Big Tech Earnings Kick-Off, UAW Strikes GM Another Blow, and Suze Orman Takes Your Questions 10/24/23

0:01Live from the NASDAQ market side in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap tonight. It is a big tech earnings kickoff. Microsoft and Alphabet headlining tonight's results, but they are not the only ones on the move. We are dialed in on conference calls. We'll bring you all the headlines. And striking out General Motors hit by another round of work stoppages the same day it reports earnings. Just how much are the strikes hitting production and what do they mean for the company's bottom line? Plus 100 percent dead wrong. Those are the harsh words Jamie Dimon had about central bank policy.

0:32what the CEO of the country's biggest bank is taking issue with and where he sees the economy going now. And later, personal finance expert Susie Orman will be here on set for advice on where to put your money in this volatile market and how you should navigate a world where rates are staying higher for longer. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Bono and Eisen, Karen Feinerman, Dan Nathan, and Julie Beal. And we start off with a full slate of earnings reports. So Microsoft, Alphabet, Visa, Snap, all on the move after their latest results. We've got full team coverage.

1:04Deidre Bosa, Kate Rooney, Julia Borson all standing by. But we start off with Steve Kovac, who's got all the details from Microsoft's quarter. The stock is higher right now. Steve, the conference call is still in about a half an hour. What are the highlights? Yeah, so Microsoft shares are up. There's solid beats on the top and bottom lines. But here's what's more important. Reversing some trends that we've seen over the last several quarters. Azure cloud growth accelerating again, up 29 percent, also versus the 26 percent growth the street was looking for. That's exactly what investors wanted to see after several quarters of declining growth.

1:34Now, what to listen for in the earnings call. Does Satya Nadella believe Azure bottomed and will continue that acceleration that we saw last quarter, or is it just going to stall again? Now, look, let's go to Windows. This is also interesting. OEM revenue was up 4 percent, returning to growth. But keep in mind, comps are much easier compared to last year. And I'll say it before the folks here at the desk can say it. Wait for that earnings call starting at 530. That's when Microsoft gives some outlook for the quarter. And you should especially listen for commentary on demand for Copilot. That's the AI assistant.

2:08Microsoft's going to start selling a week from tomorrow. I'll be back right here, guys, with more if we get some of those details on the call. And we were just discussing the wrinkle of the conference call because last quarter we did see the stock move lower. On Copilot. On Copilot, after the show and the company finally gave guidance, because this is going to be the key. If Microsoft gained a lot this year on the hopes, on that AI pixie dust that we've been talking about, we want to hear that because there's a lot of talk about the installed base adopting its AI programs. Listen, in that last quarter, in that last piece of guidance back in July, came at a time where they just announced the pricing of Copilot, right?

2:42And so next week they're going to have an event. They're going to be talking about this, and they're going to basically start to be able to start to guide to this when customers start paying for it, right? And so that's what I think a lot of investors want to hear. Also, if you think about the high that it made, the all-time high, the day that it announced the pricing of that co-pilot, we all remarked the stock went up 5 % in a straight line intraday. We were doing the math. I think it was like$70 billion in market cap or something like that. It was some eye-popping sort of number. But when you look at the situation here, the stock had sold off 15 % to its lows in August after that earnings report.

3:12It's recovered a little bit. It's up here. We're waiting for the guidance. There's a lot of levers here. And I'm sure you're going to be, Karen, fairly constructive. maybe not at 30 times right here, but they just closed this Activision deal. If they have reacceleration in Azure, I don't mean to sound like really excited about this. I'm just kind of amped up. I'm just in general. That's kind of me. But I think if you're a bull, there's a lot of things you could point to, especially if the guidance is not disappointing, why this should be back on the horse. Sure. Yeah. I mean, I agree with everything Dan said.

3:38There's a lot to like here. That reacceleration, that's a really good thing. And we'll get to Alphabet, but contrasting that they didn't have that reacceleration, slower growth. I mean, there's a lot to like. The whole question is, though, what is the right multiple? What are you paying for? How much of a premium should they get? Certainly they should get a market premium. I mean, it's an extraordinary business and the margins are just phenomenal. But where are we in the pixie dust growth? At 30 times, it doesn't seem crazy to me. I have a very small position right now. I wish I had more. But unless we hear something very different, there's a lot to like here.

4:12Especially if they're showing reacceleration relative to some of their competitors and the cloud business model. and maybe it really deserves even much more of a premium in this sort of environment where you want safety, you want execution. I tend to agree. I think it's tough to push for a higher multiple here. I mean, at 30, 31 times, I think it's what it trades. I think there's been quite a bit of pull forward in terms of expectations around generative AI. And so I think if they're able to deliver on that front along with Azure, it definitely will sustain the multiple. But I don't really see more than one or two turns of upside, perhaps three turns.

4:43And conversely, there's probably eight to ten turns of downside. So if you look back three, four years, this thing was trading at 19, 20, 21 times. So I think it's about finding that balance there. With that said, I think expectation is relatively high, even though it did have some weakness since it peaked out in July. I think the setup was set up for it to be a bit constructive. But the facts are they delivered. And I think, you know, 30 times it's really hard to argue selling it when they are actually delivering. Yeah, I mean, the stock setup was actually very constructive. It's been sort of range bound since that July report, Julie.

5:15It was, you know, between 310 and 330. It's finally broken out with this after hours pop. What would you like to hear on the conference call? Well, I mean, I think part of the reason why we traded sideways is that I think everyone kind of looked around and was like, OK, wait, when is this AI stuff really going to take shape? And I think any kind of early indication that having AI within their cloud offering makes the business stickier is going to give people a lot more confidence that there's durability to these earnings. And in this level of kind of uncertain times, people are willing to pay for that.

5:44I think where the stock is trading today, this richness of this multiple, and even this reaction after hours, is a function of the fact that a lot of businesses so far that have been reporting haven't been executing quite as well. And particularly, once you have some dampened expectations, that really is what moves the stock higher. It's like when you have kids, you've got to have low expectations. It's kind of the same thing with stocks sometimes. Yeah, the one thing I'd say, though, when we think about the guidance that's going to come out here, we really want to focus on kind of enterprise customers and demand for these products.

6:13There was an article in the information today saying OpenAI's corporate sales come under pressure as AI customers hire cheaper options. OK, so these are corporate customers. They're going to be the ones who are going to basically be buying these copilot sort of service added on to their Microsoft 365 that they're already paying for. OpenAI, obviously, Microsoft's invested$13 billion in it. They have the access that they're integrating this technology into their productivity suites. They're going to integrate it into Bing and all that sort of stuff. So I guess when you think about it from a corporate standpoint, we spent a lot of time talking about a consumer that might or might not be weakening.

6:44And now we think about, OK, what does enterprise spending look like from here on out? If we do have a weakening economy, we talked about it last week. I think Microsoft laid off 700 people in their LinkedIn division. LinkedIn is not growing. It is basically flat. And we know what the headwinds are in advertising based models and such. So, again, you know, stocks up 4 percent or whatever. It could easily be down 4 percent, you know, in an hour and a half or so. and it doesn't really change the story. It's just the expectations, I think, still remain high, despite the stock is down 10 % from those highs in July, believe it or not, because 30 is a multiple with rates where they are right now, where lots of growth investors are starting to kind of just say, is this, if this is going to be a harder 2024, right, how am I set up with some of these big names that are very crowded right now?

7:27And we, you know, I mean, they are crowded, make no mistake about it. Yeah, again, Microsoft's calling about 25 minutes time. Meantime, let's move on to Alphabet. After hours lows right now, despite top and bottom line beats. The search giant seeing a rebound in advertising, but cloud numbers were below expectations. CNBC's Deidre Bozos got the numbers. Debo. Hey, Matt. Well, speaking of high expectations and a crowded trade, that is Google. So expectations were high for Alphabet. And you can see that the stock is down nearly 7 % in the after hours. Now, the analyst call just kicked off about 35 minutes ago.

7:57Senator Pichai opened it by reflecting on the last 25 years. That's a milestone that they just hit in September and spent a lot of his remarks looking ahead to the, quote, opportunities enabled by AI. There were some good updated stats on YouTube. Shorts is now averaging 70 billion daily views. There are 150 million plus people watching YouTube on TV screens every month. That's a so-called living room segment. Also, a shout out to NFL Sunday Ticket that they said is helping to drive engagement and subscription growth. Google Cloud, though, Mel mentioned this, fell short of the street's expectations.

8:30CFO Ruth Porat telling me that it was affected by some customer cost optimization in the third quarter, which could temper expectations ahead of Amazon for its cloud unit, reporting later this week. Porat also reiterated that they continue to invest in generative AI while keeping an eye on costs and efficiency. Q3 CapEx was$8 billion, she said, driven overwhelmingly by AI compute. So on that comment, it also seems that the stock took another leg lower. An analyst, before I jumped on TV, just asked about the monetization of that AI drive. I know you guys were just talking about it. The team at Google said that a subscription model was one possibility, but they also said that generative AI's effect on search is still going to boost and keep their ad business strong.

9:17Back to you. All right, Debo, thanks. Keep us posted. Deidre Bosa on Alphabet. Karen, what do you make of these earnings? Slight disappointment. I mean, the search part was good, right? There's still growth there, so that was good. But the cloud part, which has really been sort of outside focus versus its size, that was disappointing. The margin there was disappointing, particularly in light of, as you just said, Microsoft showing pretty good cloud growth. So that's a little bit disappointing. Some of the other kind of noisy things that made the beat were things that I kind of don't care about.

9:50So, you know, Google bets, stuff like that. So it was okay. It's a different multiple, obviously, than Microsoft. So, you know, I'd kind of let it shake out a little. I'm fine. It's a big position for me, a very big position. So mildly disappointed, but I'm not going to sell. There's nothing terribly wrong here. I didn't agree. If anything, I'd rather be buying on weakness. Now, I understand that we wanted to see better results from the cloud. But the fact of the matter is these companies came out last quarter and said that enterprise customers were looking at ways to kind of make their spin a bit more efficient.

10:21So we got a bit of a lead here. So I do understand, particularly looking at the tail of two clouds, they didn't deliver nearly in the way that Microsoft did. With that said, I still think ad spin is definitely a positive sign because on one hand, you're worried about enterprise. On the other hand, you're worried about ad. And to see that tick back up gives me some hope for the economy and for other platforms. And the last thing I'll say is this reminds me a bit of Meta. Not exactly the same, but when Meta got kind of smacked around for spending all that money on the metaverse and we didn't really know how they were going to monetize it.

10:51I think we're seeing some of that in terms of the infrastructure spend on generative AI. But I really have, if there's some company that I don't have doubts about their ability to deliver on that front, it likely is Alphabet. And I'd probably buy on weekends. You mentioned ads, Meta, and I would think that on the ad beats for Alphabet, that Meta would be okay in the after our session. It's down by about a percent, Julie. And I'm wondering, you know, how do you look at Alphabet right now and how are you feeling about Meta later this week? Yeah, I mean, I think for the long-term investors, I think Alphabet is such a really great place to be.

11:25You know, generative AI is really in their backyard in terms of where it started. And I think that they are being thoughtful about how they expanded. And, you know, I think that over the long term, it's still a very strong, strong business. The biggest problem that this company faces is really more on the regulatory side than anywhere else. It has just such a strong level of profitability and cash flow. And I think that was very encouraging to see. For sure, it's a little disappointing to see that the margins, particularly on the cloud business, were not exactly where you would want them. But it's also kind of what you would expect given the level of investment that they have to make to support that infrastructure.

12:01So I think I agree that this business, it really lives and dies on its ad business. The cloud can sometimes be helpful or hurtful, but it's more important to gauge the strength of advertisers. And I think that we've seen that. For Meta, it's going to be interesting to see, too. I'm really curious about what's going on with threads and how that's impacting their business, because I think that's a place that they have an opportunity. It's interesting. So if we're going to just trade these names in the last three months, when Amazon reported AWS last July, or it was early August, I think the deceleration wasn't as great as people expected.

12:36The stock popped on better-than-expected retail. OK, and then, you know, Microsoft sold off because there was, you know, and then this one now is down 7 percent after this had a big gap. Remember last quarter because, you know, it was better than expected. I think we just have to these hyperscalers. They're all this is it. Like there's no one else. I mean, Oracle is going to try. IBM is going to try. Some of these others are going to try. This is this is what you have to play with. And I think that if each quarter you're going to trade them because one takes two percent of share from the other.

13:03This is whatever that's I don't think that's how you trade this thing. And I think just to put this point, and you guys both made this, Google Alphabet has the best valuation support right here. We expected like 20 % EPS growth next year and double digit sales growth. And again, if their margins are expected to decline, you know, year over year a bit, that is what they're telling you. Because the cost of compute to integrate this generative AI into like all of their, whether it's their productivity tools, whether it be search or whatever it is. So I think you have the valuation support here that you don't have in Microsoft.

13:31And I actually would probably rather bet on Google able to iterate and really, you know, do a better job over like and really commercialize products better than Microsoft would. Because I don't know about you guys, like Microsoft's not the product that you want to go home with and use it on your. They don't have personal devices for the most part. They don't have all this other stuff. And Google is so ingrained in all of our online behavior here. And then you think about their ability to do it in YouTube and all these other things. So to me, I think that, you know, Google, if it goes back and fills in that gap towards 122 is where it was last July when it reported.

14:01I think it's an easy buy right there. All right. For more on Alphabet and Microsoft earnings, let's bring in fast money friend Gene Munster of Deepwater Asset Management. Gene, good to see you. Is Microsoft's quarter as good as a stock pop? Is Alphabet's quarter as bad as a stock decline? Well, I'll start with Google. I think investors should just take a deep breath. We've put a lot of pressure on that Google Cloud number. The deceleration, understand that that's caught people's attention from 28 % to 23%, while Azure had that step up in growth from 26 % to 29%. But the deep breath piece of this is just looking at the aggregate of what is in front of Google over the next decade.

14:39They essentially are losing share in cloud right now, in part because of Microsoft is optimizing OpenAI on Azure. And so they are gaining usage because of that. Google's answer to OpenAI is their new Gemini platform. That is, Sundar was talking about it on the call here the past 35 minutes. And that's their new, essentially, that's their answer to OpenAI. As that gets integrated, it'll start in the December quarter and further new models, they said, will be announced in 2024. Microsoft will announce new models too. But I think that this scale will tip back towards Google or more level playing field between Google and Azure and we'll see a reacceleration.

15:23But most importantly, the reason why I think investors should ultimately view what's going on at Google as positive is they are investing more, but they're doing it judiciously. They are saying that Ruth Peratt is saying that they're going to grow earnings faster than expenses. And if this plays out in terms of how a search is going to be impacted by AI, we're just at the very beginning of this. And I just want to fill in the final thought here, Melissa, in terms of why search is important relative to AI, is what Google wants to do is take what you use Google for today, that is for information, navigation, and commerce, and add on to that basically generative features.

16:03And so as they add that, you're going to go to Google more over time and there's more opportunities for them to monetize search. And so big picture here. The Google story is intact. I haven't even talked about Microsoft because I'm just so surprised at Google's reaction here. Gene, it's Karen. Thanks for being on. So how do you think about the valuation of Google here and what penalty or what do you put on the the contra side for the DOJ lawsuit? So, in Dan's camp, he was just outlining the valuation perspective here. I think it's at the top of the most attractive. That's why at Deepwater, we own shares of Google.

16:46It is, I think, the most attractive and probably the best position relative to the opportunity in AI. So, Karen, I think that the valuation is attractive. Second, in terms of just what's going on with the risk related to regulation, is this catches headlines. It's an important topic, but ultimately I don't think much is going to change and don't have the time to go through the game theory in terms of how this most recent piece is going to change relative to their ability to bid on placement within like Safari, for example. But I think it will play out to be ultimately a net neutral for Google.

17:25And so these headlines will pass, and I think ultimately investors are going to focus on what matters most with Google, which is why they have a pole position with what's going to be a decade shift towards AI. Real quick, Gene, on Microsoft, because we didn't touch on that at all. Does the quarter so far, I mean, we haven't gotten to the conference call, but does the quarter, at least in your view, put a floor under the valuation where it is now? I think it does. I think that there's reason for optimism. Microsoft is going to be the first beneficiary of AI. We've seen it with their Azure business in the September quarter.

17:58We're going to see it when they start to turn on the monthlies for adding CoalPilot, which is going to be in the middle of November. And so I think that directionally, analysts are going to find the addition sign on their keyboard tonight when it comes to estimates for 2024. Gene, thanks. Keep us posted on anything you're hearing on either of the calls here. Will do. Thanks a lot, Gene. See you later. Okay, Dan, Microsoft or Alphabet? Alphabet, easily. You? I mean, my book's that way. Yes, Alphabet. Julie? Alphabet for sure. Wow. Lean sweep. All right, so what should they do? Go buy Microsoft?

18:38Anyway, we'll keep you posted on all these conference calls. Meantime, coming up, we've got more after-hours action here. Shares of Visa and Snap on the move after their reports and numbers from those quarters next. Plus, Jamie Dimon's harsh words for the Fed as the chaos in Washington gets even more dramatic. What it all means for the markets and the economy. Don't go anywhere. Much more Fast Money in two.

19:04Welcome back to Fast Money. We've got even more earnings to get to tonight. Snap back in the green after a sharp reversal after its results. We'll get to that in just a minute. But first, Visa beating on the top of the bottom lines, upping its dividend. Kate Rooney's got the very latest from that conference call. Kate. Hey, Melissa. So Visa executives have been talking about a strong consumer, strong consumer spending, and then travel demand is the big drivers of the better than expected quarter. The payments giant announcing a 16 percent dividend increase and a $25 billion buyback. Payments volume was up 9 percent for the quarter.

19:33Revenue up 11 percent. That was stronger than expected. Cross-border volume up 16 percent. Those are the higher margin international transactions for Visa. CEO Ryan McInerney saying that we have, quote, seen a resilient consumer spending and ongoing recovery of cross-border travel spending. He also just said There is still macro uncertainty, but I am confident we can manage it. That was on the call just now. American Express used that same adjective, guys, resilient. We've got MasterCard coming up. They report on Thursday. This was Visa's fiscal fourth quarter, so the company did give full-year revenue guidance.

20:08They are looking for high single-digit to low double-digit revenue growth there. No EPS guidance, but shares are slightly higher here after hours. Back to you. All right, Kate. Thanks, Kate Rooney. And I'm glad Kate mentioned American Express and made that comparison. We're getting very different reads, though, when you look at a Discover Financial, for instance, Capital One Financial is going to report later. And obviously, they're in different parts of the payment chain, so to speak, but still a read on the consumer. Well, listen, Brian Moynihan, CEO of Bank America, on their call last week, I'm going to read it.

20:36The growth rate, to put it in context, is consistent. He's talking about consumers, 16, 17, 18, 19, low growth, low inflation economy. Consumer activity has slowed down. This is real-time data. That's what Brian Moynihan said on their call, you know, on the 14th. So I just think that there's a lot of, you know, contrasting data. But most of the data actually points to a decelerating consumer right now at a time where we're starting to feel the lags of these interest rates. You know, we've never seen the rates go this high this fast. And you're seeing it. We started hearing this from the department stores right over the summer.

21:05They're starting to see higher delinquencies. We're starting to hear about auto delinquencies and stuff like that. So to me, I just don't know how you can paint too rosy of a picture right now based on what Visa has to say. Yeah. I don't think those two things have to be mutually exclusive. So I tend to agree. Definitely decelerating consumer, particularly on the EV side. They've come out and said I think those those more expensive, durable goods. But when you're talking about international travel, that really has been one of the pockets. Now, I do understand that there is a storm coming, but that seems to be the bellwether, at least some stability, an area of stability within the consumer complex.

21:40So I think, yeah, you probably don't want to be over leveraged to the consumer. But if you're still constructing a balanced portfolio and you want some of that consumer exposure, you likely want to be higher up and you want to have that exposure to travel, leisure and international specifically. So there's a lot of noise here, right? We've got you would think Visa with billions of transactions would have outstanding data. You would think Bank of America with millions and millions of customers and cards would have outstanding data. And yet they're kind of painting a little bit different picture.