. Still kind of a neutral setting for the stock market. Let's get to the breaking story of this afternoon, which is the U.S. government, the FTC, suing to block Microsoft's takeover of Activision Blizzard on antitrust concerns. Brandon Ross from LightShed Partners joins us to discuss. He covers the gaming market. So, Brandon, how much of a surprise is this? Because we got a little bit of a heads up that this was coming, and there have been doubts throughout.

Yeah, this wasn't a surprise at all. I think Lena Kahn and the FTC gave hints last week and continue to drop hints that this was coming. And given how quickly the responses came from Microsoft and Activision, they were definitely expecting it as well. So does the market think that this deal is going to happen or not? Because while it is, what, 20 bucks below the offer price, it hasn't been hit as hard as some of the other video game makers in the space. Well, look, I mean he stocks are probabilities at the end of the day and even if Microsoft is going to take this to court and it sounds like they're willing to fight this there's probably there is a chance that they're going to win and so the market is heavily

discounting the stock from the ninety five dollars. But even in the case that they do lose, I think this company does between four dollars and four twenty five in earnings next year. And when you look at where EA is trading at 17 times earnings, this stock is probably not that far off from where it would trade in a break scenario anyway. So you have that and then you have the ups if this deal actually does get done. Based on your read of the video game market, and I know you're not a lawyer here, but the concerns around anti-competitiveness and the fact that the FTC is worried that Microsoft could restrict some of these game franchises to other video game makers, does it sound right to you? It actually doesn't make much sense to us. If you look at the market definition for video games,

whether it's hardware, software, mobile, or the three of them combined, Microsoft does not have a leading position. And console, where I think the most concern is, it's actually third behind Sony and Nintendo. And in the case of Call of Duty, which seems to be the point of the most contest in this deal, it would be extremely uneconomical for Microsoft to take Call of Duty off of Sony's platform because it probably accounts for more than half of the overall revenue for the franchise.

So that wouldn't make much sense. I think that Microsoft's goals here are probably, if they want to restrict Call of Duty, it's on their subscription service. They're definitely, even though it's nascent and has missed targets, they definitely want to build a subscription service and use this first-party content to do so. But that's such a nascent market. I think it would be an overreach by the FTC to try and regulate it. And mobile, where, you know, King is pretty big with the Candy Crush franchise.

Candy Crush, yeah. Yeah, which I'm sure many people watching this play and spend lots of money on. But overall, Microsoft and Activision are quite small in that space as well. Mike, you've been watching the stock. We were talking about this as well. Brandon says it's actually near where it would be, even if the deal doesn't happen and they lose the challenges. What's your take? Yeah, I mean, it's plausible if it does get the EA valuation. But if you just look at how it's traded since January when the deal was struck,

it's had this vast outperformance against the other two, certainly against Take-Two. So I think it's a decent chance that the spread to the deal price of $95, which is a cash deal, is pretty significant here. And it already builds in a decent probability of a break. And, you know, we know, you know, Warren Buffett himself bought Activision thinking this deal is just a likely close. So we'll see. I mean, I think that the basic nature of court battles is there's an unpredictability to it, even if you think the rationale favors one side. Yeah, I'm glad you noted Warren Buffett

and that arbitrage trade. Thank you very much, Brandon Ross. It's good to talk to you from LightShed. Take a look at Salesforce. It continues to be one of the big laggards in the Dow following the departure of co-CEO Brett Taylor. The stock is now nearly 10 percent just this week. Bayard downgraded the company to neutral, slashed its price target to 150 from 200, citing the leadership change and macro headwinds. Frank Holland joins us. Frank, CEO Mark Benioff essentially gave a state of the company address today at the Javits Center. You were there. What did he say about the business and did he address the high profile departures? Well, to be clear, Mark Benioff was very upbeat about the future of Salesforce.

I shook his hand, he even gave me a wink. But he did admit, he was very honest that a lot of his customers have asked about the departure of co-CEO Brett Taylor, as well as the CEOs of Tableau and Slack in recent days. He still maintains, however, that customer retention and customer demand, they both remain strong. However, when it comes to that bombshell report from the Journal today saying that Benioff felt that Taylor wasn't focused enough on the business of Salesforce, not the product or the engineering, and that's what led to Taylor's departure.

Listen to what he said to that. I'm so grateful for Brett. You know how much I deeply love him and Stuart too, and so many. He's not here. That's the sad part. But you know what? Let me tell you what is exciting. What's exciting to me is that we're able to have all these great customers and also we're introducing this amazing new data cloud today. That is what is exciting.

All right, Mark Benioff, obviously talking to Jim Cramer. The full interview is going to be up on Mad Money later today, but there still does remain a question about demand. I spoke to a number of Salesforce executives, all of them saying across the board that customers are taking longer to close deals. Also, they're expecting more from each vendors. They said they don't want new products. They want Salesforce and, in all fairness, other tech companies to give them ways to maximize the products that they've already purchased. And again, as I mentioned, Mark Benioff is going to be on.

Oh, sorry. Sorry, Sarah. Go ahead. On be on. Oh, sorry. Sorry, Sarah, go ahead. On Mad Money. No, we're looking forward to it. Frank, as I understand it, the Brett Taylor news, while maybe it came as a surprise to folks, fully on his own terms. And as I understand it, he's still there and he's going to finish out. He's not leaving with bad blood or anything like that. What is the market so concerned about here? Is it the fact that it was a surprise that investors really liked him? You know, I want to confirm first what you said. I spoke to Chief Marketing Officer Sarah Franklin. I spoke to Clara Shai, the CEO of their service cloud, a big division in the company. All of them said that they wish Brett the best and

he wasn't leading on bad terms or under some type of tension or duress. I think the big issue here is that so many people who are crucial to businesses, especially businesses that Salesforce has acquired fairly recently, including Tableau and Slack, are now leaving the company. You have to remember, I believe Tableau was about a $17 billion deal. Slack was a $27 billion deal. These are huge acquisitions for the company. And now the people who guided those companies before the acquisition have decided to walk away. So questions about the growth of the company going forward.

Mark Benioff said he's looking to focus on organic growth as well as unorganic growth. And he didn't rule out M&A. No, I think the Stuart Butterfield news was just unfortunate timing in a long planned event that he would leave after a while. Thank you very much, Frank Holland, for breaking that down. Salesforce trading at lows that we haven't seen since 2020.

Chinese tech stocks, though, they're rallying again today, extending a major comeback for the group. The KWeb Chinese Internet ETF, it's up nearly 40 percent over the last month on hopes that China would ease up on its zero COVID restrictions. Let's bring in Gary Dvorak, managing director of Blue Shirt Group, which advises Chinese companies. So, Gary, there's hopes that this reopening is for real, though it's kind of hard to get the full picture coming from China. What do you see? Yeah. So thanks for having me here. The next two weeks are really going to be critical because there's two elements that are driving the rally. First of all is obviously whether the COVID restrictions are going to loosen and stick. And that's still kind of an open question. And then the second thing, what we're not hearing a lot about,

but I think is actually probably more important, is that there's been a lot of progress on this whole issue about access for the auditors, for the PCAOB to look at the audit work papers in China. And that, I think, actually is probably more important in terms of the reduction of risk on these stocks right now. So it looks like they're going to play ball here? Yeah. So I was in Hong Kong last week, and I met one of my good contacts there, a sales site analyst who's pretty close with the major Chinese tech companies,

BABA, JD, and what have you. And so he gave me a really good data download on the recent visit by the U.S. inspectors. And he told me that the companies that he talks to and he covers are extremely comfortable about the ability to access the working papers, which is a key issue. And the major Chinese tech companies that they were examining, there were eight of them, gave full access through their auditors to all the working papers that the inspectors needed. And so if you recall, like three weeks ago, the inspectors came back early, right? And they didn't really say why. There was a question, is this good news that they

got done more quickly? Is it bad news that they gave up? And what I'm hearing is that it went really well. And that's a huge positive that they're going to resolve the audit issue, hopefully within the next couple of months, because it has to happen this winter. The next two to three months, it has to get done. What about Tesla in particular? I wanted to ask about that because of these reports that Tesla is cutting production in China. Is there a demand problem there? How do you see the Tesla interplay in the Chinese market? I think they do have a demand issue. And yeah, they shipped 100,000 in November. Everyone saw that number. But the thing is, you know, a lot of the showrooms were not open. They were not able

to be open enough. And the thing I think is more important, like we all know that the Chinese economy is really, I hate to say, it's kind of in shambles because of the COVID restrictions. And so certainly the change in restrictions is going to help. But here's the thing, the Chinese are huge savers, right? Because there's not a big social safety net. And the first year of COVID, 2020, people had a lot of savings that they could rely on. Those are gone. You know, I was there the last couple of months and people like I burned through my savings. It's a different story now. And Chinese are cash buyers of big assets, cars, real estate. And so the liquidity is not there. So I think I think there really is a demand issue. How big is it?

You know, we'll find out. But it certainly is very plausible. And I think that is the case. Gary Dvorak, thank you very much. With more color on China. Quick programming note tomorrow. Don't miss our exclusive interview on this show with the Bank of America CEO, Brian Moynihan. He's joining us from the U.S. Competitiveness Council to talk about that and a lot of news made on the banks this week, Mike Santoli, that's weighed on their stocks, concerns about the economy and how they're starting to prepare for a downturn. What are you seeing in the internals? Yeah, some fresh pressure on banks this week, even though a lot of other cyclicals got hit earlier. But they have found their footing today.

If you look underneath the surface, really moderate range, moderate volumes here, slightly positive on the breath. Take a look here. You were just talking about both Tesla and Salesforce. Look at those two stocks on a one-year basis against Amazon. It's kind of the same path. They're all down just about as much. Individual stuff going on with Eats. Some leadership questions around each of those companies.

And a lot of kind of retrenchment as opposed to really gunning for growth. And all of them now basically cut in half as of today. Take a look at the volatility index. It's sort of easing back in the 22s. Got PPI tomorrow. Might be a little bit of a market move. We'll have to see, Sarah. All right, as we head into the close,

looks like we're going to break the losing streak for stocks. The S&P 500 is up three quarters of 1%. What's leading today? It's technology for a change. You are seeing strength in some of the chip names. NVIDIA up 6.5%, NXP Semi, Skyworks Solution, Paycom. You're also seeing strength today in consumer discretionary. Thank you to a rebound in names like Nike, Etsy.

We mentioned we talked to the CEO, but Amazon is higher today as well, and that is certainly helping. The only sectors that are lower here on the close are energy and communication services. That's it for me on Closing Bell.