Brad Gerstner Joins us Live in San Francisco 11/21/24
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supply i'm Scott Warner and you're listening to C N B C halftime report, the podcast the most profitable hour of the trading day. You record this live weekdays at twelve eastern listen in. Carl, thanks so much. Welcome to the halftime report. I'm Scott walked their life today from one market instances go front and center.

A special on the state of the tech trade after in video is closely watched earnings super tech investor brad gardener of altimeter capital is with us for the hour today, also joining me, josh Brown bring talking in and liz Young Thomas good to have everybody with us. We will check the markets here as we are reacting to those in video earnings. The dow is the big winner today.

You see the mazda is a bit red and the S M P five hundred, good for about one quarter of one percent. Good to see again. Great to be here towards the end of the years.

Been a while since we've seen you here on the west coast. Let's talk about in video OK. Um you read on the the quarter, which was you obviously a beat sales up ninety four percent year on year. That is a slowdown from the prior three quarters, which i've just been a standing and ninety four percent of year over year is amazing, obviously.

But what you take, I mean, let's let's say at the start is down a little bit today because expectations were sky high, but this was a blockbuster quarter by in video, right? What's clear to me now and what I think the biggest take away from the call is that the world runs on in video. As Johnson son said, A, I is in for swing.

He said, this is a more tie your event. This is not just about training A, I, this is about moving all the world's X A D six architecture. All the applications that run on CPU are gonna be rebuilt over the course of the next three or four years on GPU that are running machine learning.

So I think that the market is going to have to digest. This just isn't about training clusters in twenty twenty five. This is about GPU data centers that are going to be built in twenty six, in twenty seven. And so for us, our numbers came up. You saw that I think ten so ede analysts took up the Price targets for the stock we were buying at premarket when I was down .

at this morning.

yeah. So you know I think there was a black buster report. And I think, you know, it's clear to me that the interests of the world are onna continue to lose share and the NVIDIA s of the world are going to continue to gain share. And if you want to bet on the tail winds associated with A I, you have to have the video in your port.

okay. So it's now your number two position, correct. With buying A A little bit more this morning. Josh, what was your take on the quarter? You obviously well known for being in this stock for a very long period of time.

I think they were very artful in the way they maintained everyone's enthusiasm for the potential for black well, where order to stand the fact that demand is still at outstripping supply, but they didn't ratchet up the excitement too much to put them into a position where they just can't win the next time they report. And that's really gonna the company's job going forward. IT is already the largest market cap company in the world.

IT is already the most muston stock in the world. There is no need to continue to put pressure on themselves to outperform and outperform and outperform. So it's harder than that sounds because they do have a really bright future and the revolution is real and the the dominance of GPU and data centres going forward is undeniable.

And their market share position within that revolution is also undeniable. So they have to now do this quarter after quarter, give people realistic guidance, execute ship products, hit those numbers, but not paint themselves into a corner that they can escape from where the market expects them to double revenue every year, which of course, like mathematically, will be impossible. So far, so good.

I think jenson understands the mission. I think is accepted the mission. And i'd liked to everything I heard last night, the most important thing, and i'd love to hear broad react to this, is this idea of the mode.

Because competitors are coming in with new solutions. Amazon is ramping up production of their own uh training um two chips like they will not have the whole markets themselves forever, but they can maintain dominance. And that might actually be a good thing for the ecosystem for there to be more products out there. I think that's the the the tone that was set last night. And I think other in video logs heard the same thing that I heard.

Think I mean, that's all about the idea of the installed base, and we've heard Johnson talk about that before almost in the same way. And I think i've mentioned this in the past of thinking about that in the same regard as we do apple with its own sort of powerful installed.

But I mean, listen, the stock started here forty nine box this year or fifty boxes share today where one forty five or something the asim is closed in. Part of the reason for that is everybody had this wall of worry, right? Customer six, amazon's going to have their own training.

Um chip I said on a recent bg two podcast, of course they're going to use training. Um it's a cheaper Price solution for certain customers. But they also you know Jessie has said he's gonna as much in videos as he can get his hands on for as far as the eye can see.

They know the world runs on in video. So um you don't listen when we look at our Price target for a video next, it's up thirty percent, not up a hundred percent like IT was at the start of twenty twenty three or at the start of twenty twenty four. So when you ask me as a portfolio manager, you know, we took down the size of our position.

IT was a really outlier position for us to start the year. IT was a Normal sized position for us coming into this quarter, and we're adding a little on the pullback in this quarter. But we think it's going to be a great compounder and a great bet on not only A I, but also on the replacement to move from exd six to GPU based data centers for the next several years.

okay. Bring what about you? You've been to holder this stock for a long time too.

Yeah, I mean, I think what's so amazing and you talked about this mode and what this means for the and of the world eeta is jenson walked through how sixty four blackwell GPU can can run GPT three compared to two hundred and fifty six eight, two hundreds. So they're even making chips, the black well, which not a chip. They're making these gp s that are canvas zing their own products.

And this is why they are so hard to compete with as they just continue to innovate so quickly. And then when he talks about how oracle is is announced that a scale, whatever that is, cloud cluster that, that can handle over one hundred and thirty thousand, you blackwell GPU. And so I think when when brad talks about the shift going from modernizing from CPU to GPU, I don't think we are really great about understanding.

And jenson thinks it's a trillion dollars over the next ten years. I mean, the difference is in a billion, in a trillion, a billion seconds, thirty two years. A trillion seconds is thirty two thousand years.

I think we are start early in this, and this mode is gonna last for a very long time. But I do think they're gonna big winners and big losers. And right now, and video is the .

winner of the bunch. And this, I mean, obviously, the market still trying to tested if there was any bit of I don't even want to use the word disappointment. I mean, there's just so much to live up to.

As we said, we had eleven or twelve Price target increases on the name. I only see one firm talking about their guidance being below what they would suggest is the bull case. I mean, as you watch the market react to IT, what do you think?

Well, I think the most important points that have been made so far are that expectations were so high brads about the beginning of the show and then, josh, about making sure that they can set real alister expectations going forward. This market is hard to impress on stock Price action. I mean, we're talking about situations where you've got beats and raises being punished in the stock Price.

So first of all, I think we're still in the infancy of this AI theme. We're going to be in the infancy of IT for a little while yet. But as he matures, what we're going to find out is whether or not the companies that have been the winners so far can continue to win along that vein.

And then who are the other ones that will come in and even the other industry groups that will come in. And something that's been really interesting to me in the last month or so is just the performance of software. And I think some of that has to do with the fact that, okay, we've established that this thesis will continue going forward with A I what else can companies start to spend on? Where can they actually find the profit and who are the that are going to help them create that profit. And I think software as a big group that's gonna enter IT from that going forward.

Okay, we're going to get to that certainly coming up with brad, but I want to move on as we I like the way it's been put where sort of assessing the winners and the losers in various spaces. I have to admit, I was shocked when I saw this today because of how bullish you've ban on on uber. Yeah.

you sold IT. Listen, you know, let me let me say at the start, dara has been an incredible cea uber. He's dramatically increased the free cash flow.

He's increased the competitive uh you know position of that company. There's the dominant leader now in global mobility. We love the company and its inexpensive.

However, leading up to the election, right, we have been taken down our position size and we have been rotating into tesla. why? Because I said before, we had a ChatGPT moment around full self driving in twenty twenty four. I think the year of twenty twenty five is gonna about robot taxi.

We were present at the robot taxi day um you know we were impressed by the robot taxi and so for over they have to get past this moment, right where are you know they have a hugely disruptive force coming a in the case of tesla. And now we know that the trumpet administration is going to push right for a national regulatory change. So that will be good for one o and good for tesla.

Now uber has a solution to this, right? They have lamos on their platform, but we just want to see IT play out. We want to see a few more months of this playing out.

So again. IT comes back to portfolio management for us, the optics, right? And certainly right after the election, we bought more tesla. We rotated out of our remaining uber because we think the optics are going to be really tough for uber over the course of the next few months, and there's gonna be really good for tesla as we get closer and closer to the launch of robot taxi, which we think .

will be q two of that feels to me the goal posts moved. Yeah um mosques proximately to power. Um that dynamic has changed. He is becoming quite obvious, a very influential voice in in some of the policies that are going to happen, whether they are beneficial to him personally or beneficial to his companies plural, because I think you could make make that argument. That's what this strikes me as is the goal post moving in some respects to favor tesla and in some respects.

heard the competitors. I I would disagree with that.

I think the bigger regulations that we said, sure of ending the E V tax credits, easing the self driving regulations, those are underway.

But if if they changed the regulations, but fsd was IT killing IT the way twelve point five is and the way fd thirteen is going, where you have a thousand x improvement in false of driving safety in one year alone verses the ten percent per year we were getting up until two thousand and twenty because we've gone from these deterministic models to these ima learning models. It's about the performance at tesla that is driving us. Not sure.

I think national regulation makes sense in a country of interstate commerce as IT makes sense that one states going to allow me to drive my tesla on false self driving mode. Then I get to the to the state intersection between texas and oklahoma. And I no longer can useful self driving.

I have to stop the car and change the mode of driving. That doesn't make any sense, right? We drive cars across state borders.

So having a national regulatory framework, not just for tesla, for everybody, for gm, for o for everybody, that just the right policy, I don't think it's about favoring musk or his companies though. I think regulatory clarity is needed in this country. But I I look at IT, it's the improvements that are going on in tesla.

And I think, you know, eighteen months ago, nobody would have said that this was winner take all or winner take most. They would have said everybody's gonna have full self driving capabilities. I you right now, tesla is running away with their false self driving capabilities. The only other game in town really is way more so.

Josh, I want to take on this because zuba a large position for you and you. I don't recall you being as bullish on the tesler fsd event as as brad certainly seems to have been what you're take on him selling the stocks here. I I was just shock, to be honest with you. When I heard .

about that move, brad's made a lot of money in the stock, and I completely understand his point. We're right now in this kind of grey area moment where it's unclear how the onset of a VS is actually going to play out.

I want to say silicon valley is probably one of the greatest resources, natural resources, I would call IT, we have in america, the people who live there, the people who risk capital, the people who invent things there, have just done incredible things for this country. Um but as a east coaster, as a wall streeter, I also want to point out the blind spot. They very often times think that things you're onna happen tomorrow that may not happen for ten years.

They have to think that way. It's endemic to the species. And thank god somebody does. Here in new york, we think more immediate, we think more cash flows. We don't think so much about what's gonna change.

We think about what's not gna change, and that's a little bit more of a new york mentality. And I will tell you what won't change most international net marketplaces or demand aggregators. That's how you win in my view. The way this will all play out testers, autonomous vehicles and and cabs s will be phenomenally successful as well, way mos, as will probably two or three other large scale providers because there are apps that will aggregate demand between all of them. I find IT very hard to believe that you're going to have ten thousand testable full self driving cabs on the street, and that's going to open the company that has over a hundred million users on their platform.

The more likely scenario from where I sit, and again, I could be wrong to the more likely scenario is that uber is going to aggregate demand amongst all of the various players that have different types of autonomous vehicles on the road. The consumer is gonna want one, stop shopping, not, hey, this time I want a two door, that time I want a, maybe a more pad this apple go to because I want this. I don't think it's going to play out that way.

And I think uber is gonna the central demand aggregator, and that's the bet that i'm willing to make. Now the stock might be voluntary, and brad might look right in the short term as elon consolidates power and convinces trump to push for things that benefit fsd. I won't deny that the thing is unwilling to sit through IT because I think the bigger story here has got to play out.

We have very quickly, judge. I love the way josh frame that. I think it's brilliant framing. To be clear, we were the biggest defenders of the stock from fifteen dollars to eighty dollars.

We sold the stock much higher than the stock is at today, right? And I reserve the right. I may be buying the stock tomorrow or in a month or in two month.

I just thought that the optics we're going to be really chAllenging as we move into the launch of robot, which I think will a cur next year. And this is not about regulatory capture. This is about the full self driving capabilities about fsd thirteen at tesla. Without that, there would be no investment going on in tesla. People are excited about what they see with optimists, what they see with full self driving, what they see with a the inexpensive cars they're putting on the road.

I do find that interesting too. You mean you have been trimming many, if not most, of your large tech position? Meta is smaller today after trump on the election. Microsoft is smaller. Google, smaller, amazon smaller, apple smaller.

right? right. Well, we have two tech tonic shifts going on in the world, Scott. Right, coming out of twenty twenty two, which was devastating for technology, right? Twenty three was reversion to the mean.

Twenty four was you know about the AI tailwinds and who were the big beneficiaries. IT was mag. IT was the safety trade. It's where all of us went and hung out because we have post traumatic stress from what occurred in twenty twenty two.

So as we got through the middle this year, as the election approach, I said, people, if trump wins and we have lower taxes, less regulation, that's gonna be a try factor for this country, right? And so we need to get out of the safety trade and move into the things that haven't worked. So we moved, you know, if we have thirty percent and mag five, now we have over thirty percent and software because we think those applications are going to be the the next phase of the winners. So again, I just think that's good portfolio management. You can't go through the tectonic changes we've gone through over the course of last thirty days and not be making .

portfolio adjust or any of these adjustments. again. I mean, I feel like some roads lead, if not all, back to elon in the sense that he was on the call with such a nadella and present electrum um he had beef with zuker berg he was tweet at BIOS you know we can show the tweet just learn to ight at mario go that jeff bassos was telling everyone that trump would lose for sure so they should sell all their tesla spaces stock to which um basotho sponde hundred percent not true. I mean there's all of big technical to watch its back.

No, I mean honestly I think that the east coast fascination, the elon is somehow my servius sly hurting. No big tech. I just think it's way off base. The reason think about this.

I was one of you know an outlier position for altimeter, right, like a thirty percent position from ninety dollars this year to five hundred and fifty dollars a year in meta. So nobody needs to tell me about the tell you in the outperformance, in the incredible leadership by mark zuker berg off at the bottom. But you also have to look at those moves and saying, now that those a symmetry are known, people now know that in video is the leader in A I.

They know that mark zuker g is benefiting greatly from my eye. So the question is, what comes next, right? And when I look out at twenty, twenty five, I think it's going to be very beneficial to a lot of software players.

And so we just wanted to get more dollars at work there. So this isn't a question. In fact, we're buying google today.

It's down seven percent on on the D O, J. Calling for IT to diverse chrome.

right? And so like what have we seen over the course of the last twenty years? We've seen a lot of assaults on google.

I think that soon are has gotten the message. I think the companies getting more efficient, I think that search is more resilient. And so we're actually buying IT today.

This this requires you to be nimble and and mentally flexible because a lot of things are changing. I think most of technology going to benefit from this A I tail wind and the things that are occurred in washington, you know. But you do you have to be flexible in your pork.

So buying buying a malfa bit today on this news and its a big move lower, josh, for for a stock that you've like for an awful ly long time, down near six percent. Now .

yeah, the last time we spoke about the stock, I had tried my position. And i'm genuinely concerned as a shareholder that they're going to go through this gap period between when the world figures out that the poc has now moved from showing people search results to handing people the answer and how soon they could monetize that AI summary that they are now automatically putting at the top of search results also, even if they figure out the modernization of that AI summary, does that canabal ze some of the margin from search IT may take them a minute.

And by a minute, I mean two quarters, three quarters before a, they can convince themselves that they have solved that and b, they can prove to wall street that they are not going to lose as much market share as people are now starting to be concerned that they might. So i'm a shareholder and alpbach. I'm a long term believer that they will get IT right.

I just don't think anyone else is gonna ve that and that's why I had tried my position, which we talked about at the time. Yeah, nothing changed. The the any trust stuff is going to be an albatross around the company's neck for a while. It's not clear to me that this couldn't go on for three years of appeals and and blab a blah. I don't know how much longer that can be Priced into the stock, but it's it's a new wrinkle.

There's no doubt about IT. yeah. I mean, the other thing that we've been watching is not a stock, it's bitcoin.

Let's show IT I mean because it's bumping up against one hundred thousand dollars and it's getting awful ly close. Whether IT happens today, ninety seven and a half is where IT is now. Kate runny has some new reporting. She's with us now on how retail is certainly one for the ride.

Yeah guys, great to see you. You too bad. But so bitcoins part of the story, but there has been resurgence of what you are calling the yolo trade.

You only live once you can see IT on social media and wall street bets. Remember that form on red that's been heating up again. Bitcoins rises is another way to track that sentiment. Vanda research this morning that points to action in microstrip gy in particular, that is a proxy for bitcoin. Ts, one of the most mentioned stocks on social media.

It's up almost seven hundred percent just this year when a research put of this morning nothing screams foo chasing more than this doctors been to Spike in equity purchases by mainstream investors in this name just since the election. And it's not just single stock buzz. You've got out of the money call options on microstrip gy exploding recently. That is about the risk of trade you can make on script. Or right now, generally bullish shops and flows are on the rise as well because what you think of.

of the script move.

are you in IT? I mean, IT at a personal level, right? I've been adding to, I added to before the election, I added to IT after the election. We don't note IT in the fund, but I meaningfully personally, and you know, if you think about IT this way, k, yes, retAiling investors are getting into IT.

But we've had a decade where the federal government has literally launched a soul after assault on crypto to and now we have a president who is going to be a very pro crypto president. Think about how well cyp to has done in the face of the regulatory assault coming from gangs, the c eeta. And now we're talking about having a strategic bitcoin reserve in places like the federal government. Texas.

maybe even a White house position is is being banned about.

And so for me, it's a store of value. It's a lot of fun. You know, I opened up my coin basic account and one of those retail vectors, I don't I don't mind get a little A A little action during on the side in the day in bitcoin. But also, I think it's a responsible way for us to baLance our exposure in a world where you don't know exactly what rate and inflation are going to do.

Brand, you have a bit point to right? The ibi.

T yep, yep, I sure do. I mean, I think talking about retail investors or investors, you know underneath the market, I think there's just like I think you is an understatement with these levert. Tf, I mean, yesterday, I think there was fifty billion and flows.

If you look between the leverage tps and the other crypto, I mean, this is really big size and I think there is creating some really, I think, volatiles somewhat dangerous moves and levered etf because these things just don't end well. So yes, I think that point has been somewhat boring, a one hundred percent relative to some of these other names. But I do think these these confirmations that next year there's going to be regulation, are we going to have a bitcoin taxes for our golden reserve by bit coin for that?

I mean, these things are gona continue to create a bid around these names around bitcoin specifically. But I would just like continued warn investors on these levered cyp to ecs. I just think it's a disaster waiting to happen.

Yeah, ninety seven six is where we are. You can bet there's going to be more product coming to market as well to feed the beast, to service.

speak a lot, form options activity, even see platforms like Robin hood are rolling out more of the advanced trading capabilities. I mention short interest that something to watch, potential short squeeze when you see this type of retail activity can kind of get traders off sides.

If you're shorting one of these jokes and something to watch, you mention the sec we had last ten of this week, he talked about ten gale er, their chief legal officer, is seen as potential air pairing to gay gillers. He called him the cyphered king. He's been very cyp tio friendly. So that would .

be an appointment to I. I appreciate you with the set up worse to you. Thank you.

That's kate. really. We do have some breaking headlines from chicago .

fed president Austin cools. Be our Steve eman has that force now, Steve, end up, quote, a fair bit lower next year than where they are today. So continue with this general devices that he has.

He says the fed needs to move rates to where they think they should settle to eventually, but does not have to adjust rates immediately. It's an interesting comment. All the dubs are still doubt, but a little less cautious.

I'd say i'll get to that the second, where there is uncertainty, e goosby says we have to we have to slow th Epace o f r ight c uts a s w e g et c loser t o n eutral. The fed will quote, think through the impact of the economy on new laws, unemployment or Prices. Those comments kind of dove tale with those of new york fed president john wiliams in a barge in of view.

He said it's appropriate overtime to bring down the funds rate in more neutral levels and that monetary policy is restrictive. The funds that will be lower next year than IT is today, he said in the interview with parents. He was on a safe inflation says higher.

We can slow th Epace o f d orma i zation. If it's if IT ends up becoming down more than expected, they can increase that pace. He sees pretty good, pretty steady cooling of the labor market and inflation he believes will gradually come down. And interestingly, his take on the rise in the ten year reflect strong growth y he said less than inflation, animal positive outlook, he forecasts potential growth oh, higher that IT is right now two to court to two and A F person, two percent from two percent scored.

If you look at a lot of uncertainty in the funds rate market right now, the futures market, you can see the probabilities have come down over time, just like the december fed funds and contracts got IT was already eighty percent for a rate cut now, which I don't know, hovering in the there's an november twenty five one or three ninety. But if you look at the december one, which we made a chart for, you can see this come down from about eighty percent, about fifty seven percent now, reflecting on certain view of inflation. Growth theory is right, fifty six percent. And of course, the outlook for physical policy from the new administration.

Scott, yeah. I mean, look, if you we saw the movie yesterday with fed governor bowen, Steve, which was about as hawk as we've heard from anybody yeah I mean.

he has been hawkish. SHE remains hawkish. H Y doesn't really want to move until we're back down to the two percent level. And and there's still also, I think more interestingly, got a as interesting that is the causal ously in the reMarks of the dubs who do want to bring rates down, but talk about being more gradual, about IT waiting to see how the day to shake out.

Good stuff, Steve. thanks. Is always Steve leeman coming up next to charter the day. It's brad biggest holding and IT is soaring right now, plus one committee members adding to IT as well. We will reveal IT next.

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talking about a half time, I was accuse with your cbc news update. The heads of the FBI and department of homeland and security is declined to testify publicly at a scheduled senate hearing today on global natural security threats. The move breaks years of president the FBI said the committee would benefit from a quote, classified setting where more substantive discussions and additional information could be shared.

The consumer financial protection bureau expanded its oversight of digital payment services from non banks firms, the agency said seven non banks qualify under the rule, including apple and google, as well as peer to peer services. Then mo and zell, the illinois supreme court, overturned a conviction against former empire actor just a smaller for falsely reporting a hate crime to chicago police in twenty sixteen. The state's highest court ruled the actor should not have been charged after he entered a non prosecution agreement with the colony state attorney's office.

Smaller was found guilty of five counts of disorderly conduct in twenty twenty one. He has maintained his innocence. Scott, back of deo perth.

thanks as perth cooms. Megan cassella has some breaking news. Forest, Megan.

He's got that right that gates, the former congressman who withdrew from congress last week, is withdrawing his name from attorney general, the president of ccdd. Trump has had said that he was his pi C2Be att orney gen eral. Now gates was a very controversial figure on capital. Hill had been meeting with senators yesterday and a lot of questions about investigations surrounding him in the past few years for accusations, allegations of sex trafficking, having sex with a seventeen year old, gates now saying in a long statement posted to social media that he is withdrawing his name from consideration.

Part of the statement he has got saying that while he had excEllent meetings with senators yesterday, he says there is no time to waste on a needlessly protracted washington scuffle and that IT was clear that his confirmation was unfairly becoming a distraction to the critical work of the trump vance transition. So against Scott, he had withdrawn from congress next last week after this announcement had been made, that he was trumps pick to be the attorney generals. That leaves a gap now in this cabinet that still information a new pec will need to be coming for the just department. Scott.

begging, thank you. Begging cassella you see down the floor da force today, right? Check out chart of the day.

IT is snowflake and IT is surging on its earnings. We said it's now your largest position. I mean, this is unbelievable today.

I mean, you know, Scott, you know, we SAT here at the start of twenty three, and I said, I took down all of our software position. We rotated a lot into the video. We thought the age of ai. Was going to be about the age of semiconductors and building out the infrastructure. And that's largely been the case for the last six quarters.

But as we headed into this election, so you know starting, you know really late summer, we started thinking about what comes next right in the age of AI and what comes next our applications and data platforms that all enterprises are going to have to put in place to benefit from the infrastructure that's been laid down, right? And so IT was our only outlier position coming into the quarter. But IT wasn't just snow like confluence, another big name we owned in software sales forces, another name, you know, we own in software.

So we were rotating dollars in the software and out of the mag five infrastructure names that have done so well. But but let's talk about snowflake for a second. Right over the last two quarters, IT felt a lot to me, like meta, in the fall of twenty two, the headline snowflake is dead.

It's all over for snowflake. The sentiment on this stock was a zero out of ten, right? And what did I watch the company do in the face of withering criticism? Treat our ramsa I, who we've had on this, set the CEO of that business seven days a week grind, delivering more products in this quarter, he said.

Then in the prior year combined, right? The reason he became CEO of this business was to put in place the AI infrastructure to allow IT to compete. And it's not just snowfall doing well here.

Data bricks, where were also a very large shareholder, is also doing incredibly well. why? Because every on the planet needs to get ready to leverage A I, and you can't get ready to leverage A I if you don't have your data in good order.

And these are the two largest data platforms in the world that allow you to get your data in order. And so IT was an incredible quarter. They grew twenty nine percent.

But importantly, they said two things never won. A third of their customers, thirty two hundred customers are leveraging their AI applications are ready. And then number two, IT was really clear to me that as you look ahead, this wasn't just a lip.

This was the new Normal in terms of the growth rate we should expect out of the business. And if you you look at that against terrible sentiment, lots of hedge fn shortly in the stock. And the stock Frankly, you know hasn't done well at all over the course of less. Uh six you know IT gives you a day that .

looks like a coiled spring move. Um by the way, the CEO h street are is going to be ond overtime today. So make sure you watch that with us right now. A step in the link SHE owns the stock and watch note where about that is that he is buying more right stuff?

Yes, I am. So a great day today, but the stock is still down sixteen percent year today. I think sentiment is still very wary about the company.

IT trades at a discount to its peers at nine point five times cells, the groups at about eleven. And it's it's absolutely about the CEO. It's a third quarter.

The CEO is in the seat and he's finally found the the his footing, if you will. So the most important two metrics of brad mentioned, product revenues accelerated twenty nine percent from the low nineties, but Operating margins were double expectations. So they're balancing growth and profitability and the margin's story and that you know i'm a big fan of.

So I think the message is optimization is ending and real dollars are going into product revenues on a sequential basis. And oh, by the way, really positive about this anthropic deal because IT definitely gives them credibility. You know amazon has a five billion dollar investment in anthropic and alphabet has a two billion, so they're in good company for sure.

everything?

Yeah no, I think .

those things I always look inside the company, like what's happening in the business is moral high. Are they hiring good people, right? What happening in terms of sales? The new logos in the quarter were terrific.

The net dollar retention, right? Companies that feel confident are expanding. And then I talk to a lot of big companies in the quarter who are customers of theirs. You know, I think after two years where everybody said, hold on, pau, use everything, we need to understand what's going on in the age of AI. We need to make sure this company is future proof.

They've now decided that IT is there are meaning back into their data spends in again, this is benefitting in everybody from microsoft and amazon to data bricks and snowflake. But snowflake is the market leader in that in that data platform. And IT was up against really, really terrible sentiment. So that's why you get the spring coil of stuff.

Thank you. We will see on the desk soon, but thanks for updating on on this move. Is so notable guys is that the last time that we were out here at one market was june eleven. And oh, by the way, brad gerson had a lot to say about software at that moment that the worst was probably over. Remember this.

think we're probably getting closed to the bottom of software. We expect to t to inflected higher in terms of growth rates as we get toward to the end of this year and into the beginning of next year. Remember where trading twenty percent below the ten year average multiple for software, if you look as a multiple, either free cash low or revenue. And so I think this is a good time to go, honey in software.

Well liz software since then is up twenty eight percent. The ig v is semis. The s mh down five IT says IT all IT does and and actually .

if you look back over twenty twenty three and twenty twenty four um in sort IT was up almost fifty percent in twenty and twenty three and IT just paled in comparison to what happened in semis. This yeah software is only up about fourteen percent, which is good by broad market standards but again pales in comparison to semi.

So I think that there's going to be a rotation that has probably already started taking hold but will continue into next year. It's obvious that this market, once earnings wce fundamentals to prove the moves in stark places and semis, have seen that big move already. And when we break IT down into what spent driving that move, you've got about two thirds of IT driven by earnings.

And and to be fair, semis have far outpaced earnings growth in software. But then the other one third is just multiple expansion. And we know that, that piece of IT is fragile. So as we get into twenty, twenty five, I think they're still a lot of uncertainty from a policy perspective. And even from a rates and economic perspective, software is a more defensive part of the tech sector. And as investors want to take gains in some of those big names that they've made a lot of money in, they going to be looking for opportunities where they can still find commensurate growth but not be taking as much valuation risk. And I think it's gonna a beneficiary of that trade.

We're watching palelo speaking of software names that are on the move today, after earnings, stocks up, it's four hundred bucks. We keep an eyes there. We're watching crowd straight today. Three, seventy new Price target from canada. X jerold, bring you own the bug cyberia.

Tf, yeah, means that means I own crowd strike. Hello, fortunate. And so this this, like A I, is a secular trend because we know cybersecurity, just the the bad guy, is continue to get smarter, unfortunately.

And so I think between A I and cyber security, these companies are going to gonna continue to grow on a secular versus cyclical basis. Like the semis outside, I will say a broad calm. And in video, I think you wanna stick with cyber, stick with A I, but be very judicious on the man.

That was a hacks of a call. I I just read out the numbers of performance since then, but you're always now what yeah I know I mean, let's first semis are .

down and there are a lot of things that haven't done particularly well. Intel, you know AMD eeta. But but we're also in videos has done quite well. Um we're also in a stereo labs, which is done quite well well, which is providing networking. Um you know all these customers eta, so I think you can still be in that trade.

But when you know sometimes I just as is obvious, right when there's blood in the streets, you know and if you believe in the AI trade, then you have to believe in software and data platforms. And we did and there was blood in the streets. So you lean into that trade, right, when everybody already knows that something is great in their trumpets in the air, like within video.

IT doesn't mean that it's not a great business IT just means that there's less a symmetry from a portfolio management perspective. The great news for technology, Scott, is this I look at massive tail winds over the course of the next five years. I think they're going to be incredible winners when I look outside the technology, really high valuations, you know, and and I see some headwinds for a lot of companies.

So I think twenty twenty five is gonna about picking winners and losers. Software, clearly in the backyard this year was one of those winners. And I think we're just getting started. We're still trading under that ten year average.

right coming up. We have two big moves from josh Browns today will get to those plus urge bossa on what might be called a rift in sicily valley. That's what some are saying. We will talk about the political fallout hearing techland following the election. We're backup after .

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Walk back to the half time before we do have some committee moves to get to. And josh Brown, you are up because you bought block formally square.

Tell me why? Yeah, yeah. I can't believe i'm going back into a jump. Dorsey land, uh, the technical set up here is fantastic. My friend Steve starza flag a fairly large purchase from a former board member at paypal. This was, this was A A purchase that actually ended up marking the bottom in the stock.

And I think when you're forced to look at something that's breaking out technically, which if you look at like a five year chart, you see this massive consolidation, the stock is now breaking out technically. You want to look at the fundamentals and what might be happening here. Number one, the stock has gotten caught in the updraft of the egypto related equities out of all the publicly traded companies.

I think it's number eight or nine in terms of its own bitcoin ownership. They have somewhere between eight thousand and nine thousand bitcoins on the baLance sheet. I can't nail down the exact number because jack dorsey has already committed as of may to take ten percent of all their profits and pour them into bitcoin so we can assume they've spent the summer doing that.

So the last count I saw is about eighty three hundred bitcoin on the baLance sheet. But this is an Operating business. It's not microstrip gy.

This is a company that got the um the cash APP as about half the business. The other half is square, which is a massive payments network that includes the after pay by now pay later service that they bought. Admittedly, they they bought at the top, but that's not our problem.

If we're entering the stock here, the tactical look really good. Stock has a lot of rooms, the upside cleaned up, a lot of cellars. They are in the right business.

You look at some other payment stocks and how well you've done. Look at fy serve. Look at toast, which I also oil, by the way, has broken out.

Look at the credit card companies. Look at paypal. This sector is red hot square.

Really block really hasn't made a big movie yet. So that's what i'm here for. I am playing with the stop. It's not a high conviction. Long term investment, probably closer to a trade and we'll see what happens.

Yeah, we will. What's up three and eight percent will follow that of note as well. Is is josh also trimmed fisa in half? It's on pace for its worst months since january of twenty three.

But as we move on, I want to turn to what summer calling a rift out here in silicon valley, the growing political fallout in the bay area of following the election. Your deposit is here with more on that. Very interesting story. yes.

So there was rifts before the election, and then the rifles have shifted a little bit afterwards. No surprise. Different reactions from different camps and technology from a lot of the conversations I had, if I had to broadly care drives that you're seeing more optimism from little tech while they're still a lot of uncertainty.

Ty hanging over big tech boxer air and lobby. One example. He was one of the most vocal voices here supporting the Harris campaign.

When I spoke him last week, he changed course saying that having people like elon musk in the president elect orbit, that'll be positive influence on progress, th and innovation policies. I spoke to another founder, Jason freed of him base camp the other day, who said that there's excitement in the area. He is happy to see growth minded builders and makers of things like musk again, getting involved.

Quote, it's nice to see your own kind in there. Other founders and VS that i've spoken to are skeptical of how long the trump muscularly moon will actually last. There can only be one main character type of thing.

I was at a dinner the other night, we actually took bets on how long this will last. I think the long was mid terms. Big tech though, guys, an entirely different story with one troubled administration under their belt, there's a bit of a playbook.

They congratulated ted trump early. They struck a more productive tone. What they may not have anticipated.

The big tech that is see us is exactly what's encouraging, little tech, the must factor that could lead to really unprecedented levels of conflict of interest impacting that, like having mask on the phone when another portrait calls to congratulate trump. S so kind of two sides. I'm super interested.

Hear what brad hasn't I want .

you point of view on this two because of the first that I think we started thinking about this or hearing about this, was when reid hoffman said that there was ranker disrupting silicon valley, a long lasting rift, he said, that has interfered red with business in the valley. You know, a lot of these players.

if not all of them, I mean, you know, my podcast partner, bill gurley, said one of the magical things about silicon valley is at three thousand miles away from washington, dc. The reality innovation occurs here.

What do we like? We like less regulation, lower taxes and a baLance ch budget, right? So the excitement that comes out of this moment is that we have a lot of people in washington who are committed to what I think is some of the biggest platform changes in washington that we've seen in decades.

Now there maybe people on the other side of that who are grumpy about the election, you know the node and and and read we're certainly big biden supporters going into the election. From my take, I couldn't be more excited. You know josh cut his his father position in half.

I think that's the right thing to do for two reasons. Number one, I don't think you want to be on the wrong side of the trump trade, and I think that those things are. And number two, I think the excitement is so big out here. You don't need viagra more, you know. So you may as well get advise .

IT seems like this election, more than any other that that we can recall, has engaged the major players out here like no other you had you know big names out here, you taking sides hosting fund raisers. Is there a fallout for the capital flows where they flow, how they flow? Um our companies, you know potentially gone to get less funding from corners in which they would have before. Maybe we need to think about all that. You have a VC the party business too.

Yeah, I know from my perspective, if I don't see any of that blow back, honestly, don't I don't see IT from any of our L P. S. I don't see IT from our founders.

And I think that again, we made a lot of headlines out of the ranker. I don't see the ranker. I see excitement. I see founders and builders building .

make the headlines. We make the headline.

I'm not blaming on your Scott, but i'm saying there is a fascination, right with the competition, with the ranker. And i'm just saying I see a lot of unity around things that we can get done. Everybody in this country knows that a two trillion dollar annual deficit is unsustainable.

There is bipartisan excitement. Not only here, i've talked to senators and house members on capital hill. There is bipartisan excitement about the department of government efficiency because everybody knows that washington can work Better. And so some of our own seen entrepreneurs around the table lending a hand and making, you know, washington more efficient.

Some we get excited. We will put char up to to that table.

Do my part. Thank you.

We GTA run. Did your boss to thank you so much for that? Alright, final trade.

Next closing bell, the day three clock eastern sera olic will be with me from new vene jeff Richard's logic monitor CEO Christinia Cosmos y joe nova am Parker. I will see all of you. Then I ve got to correct something too.

I miss spoker earlier when I said that I was such an adella who called a present elect trump and neyland bus was on the phone IT was sent ara chase on my bed. On that, I just want to make sure we're all correct there on that final trades. Let's do IT, liz.

This is a contrarian one. But health care, I know there's a political environment that's up against IT, but I think a lot of IT is already in the valuation is in oversold conditions short term, I though .

bring energy transfer. I think .

pipeline will continue to do well next year, and IT has a seven percent distribution.

Yld josh Brown.

fresh fifty two week high for Baker hues, raised the roof.

We got you got a final trade.

final trade zero, one of our larger positions. I'm a long team america. I I am long housing h it's been underwhelming for years. I think this company is both getting more efficient and also is gone to lead the way on the other side of housing.

IT has been awesome spending this hour with you. We did at mid year, and now we about to close out twenty, twenty four. So it's great to get to a check up on what's happening and technology again soon.

Yeah, as bad person of ultimate god. Nice market move two thousand five thirty. We will track IT over the final stretch. The exchanges. Now you've been listening to c, nbc's halftime report, the podcast you can always catch us live weekdays at twelve n only on C, N, B, C.

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