¶ Intro / Opening
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Market moving insight and analysis. Join Jim Kramer, David Faber, and me, Carl Cantanillo on the opening bell hour of CNBC Squawk on the street.
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¶ Market Open & Amazon's AI Bet
Good Tuesday morning. Welcome to Squawk on the Street. I'm Carl Kintonier with Jim Kramer at Post Night of the New York Stock Exchange. Favors at Milk In once again in Beverly Hills. Oil prices behaving pretty well this morning after the highest settle for Brent yesterday in almost four years. Defense Secretary argued. The ceasefire with Iran is holding and ads were not looking at the first time.
Futures are green. SP is gonna try to get close to some all-time highs. A lot of stocks raising guidance today, like Jupont and Pinterest, although that long bond's still holding five percent today. night investors will be rewarded by the company's heavy AI spend.
¶ Jassy on AI: A Transformational Shift
Let's begin though with uh Jim's interview with Andy Jassy last night on Mad Money. Take a listen to what the Amazon CEO had to say about CapEx and AI.
The really big capital expenditure bet that we're making is because we believe that AI is the biggest technology transformation in our lifetimes. It's gonna reinvent every single customer experience we know and altogether new ones we never imagined after the first The first three years of AWS we thought we were growing really fast and we were about fifty six million dollars in revenue. And after the first three years of this inflection of of AI or this i incarnation of AI,
our run rate's over fifteen billion dollars, two hundred and sixty times what it was the first three years of AWS. And we thought we were growing fast with AWS. So When you have shifts that are this momentous, uh you you wanna make sure that you invest in such a way that you can pursue the opportunity as broadly for your customers as possible.
When your revenue growth starts to catch up with the capital expenditure growth, you actually end up really liking the operating margin, the free cash flow, and the ROIC. And so we've lived this movie once before in the first wave of AWS where we had this same type of of curve where we were spending so much capex in the short term and then we all really liked the free cash flow in the R O I C a few years later.
And I think the same story is gonna play out, except with just much larger revenue and free cash flow downstream.
¶ Amazon's Ambitious AI Dominance
Jim, I do love that line, we've lived this movie once before.
When you're out there, you're conscious that you're dealing with warriors. Seasoned warriors, people who have really gone through many, many different travails, uh, and know whether it's worth spending Uh when you come in as skeptical as I was, you're very quickly convinced that perhaps the skepticism has to be tempered initially.
And then you go through this period where you say, All right, maybe. And by the end of a day, speaking with a lot of people deep in the bowels of the company who are involved with it. You say they are so on to something. I I wonder if the other hyperscalers recognize how they see this ROI much quicker. This is not a thirty year, this is not a defense. It's an offense that they're playing. And Jazzy's talking about twenty seven, twenty eight, making some money.
That's not that far away.
No, it isn't. And he's talking about a thirty year performance because the data centers are gonna be that lucrative. So what he's saying is look, if you want to make a lot of money, get a lot of chips, of course they prefer their own training.
forty percent as they would say cheaper than NVIDIA, though they provide NVIDIA. If you wanna make a lot of money, you gotta spend a lot of money right now in order to be able to make all this money in twenty twenty eight. Right. So it's a different it's a totally different narrative from what people think.
David, I have to imagine that that uh that theme is reverberating all over Milken this week.
Without a doubt. I mean it is uh it is top of mind for everybody. It's the subject of so many different conversations as you might imagine and panel discussions, including one I'll share with you guys shortly as well. um that included Ruth Porat from from Alphabet. But yeah, uh no, it's what you have to talk about and obviously we we talk about it every day as we have
More or less since the introduction of ChatGPT back in what, November of 2022, guys, but there's so many different implications across the board that would be discussed at a uh conference like this one that doesn't focus just on the financial markets. Jim, I would come back to you on Amazon, of course. I mean it it's it's been interesting to watch the rally in the stock really since Since he put out that shareholder letter actually which is a good thing.
did seem to quell a lot of the concerns about all the money they're spending and he is continuing to see effectively, I guess Jassy, articulate their vision and why they are so confident. It seems to be working, not to mention I think Strangely or interestingly, Amazon is almost a an anthropic related stock. So when anthropic seems to do well, Amazon also seems to benefit in some way because of that connection too.
Well look I I they're very proud of the connection. Obviously they were early. Uh remember, NVIDIA was not early and that's important. There's a a very clear NVIDIA versus uh Amazon
going on here, although it's not from the NVIDIA side, it's more just Amazon talking about it because they've got their own chip training'em. But David I agree. I think that what's happened is y you go through the previous conference call versus this call. In the previous call, and I said this to to Andy Jassy offline uh I felt that they were a little uh not defensive but tepid. Th they they were trying to explain what they were doing.
In this call, it was basically raise numbers, people, because you don't understand what we see. And it wasn't arrogance. There's not an ounce of arrogance to Jassy. It was just a recognition that Guys, we're doing blocking and tackling and we're gonna make a huge amount of money and you seem to think we're gonna lose a lot of money. So David, I think a lot of it was just not hubris, but a pen-paper analysis of how much money they're going to make.
because of how much they're spending. And that was kind of like the old Amazon and we were thrilled to see it.
Yeah. Um and interestingly, I mean it didn't respond that much to the actual earnings, Jim, uh despite the fact that obviously you were quite positive. They showed that what twenty billion dollar run rate on training. Uh reacceleration in terms of AWS. But in general, as as we said, the stock is on quite a move. You saw it up over thirty percent.
just for the last month, after really not doing much for for some period of time. Um I I guess my question to you would be Do you see that continuing or has it reached a level now that effectively reflects many of the things that Jesse has talked about?
Well I I don't wanna be too uh aggressive and certainly not promotional about this, but I think it's uh not the latter. I think that what's entirely possible and Carl share this with you, but entirely possible this is a very misunderstood company. uh that they are doing things that are the equivalent of o o almost domestic uh domination.
They recognize that they can be number one in food, they can be number one in in drugs and healthcare, they can be number one in logistics. That was yesterday's announcement. They certainly like to be number one in data center. They wanna be Obviously number one in in in commerce and then number one in web services.
Gro number two grocer I think, right?
number two grocer. So what what their plan is to be is number one in everything. And if you want to be number one in everything, that includes being number one in the data center. Uh and they wanna do that with their own chips. Of course if you want to have Amazon be your provider for web services, but you still want to write on NVIDIA, they'll make that happen.
But m this is a very confident crew. This is a twenty nineteen twenty-seven Yankees crew. It's like a murderous rope. Every single every single player comes up to the plate is a guy who can get
And you don't seem uh all that troubled by their size or any of the political blowback that comes with being big.
Uh you know, it's funny. I spent my second part of the interview, I came in and talked about how they're going after rural rurals underserved. I mean if I were a congressperson, of which there's a huge number of rule, I would say, don't you take my Amazon away. Amazon's why my people gonna have broadband. Amazon's why my people are gonna get same day.
Amazon is the company that has not left us behind. So I mean David, they they've got an ethos that is very uh defensible, so to speak. Uh they're they're almost like the underdog who's champ.
Uh yeah. Yeah. I mean uh right. And again in in part because They hadn't been getting perhaps the respect that that you felt they deserved certainly in the market until until of late.
¶ Amazon's Logistics & Market Impact
Thank you. And by the way, we mentioned yesterday uh the declines in FedEx, CH Robinson, XPO, you name a lot of expediters, I mean a lot of names came under pressure because of that new product.
Yeah, that's true. I mean I remember I uh Raj Suberman who's by the way done an amazing job since he took over from the late Fred Smith, whom I also love but You know, their growth strategy centers on providing end to end network solutions, particularly for industrial customers. Uh they have a they have a business, two billion dollars that could be uh in jeopardy by it, but that's absolutely you know, that's a just a thimble.
Uh I think it's more UPS and sort and these truckers. But r remember what they're trying to do is just cat the Fed FedEx uh is got a different kind of network. Amazon's trying to capitalize by saying, Look, if you want to skip through the distribution stuff I think it's much better for small and medium size. It's very interesting. Rod sits on the board of Procter. It's not like Proctor is going to just say, you know what, FedEx, get the hell off our board.
Well they were a landmark customer on this new product.
Yes they were and it was very pointed that they're a landmark customer and I sat back and I said, Okay, I know Proctor is unbelievably good at supply chain. I guess maybe it's uh uh uh you know free a free-for-all and everybody wins.
It's still puzzling. I spent a lot of time trying to figure out exactly what it will do and all I can decide was if I were a small to medium sized company, I'd call them today and say, listen, I want to get away from the pattern where I send it to my distributor, he takes thirty percent and then I get it and then it goes to where I'd like to do point to point. So it might be point to point rather than point to point to point of which you lose thirty percent price.
Pretty fascinating. Yeah. Is it is it, by the way, before we move on, is it now your favorite name above alphabet, let's say, within Mag 7?
Now did I drink the Kool-Aid?
Uh
Well I know that I know I maybe I drank the lime juice. Limes are the number one most popular thing that is shi that is shipped by food. And then second's avocado. And you know what?
Go to Mile. Say go to Mile, very good.
¶ Palantir's 'AI Slop' Stance
Uh shares of Palantir are down in the pre-market this morning despite a quarterly beat, an 85% jump on revenue. They did raise the full-year guide. On last night's call, Alex Carp and company executives slammed what they call AI slop. Take a look.
The reality that we will be able to drive a hundred percent growth in the US is being driven by the fact that our customers either know or will know that you need actual results. Those results require granularity, specificity, actual relationship to facts. The appearance of software working is not software working.
And this the slop that is getting a lot of attention is not only dangerous i in terms of the hyperbolic retic that it also like there will be no jobs because of the slop. The nothing will work. We will have a godlike figure in the name of AI. When in fact what actually does work is a platform built like by a motley crew of highly technical people who over twenty years have been maligned for being right.
Is this a shot across the bow of models overall, Jim?
Uh boy I know I took a shot at at Salesforce and talked about how it's expensive that that could. I will say that I saw the stock down three and I remember if I had a hedge fund manager, I would have gone I would have just swept it. I would have swept it. I'd take five hundred thousand shares all the way up to where it was unchanged. It was a great quarter.
A remarkable quarter. Uh fantastic growth in America. Uh the free grief they had is equal to the revenues of the last last year's quarter. Uh someone tried to say that the commercial business is what was the problem. I mean they ought to go spend ten seconds understanding the company. Now when the remember they're boisterous, but you've gotta take it with a grain of salt. They're delivering the numbers. David, I I don't know how many people are talking about palantier out there.
But Paneltier still represents a a skein of thought which just says the West is winning. We're part of the West. Don't worry that we d that we are so alive with the administration. We've been alive with other administrations.
¶ Palantir's Valuation and Future
They tell a good story, David. We're just not used to something as promotion.
Yeah, well he is obviously very outspoken and quite articulate. Um I yeah no, I think in some ways he also was reflecting this argument that's being made generally by software companies that find their uh Their shareholders certainly quite concerned about what the future is going to hold for them, but this whole idea that when you're using AI, to a certain extent you're dealing with probabilistic outcomes and you can't have that happen. You have to be deterministic. You have to know.
You can't be 98% correct because that's not enough. It's gotta be a hundred percent. And those kinds of errors can build over time as well, Jim. That's sort of what you will hear from any number of companies that are facing at least challenges in terms of of combating the overall theme that somehow their business is gonna get disintermediated by Claude or Codex or whatever it may be.
You're so right. Uh a and a lot of what they do I think is very difficult'cause it It's black box. I mean we don't know I mean, they i if to listen to them is to think that what you're seeing in Iran is really run by them. It's just that I think a lot of Americans are quite jaded about what's going on in Iran, so we're just not sure what they're doing that's so right.
But we know from customers, whether it be the Pentagon, when you speak to them offline or when you speak to I've spoken to a lot of their aerospace customers and People are thrilled with him, David. I mean, there isn't anyone who says to me, boy, I wish I hadn't paid so much money to pound there. I've never heard that. I've only heard good things. And it's difficult to try to do uh cause and effect with the Pentagon because we don't really know what's even going on in it in Iran right now.
No, uh that's that's a true statement. Um listen, the revenue growth right accelerated, right? 85 percent. Um you know when it comes to though what investors are willing to pay for that. And we've seen the stock has sort of flattened out after an incredible move right in what was it, in twenty four or part of twenty five. Um, Jim, and I do wonder, you know, the valuation has kinda perhaps come to the fore here to a certain extent in terms of a as a breaking mechanism.
Um at this point even with an acceleration of revenue growth to that eighty five percent number.
Yes, what um what you're seeing is the I think the twilight of this rule of forty that never really made a lot of sense to a lot of people, which is, you know, you take the revenue growth and the gross margin grow yeah, and you just add'em up and if they come to the north of forty you got a good one. This is the highest one there is. Uh Bill McDermott uses that at surface now too.
I think it's going out of fashion, frankly. I think what people want is just clear card numbers, Carl. And this rule of 40, which was very exciting for a long time, is not cutting it anymore. And I think that people should recognize, you know what, it's a factor. It should be the factor.
Yeah, uh yeah, Palantir topped out in November around two hundred five. Uh there's been a series of lower highs since.
Even though again I think it's a good thing.
Yeah, it'll be interesting to hear McDermott later on today service. Now, one of the more challenged SP names of the year so far. Take a look at the pre-market, though, as things look rather constructive for the Bulls on this Tuesday. We'll see if we can get back to some of those highs from a few days ago. Below 18 today, stay with us.
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Take a look at some NDX gainers. Micron. We're gonna talk about this story that Apple may potentially be exploring Intel and Samsung supply as a secondary option to Taiwan semi. Intel did get above a hundred on Friday. Might get close once again this morning. Look at Kramery's mad dash countdown to the opening bell in just a moment.
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¶ Micron's Secular Growth Opportunity
Let's get Kramer's mad dash we count down to the opening belt.
Yeah, we're talking Micron. Micron looks to be taking out the level it was at when it reported last when it reported was actually quite good quarter. I bounced off to a lot of the people I met at Amazon yesterday. Whether there isn't something to be said It may be really a secular growth and no longer cyclical. And something like the like Ben Rice thought about generational opportunity over millions. No one disagree with me. Micron, Sand Disc, Western Digital, Seagate.
Uh no one said to me, you know what Jim, you're falling prey to that whole idea. We've seen it before, up down. Almost everybody agreed with me when I put out the thesis that maybe it's secular growth, not a lot of new capacity coming on.
Micron is trying to bring on capacity as fast as they can. But we need storage. We there's just a huge demand and there's not a lot of companies in it. Even as recently as three years ago, Seagate was losing money. So Micron's a big winner. Uh Sandra Morota are doing a terrific job. One of the few people, along with Jansen Mong, who saw it coming, putting up capacity as fast as you can, deserving of this. You're going to see this for quite a few days, Carl.
These companies, this sells at six and a half times some people think six and a half times earnings. Why shouldn't it sell at twelve, maybe thirteen? So you've got this year of magical thinking when it comes to drives. And you're you're gonna say, Oh darn it's up another twenty seven. Oh so you have to wait for a day like yesterday where you had uh Iran saying that we're shooting missiles at US. Have the stocks down, they come down very fast.
and then pick some up if if you're a trading oriented person. If you think that you've missed this, uh y you know, i strange as it said, there may be more to
I was gonna say if you're prepared for a twelve multiple, then you are not anywhere near selling this into strength.
No, you would get you you'd be headed to nine hundred. I call this galloping. At the old days when I said head fund, I people would say, Well, Jim, why is it six hundred? and I would say, Because it's going to nine hundred.
But are you truly done with boom bust cycles and semis overall? You really gonna go there?
No, no, because I mean on semi's up very big data. No, I'm just saying that because of just a tremendous inability to make money for so many years. There just was no CapEx devoted to this air. And that was something all the Amazon people said, yeah, well you know like geez when you don't when you don't build uh you get this. There has to be something coming from outer space to say listen I've got a better way to store.
Now is that possible? Everybody was positing that, but no one seems to have an idea what it's gonna be.
Fascinating. Yeah, micron about six hundred for the first time.
Sean Jane deserves it. Yes.
Uh opening bell coming up in a few moments. A reminder, you can always catch us anytime or anywhere. Just listen to and follow the Squawk on the Street Opening Bell Podcast.
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¶ AI's Societal Risks and US Leadership
Wait.
unequivocally have to protect on the downside every element of execution. quality of content, elections, uh affordability of energy, and how the models are used, as we're seeing right now with the cybersecurity risk. We have the ability to stay ahead of the bad guys. if we continue to innovate and lead. But I feel like we only have four minutes left and we this
This is
is the conversation that's happening in America. Ninety percent of what we talked about is the downside, ten percent is the upside. And then we wonder why optimism in America is lower than any place else on the planet.
That was Alphabet's uh Chief Investment Officer, President Ruth Porrat on stage. Uh yesterday at the Milken uh conference. We had a panel. I led a panel, included uh Senators Warner. Virginia, Hagerty of uh Tennessee, as well the president of Meta. Porad and the head of the uh Exon Bank as well, guys. And you know, a lot of the conversation was around
Energy and how we're going to get the power we need to for all the data centers, something we talk about all the time. What the impact will be on the jobs market, what the risk is of cybersecurity, what a mythos, for example, from Anthropic.
means in terms of raising that risk and other programs as we can or uh large language models as we continue to move forward with uh even more powerful models. And what you continue to hear guys is we need to combat all the pessimism Because if we as a nation are this pessimistic about this technology, we won't win the race with China, which everybody still agrees. The key.
Thank you.
technology race that we're in right now.
The spirited defense of the whole industry and what we're trying to do by Jensen Wong was most what I thought was most effective. I like it.
Uh yep. Trying to stay vigilant to all the risks and opportunities around it. Uh let's get the opening bell here this morning at the big board. It's Chesapeake Utilities Court celebrating Beth Cooper as she retires after 36 years of service, including 18 as CFO.
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Anniversary and Mother's Day this Sunday. And at SIBO in Chicago, Chicago Trading Company, a trading firm specializing in ترجمة نانسي قنقر
¶ Big Tech's Government Scrutiny
What a battleground. Uh it's very interesting now the separation between the Dow and the Nasdaq. Uh the part that is
uh that that is data center continues to fly. I was listening to what David was saying and David I can bring it back to what Ruth Ruth Port is a seasoned warrior and I think she understands something that I that is a subrose of thought through a lot of people's mind which is This whole notion that the data center is somehow evil or somehow raises prices, destroys water, it's not really true, but there were initial deals done.
that really did not favor the consumer. And since then, I think the industry's figured out that's not good for anybody.
Yeah, no, I think uh they um You know, there's so many different conversations to have around AI, and obviously, as I said, and one that was a key one is sort of trying to combat a lot of the negativity around. The concern around jobs, energy, data centers. To your point, will they raise electricity prices as we start to see various municipalities in certain parts of the country that are rejecting the idea of data centers in their area?
Jim, it's it's a key to a larger conversation that also includes our leadership in government. Safeguards around the technology. We continue to sort of see at least a an effort perhaps from the White House that's being reported on in terms of its communication with many, you know, of the leaders in the in the area.
Given mythos that came out from Anthropic and we gave it so much attention a few weeks back because of the power of it, what does that mean? And can you really have no safeguards or regulatory control whatsoever around these companies? when they are developing models that conceivably have such power and could be used by bad actors to do a lot of not particularly good things.
Well I do think Carl that when you're out there and you know day I was in Seattle of course David's down sort of milk in that you realize that there's the government and then there's these conversations
Uh and I know that sounds highly unusual. We haven't seen anything like this, I think. I mentioned it to the guys at Amazon Since Standard Oil, when Standard Oil owned one hundred percent of the oil market in this country and the president realized that's just not right, these companies are so powerful that they do charm offenses all the time because they most the only ones who
You know, they're not gonna be knocked out by competitors. They're gonna be knocked out by the government. And right now I think they're grateful in their own way that the government is focused on a lot of other things, but they recognize that if there is a sweep in the midterms. Oh yeah.
Um, you saw Semblest yesterday. Uh I mean he Michael Semblist of JP Morgan huge report yesterday on why GOP members are in his words essentially running for the Hills, retiring ahead of the midterms. One big reason is is power prices and Strange things at DOJ and farm bankruptcies up fifty percent.
There's a lot I mean, there's a there's a lot going on and uh to say that that the election is probably going to be the single biggest thing that's going to happen to tech is not wrong.
Do you does it make you worried about the back half of the year from an equity standpoint?
I I think that you could have I don't know what a witch hunt would do. I think that if you had Pakora like hearings like in the thirties where we called in all the rich people and we berated them, I think that can happen. I think that will happen. I think Elizabeth Warren is g I w I remember once I had lunch with her and she
just berated me for two hours and I was trying to eat you know, I was like eating my salad and it was like I couldn't it was like finally I just put my fork down and just wanted to put it in my eye. And at the end I said something really nice to her. Yes. And she was stunned. I mean it was meant to make me angry. I think if you can get if you can say things nice if you're calm, if you're cool, maybe you can get over this, but it's coming.
¶ Data Centers and Reindustrialization
Yeah, yeah, yeah. Jim, there is a bucket of industrial earnings we should probably get to. One is Rockwell, uh huge gain today on this beat and raise. Cummins another one, another raise. American Electric Power, I think that's gonna be at least a multi-year high.
Well look, you y you've got companies that are involved with the reun d reindustrialization of America. That's Rockwell. Cummins is back up power when it comes to uh you know, literally when it comes to the data center. AEP in its own quiet way became the growth stock For the data center. We were so used to seeing AP. I mean AAP was a what was not a sleepy company, because it was always really, really good. But it was a company that grew.
No, it it grew by a percent or two. That was a big deal. Look at the areas that it covers, largest distribution cup largest transmission company in the in the country, but it was part of that sleepy Midwest and it ain't sleepy anymore. I mean I was c very conscious of when I was uh w with Amazon. They had Project Rainier i in Indiana and yeah, that's kind of like everything's like the TVA under Roosevelt.
Like, you know, let's just go build things and let's put people to work. And I think that when they're in front of Washington, if they have to go in front of Washington, they have to say, listen, here's what we did. Look at the American electric power footprint. Um we're the reason why it's happening. They have talk about reindustrialization, they have to talk about onshoring, and they have to talk about how the data center actually lowers
the uh cost of electricity to everyone. They do have a couple utilities people. I think AAP would say it. I know that Patty Poppins, Pacific Yes, Electric would say it. They need to have their ducks in a row for the coming onslaught.
¶ Paramount's Merger Challenges
As you said, uh it is coming. David, I don't do you want to do a little media before we get to uh Shopify in the next block? Peace guy looking ahead to Disney.
Absolutely, happy to do that. Yeah, I mean I actually it's funny I'm looking through a couple of the analyst notes right now on uh on Paramount, which did report as you know. Uh first quarter earnings did beat a lot of, you know, some of the revenue estimates out there adjusted EBITDA. The stock though down about six percent. Of course looming is the uh completion of the acquisition of Warner Brothers Discovery, but prior to that there's still focus on
What is the integration of SkyDance and Paramount? Remember, it's not that long ago that Skydance bought Paramount. They are on track, they say, to deliver$2.5 billion of run rate efficiencies by the end of 2060. Uh and they say they have a clear path to at least three billion in cumulative savings. That was the three billion was the synergy number originally there. Um uh by the end of uh 2027. Of course Warner Brothers They've talked about delivering as much as six billion.
And that is going to be a key because you're talking about what will be a fairly highly levered, or not fairly, a highly levered company at some seven, seven and a half times. And in order to get it down to the four and a half times of their target. You've got to deliver on those synergies. Before they can do that, of course, they have to close the deal.
for Warner Brothers. There is a lot of debate about when they may be that may be. They continue to talk about the end of the third quarter. Um and there is some optimism, perhaps it might be a bit sooner if you don't see any action. from the state AG in California, for example. Conversations there in my understanding continue around jobs and things of that nature. You still need the EU to of course weigh in as well. That could be as soon as July.
We'll see guys. DTC not bad. Um, you know, Tyler uh Taylor Sheridan's still a key part of their programming in Paramount. Remember, he is moving. has moved to to uh to peacock, right? So th that also is something to to keep in mind for the future, not to mention a higher rate for the NFL.
which was their right in terms of reopening that contract as a result in the change of control uh for the ownership of CBS. So a lot to digest there. You can see Paramount stock is taking a bit of a hit right now, as we always point out, not particularly liquid given the ownership right now.
And a lot of buyers coming in there, what was it, about 12 bucks a shares where they're gonna be buying the new equity, right? Larry Ellison, a lot of uh investors as well from all over the world, Mideast being a key part of helping to finance the equity. portion of that huge deal for Warner Brothers, guys.
¶ Amazon's Expanding Media Presence
You know, Dave, it's funny. Andy Jass has spent a little more time with me than I thought talking about them, MGM, about this incredible movie schedule they have.
Project Tail.
Yeah, I mean uh uh sports. David they wanna be a powerhouse even in that area, can they be?
Well, they can be anything they want, given their I mean, these days they are spending an enormous amount and so free cash flow is under some pressure, but as we well know, they can do an enormous amount. The NFL is fascinating, guys. You know, obviously we talk so often about so many of the top broadcasts of any given year are NFL games. You know, will they continue to look for more and more? Will that enable the likes of an Amazon with e with even deeper pockets than some of the broadcasters?
to air even more games. Um as they, you know, what are they in now? Year five I think or more of airing uh NFL games at Amazon. Um Saw Michael's the other night, he's gonna continue in his role of course there as well. But you're right, Jim. Um, yeah.
Thank you.
player in media, even though for Amazon it continues to be, for many of its shareholders, sort of an afterthought.
Right, I know. It's funny like when you start going over Uh he's he's talking about Alex Cross. He he was talking about uh you know well relatively minor Amazon properties that were actually doing quite well. And David, what I thought was most interesting about is Jassy himself. Is so interested in sports. He knows he able to know the technology that Amazon has with the actual sports elements.
to make it so it's a little more fun to watch it on on Amazon than it is anybody else. I only bring it up because it just seems like an afterthought to them, but because they're so big, it's gotta be worrisome to everybody. He is friends with Brian Roberts at Comcast, as you know.
No, listen, i i they are an absolute player in this and in this ecosystem and an important one given of course the heft they have in terms of actually spending money should they choose to do so.
¶ The Amazon Breakup Speculation
And I you know, I come back to this theme as well. I mean, Jim, nobody ever talks about the idea, right, of breaking up Amazon, right? AWS, retail, media. You can do the same thing of course with Alphabet. These are the modern day conglomerates, right?
Well, look uh Look, I I'm sure if if Bernie Sanders would have actually spent time watching your show, which I think is probably the most antithetical possible. Uh I think he might say, you know what? I listened to that guy, Davis Fab, what was it Faber Davis, and he said break up Amazon. I'm going with that. I mean, because that's what it's like in this country, right? Then Elizabeth Warren says there is a ground swell.
to break up Amazon. And then you know it's like break up Amazon. And then Wall Street Mini Cut says, hey some of the parts, four hundred and twenty seven dollars. Go break it up. And there, there's the whole narrative, go home, I'm done today.
All right. Well now they're gonna ru now they're gonna air that clip and not within context of you actually joking and they
Enjoy yourselves.
just said four hundred and twenty dollars on an Amazon breakup. So yeah.
I said Jassy could you could break it up, could be like standard oil. You know what? Roosevelt created a lot more wealth when he broke it up. It could be Roosevelt's
We'll see if we get there, guys. Um watch bonds today, an important day. Uh got our Tenure holding four four, our long bond holding five. UK 30s 576 is the highest since 98. Whoa. And the Bank of Australia hikes for the third consecutive meeting eight to one, as they warn, in Australia at least. inflation might be higher for longer. I'll be right back.
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¶ Economic Indicators and Market Pulse
Rick Santelli here live at CMEHQ with the second batch of breaking news this morning. The SP Global Services and Composites. April final read. We pull the mid-month read and replace it. Mid month read on the services side was fifty-one point three. It gets downgraded to fifty-one point oh. 51.0 would be the lightest since March of this year when it was just a bit under 50. If we look at the composite,
52.1 uh be uh 52.0 excuse me was the mid-month read. 51.7 is the new read, also degraded by three tenths, and fifty-one point seven, that would be the weakest going back. to wow we have to go back a bit here. That's the weakest since CEP of 23. CEP of 23. We don't see a huge market reaction here, but at top of the hour we'll have ISM
Services on the PMI side, along with new home sales, and maybe the most important number of the morning, job openings and labor turnover, known as jolts, and that will be of course a March number. Squawking on the street will return.
After a short break.
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¶ Shopify's AI-Powered Commerce
All right, shares of global commerce company Shopify under pressure this morning. A slower growth forecast overshadowing and earnings beat we need to know.
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now personal CNBC Shopify President Harley Finkelstein. Harley, always great to have you back on the show.
Great to be here, Jim. Thanks for having me.
Okay, so Harley, before we get into how great the quarter was, and it was great or all the new advertisers you have, the gross the the merchandise value going up a lot.
Um I wanna deal with this notion that you somehow feel that the uh business is slowing, which is what uh the overwhelming evidence of what the stock market's saying. When I read through your conference call and I read through your notes, I don't detect That same level of pessimism that Wall Street seems to have decided in a shroud over your stock today.
I totally agree with you. Q one demonstrated Shopify's incredible growth. It demonstrated consistent results and I think also re-i real AI leadership. GMV was a hundred and one billion dollars gym. That's up thirty-five percent. That is the second consecutive quarter of GMV over a hundred billion dollars. Remember, GMV is the merchant selling on our platform.
And we've now seen cumulative GMV of of about one point seven trillion dollars on Shopify. Let's talk about the gross side and and specifically to your question. On the revenue side, Q1 saw 3.2 billion. That's up thirty-four percent year on year. And when you actually add in free cash flow, which was almost four hundred and seventy-six million dollars.
We saw a 15% free cash flow margin. So, Jim, that's four straight quarters of thirty percent or more revenue and GMV growth, and then mid to high teens free cash flow margins. This is Shopify at its best. And then when you add to it all the merchants coming on, we're now fourteen percent of US e-commerce and we're adding some of the largest companies on on the planet to Shopify.
Yeah, I I I think one of the things that one of the reasons why I I think people love to deal with your company is because of something that's now developed into sidekick, which is that you have the data. You have twenty years with the data and that's data that can help L VMA.
It's data that can help uh Orvis, but it's also data that can help someone who wants to live through their dream and be able to have a little bit of money and say, I'll go with with Shopify and I can become something big and major. Sidekick's available to everyone, isn't it?
So let me say this. I I think this is something that people are are missing here. In this new AI era, there is no group we think that benefits more than entrepreneurs. It is making entrepreneurship dramatically more accessible and in fact it's accelerating success, which is good for entrepreneurs and very good for Shopify. Let's talk about AI, because I it came up a lot on the call.
I think it should be very clear right now that Shopify is at the epicenter of the AI era. If you look at AI shopping, we built the infrastructure that now powers AI driven shopping and connects demand to our merchants. We are the only platform powering selling inside of Chat GBT.
Copilot and Google. And when you look at orders from AI searches to Shopify, they're up 13x year on year. So we've built the full catalog that feeds these AI agents and shopping experiences. Then when you look at the AI-powered merchant tools, you mentioned Sidekick.
Psychic is our intelligent assistant, which is becoming the new way merchants run their businesses. And it's trained to your point on twenty years of insight about commerce. No one else has that. And merchants are loving it. Usage is up four X year over year. So we think that merchants on Shopify are simply better positioned by far than those that are not.
Harley, do you think you could have been more aggressive in your Q two sales guide other than to say hi twenties?
Look, I mean, obviously the gr the growth speaks from the selves, Carl. We've been demonstrating consistent, durable growth, top line and bottom line. We're entering new markets. You know, only a couple years ago I was on the show. We were just entering enterprise and now we're becoming one of the dominant enterprise players in commerce. A few years ago we were talking about international. Now international is a massive part of our business.
point of sale, agentic. When you look at all these growth levers, I think the future is about as bright as ever for Shopify.
I did notice I think it was Stripe this week had some data on business and corporations here. And to your point about this entrepreneurial boom, I I just wonder if if your data is backing that up as well.
We're we are seeing more merchants than ever before, not just start on Shopify, but also grow on Shopify. You know, in the in my my preparative marks it it sort of got mixed missed a little bit, but I mentioned a company called Groons. Groons was launched in twenty twenty three. They're now doing nine figures on Shopify and just got acquired by Unilever.
We are seeing not only more starts, but also way more merchants getting uh getting built faster. And that's happening across Shopify. I also think the other thing that that is sort of getting missed uh in this all all in in this conversation. Is that when you think about the millions of stores on Shopify, the hundreds of millions of buyers and the billions of products, we have this advantage around our data that compounds with every interaction.
And when you add on things like payments and enterprise and you know UCP has now become the enter enter the industry standard and Shopify built it, the only protocol that actually has built the full journey from end to end for agenda commerce. Shopify is really playing at the epicenter of all of this.
So Harley, what I understand, I spent the day yesterday at Amazon, your relationship with Amazon, a lot of these companies, the larger ones, would have I just felt would have been exclusively Amazon. Obviously they're doing both. Uh what's the coordination or friendship or frenemy relationship with Amazon.
It's actually wonderful. Think more about Shopify Gym like a hub in spoke model, where at the hub is the Shopify admin. It's the retail operating system. It's where the millions of stores run their businesses, large ones and also smaller ones too. And think about the spokes. The main spoke is gonna be the online store, which is so dominant. Then you have offline as well. Agentic is a new spoke, social commerce is a big spoke.
As commerce becomes more complex, as merchants want to cross-sell across different marketplaces, like Amazon or Walmart, for example, they can do all of that from Shopify.
Shopify's position now is the perfect hub for the future of commerce. And it's a place that has a full understanding of your business. It is the it is the de facto retail operating system we think for modern retail. And I think retailers are starting to to to realise that and I think what that's leading to is these incredible results we posted this quarter.
Well I wanna thank you, Harley Finkelstein. Thank you for coming on the show, President.
Thanks for appreciate it, Jim.
¶ Chip Sector's Sustained Rally
We should note uh the NASDAQ all-time high this morning, Jim. NDX being led by Chips Intel 105, Zandiscum 7.
And I know people uh say well it's all re unrealistic, but as long as there's no new supply coming on or no new machines being developed by a Lamb Research or by a KLA or by applied materials. It can go on. I know it seems shocking, but it can go on.
Yeah, we're gonna talk a lot more about it tomorrow with the AMD's chair and CO, Lisa Sue. She's gonna join us exclusively after quarterly results after the bell tonight, Jim. AMD up a little bit, not as much as some of these other people.
I don't know, did a whole new supply come on that it really
Well interesting. The HSBC downgrade was a was to neutral, but they raised the target to three forty.
I know. Look, it's a it's a tough thing to come in now and start buying these because it's always been wrong to do that. But people don't realize that there is a long term
Sure.
That can't be refuted.
Jim we'll see it tonight. Uh busy night tonight, mad money of course 6 p.m. Eastern time with the Dow up a couple hundred points. SP trying to get back to 7250. Don't go away.
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