tv Tech Check CNBC April 26, 2022 11:00am-12:00pm EDT
green, but largely it's another down day, at least for now. >> yeah, very defensive tone, also buying deals down pretty significantly. you have the ten-year down below 2.8% there is a little bit of that old safety bit in there as well. >> it's been great going this hour with you mike that will do it for "squawk on the street." "techcheck" starts now happy tuesday, welcome to "techcheck." i'm john -- with julia boris ten. what that means for the company and other social media and advertising stocks tesla shares, which are plunging, they are down, i think, more than 7% today. we'll take a check on that, also look at the broader tech ecosystem. iak jack dorsey dweeting, lon is the singular solution i trust. extending the light on consciousness. more on that with julia in a
moment but we have to start with this dropoff for tech stocks that we're seeing right now, the nasdaq is down 2.5% as the selloff picks up steam, alphabet and microsoft report numbers in a few hours, that's bound to influence things dom chu has more on what's moving right now hey, dom. >> influence things in a very big way. two of the biggest weightings of the nasdaq 100, the nasdaq composite. the s&p, you name it but session lows for the nasdaq, off almost 3%. 380 points or thereabouts. the reason why this is an area that some traders are watching closely is that because now we are now 22% below the record highs that we set last fall. so, again, into that so-called bare market territory that some traders like to refer to what's the level that some traders are watching right now it's going to be 12,555, or thereabouts. the reason why they're watching that is because that was the intraday low we saw earlier on this year with regard to the move lower, just about a month and a half ago to the nasdaq
composite. 12,555, the downside level some traders will keep an eye on today. the stocks making the biggest downside moves here within that nasdaq trade you mentioned the tesla trade, down more than 7%. 9 #.5 downside for tesla, lucid on the ev side of things, down 6.5% nvidia, docusign and zoom, during parts of the covid lockdowns we saw, is starting to weigh on that nasdaq trade i want to point out in particular zoom video and tesla, those two stocks individually represent the two single biggest holdings in the ark tech innovation etf the ticker arkk we've talked so much about over the last couple of years now, the ark innovation etf is down 5.5%. the reason why i want to highlight this particular move is because tesla and that trade ma we saw developing with zoom video are the two biggest ratings, they make up 15% to 17%
of the portfolio, at the lows of the day today at one point we are going all the way back to april of 2020. so the lowest levels that we've seen here, the drawdowns so far has been roughly 66% from the record highs that we've seen, so, again, the tech, the momentum, the growth oriented trade, guys, is what we're talking about in terms of the focus for many traders out there. >> yeah, dom, that is a wild chart. up just less than 8% in three years now. i know she looks at things in a longer time frame, 7, 8, ten years, as you're speaking, dom, we're seeing the nasdaq hit new lows of the day. down 3%. this is a really tough setup to be going into the big tech earnings of the week i mean, you take a look at netflix. punished 35% lower the day after its disappointing earnings you also see, like a tesla, it had a stellar quarter x that stock only was up 3% the next day. so it's hard, i mean, even if some of these tech companies, i'm talking alphabet, microsoft,
night, apple, amazon later this week, metado well, the risk/reregard is tough in this environment. >> and deirdre to your point here, this is also maybe a little bit more symptomatic of a general aversion to risk right, we pointed out that the interest rate complex have been so closely followed as a downside driver for many tech valuations, as interest rates rose, the assumptions changed for how you value the growth companies, longer term ones, now that interest rates are falling, people are buying up the safety of u.s. treasuries, those interest rates should be a tail wind for valuations, yet they are not right now. in fact, those moves are even more exacerbated than the downside so if that is the case, that we are seeing right now, it may just point to this notion that there is a, again, general risk aversion people are trying to de-risk their books, get to a point where they feel as though cash is better put to use somewhere else down the line because they think more downside moves are coming, guys. >> that's a great point.
we spoke to morris mark yesterday, he said he is in an increased cash position, a number of hedge funds are doing the same, dom, last week, i think we talked about heading into earnings, you're looking at some of the stocks that have been beaten down so much, that even a little surprise to the upside could put a floor under their stocks but that isn't even looking like the case. especially in today's market you see names like paypal, and shopify, the big megacaps but the big tech names are getting killed. >> not just that, a lot of traders like to look at the statistics around trading activity and one of the things they look at are certain gauges of momentum, or relative strength, or some other measure thereabouts. if you look at the s&p 500 overall, some of the stocks that are now trading the most below their longer term trends, in this case we're looking at stocks most below the 200 day average price on a rolling basis, you're talking names, i believe at one point yesterday the biggest downside move below its 200 day average price, or
longer term trend, guys, has been netflix, within the s&p 500. you have to put paypal in there as well, to your point, deirdre, also et al.sy is in that mix as well so many of these names are now trading at levels where you think to yourself, maybe there's a bounce out there, but this has now become very much a momentum trade and the trend has been the friend to the downside for a lot of bears out there it's going to take more, i guess, evidence for bears to reverse course and say maybe things are bottoming out as we speak. >> dom, we'll see. thank you. sticking with stocks, talk some individual stocks, twitter for one, julia, you're looking at how elon musk's buyout could impact the larger digital ad ecosystem. what do you think? >> well, john, i first think we have to ask how the timing of this buyout and the fact that the board accepted this offer, just a couple of days before twitter's earnings could indicate broader concerns for the ad-supported space
we saw some of these issues raised in snaps earnings, they mentioned they've seen advertisers put back both because of supply chain constraints, also the impact of inflation, and i think this could indicate that twitter's numbers could be quite bad when they report on thursday, and it could also mean that we're seeing those broader challenges, front and center, for the likes of meta, as well as pinterest and alphabet how bad is the ad environment that the twitter board was in a rush to accept this deal before earnings there's this broader question of if musk does get rid of content moderation, if maybe the content on twitter becomes more risky for brands are we going to see advertisers shift ad dollars away from twitter and into the likes of meta or youtube or snap or even tiktok, because that platform becomes a little bit more risky to them. >> twitter not exactly a bell weather, though, when you look
at all of the social networks out there, it's kind of like, it's a scrub, you know, revenue-wise even if twitter's business were to -- if all of twitter's business were to go to meta, that would be a nice little one-time bunt, maybe, but it would still be a little one. >> yeah, a little bump but i think the question is where do these dollars move? twitter is 85% brand advertising. that's the type of advertising that typically is more similar to tv advertising, rather than direct response. which is what facebook is particularly good at and so there's also been some speculation by analysts that we would see those ad dollars, 5 billion a year, not nothing, not the size of meta, that could shift over the likes of hulu, peacock, pluto, these targeted digital video ad platforms and they could benefit from some of that money moving around we'll see. and we'll also see, maybe elon musk has a way to make advertising even more beneficial, even though he's certainly been very critical of
the ads in business as a business model for twitter. >> julia, thanks. got to keep our focus on the markets. the nasdaq is down just over 3%. let's bring in dan niles on this selloff. dan, you must be making money, you've been short, a lot of things. >> well, i can't complain about this year, so far. so we'll see what happens for the rest of it every day is a new adventure, john, as you know. >> so what's new in the adventure today where the markets are concerned, and how are you positioning yourself ahead of so many earnings reports that are likely to influence this market? >> sure, i mean, i think what today it's hard to separate two things, when you're, number one headline when you open up google news, if we keep supplying weapons to the ukraine, that there's threat of nuclear war. that's not a good sign, obviously. so, you know, it's hard to separate that out, versus, you know, the unbelievable rally we got yesterday and, you know, midday and, you know, whether this is
just sort of reaction to that. but to your question directly, i think the risk-reward is just not there in big cap tech earnings the way i would look at it is tesla reported a stellar quarter, beat revenues, beat margins by a lot in automotive. which is where you want them to be bdps and that's despite everything going on with supply chains, in china, shutting down again, their exposure to europe, et cetera. they still had a fantastic quarter, the stocks up 3% the next day netflix misses yet another quarter, don't forget they miss several quarter last year as well it's not like it was a surprise it was going to be bad and you got punished for a 35% move the next day whether you look at that or ge today, which beat revenues, bdps, somehow miraculously managed to maintain their range, they got it to the low end of it, which i would argue is a victory in this market, their stocks getting crushed today
so i think that tells you what you need to know about big tech earnings, because i expect every single one of them to seaford numbers go down, and, you know, with the punishment you're seeing in reports that you already know are going to be bad, i just think the bottom line is, don't fight the fed that worked on the way up. you made a lot of money during the global pandemic by not fighting the fed don't fight it on the way down either because they're going to be raising rates a lot over the course of this rest of this year. >> dan, it's deirdre yeah, you've been telling that to our audience for months now, and i know one thing you've also said for the average investor is to increase your cash position you know, that seems wise. especially on a day like today but do you think for the average investor they should be increasing that even more, maybe i waiting on the sidelines is it too hard to catch a bottom here >> yeah, i mean, you know, if you can't trade this every day, if you are not willing to go short, you should just sit in cash because it's better to lose
five, 6% to inflation than to over 20% because the market's killing you. so, you know, if you don't have time to manage it daily, that's what you should be doing and so i 100% agree with that. i still believe down 20% from peak to trough in the s&p, at a minimum, is what you're going to see before this is over and i think it's going to take, you know, a year plus for this to all play out. we're just in the beginnings of a tightening cycle, and, you know, when you've seen aggressive tightening cycles in the past, whether it's the 1970s or even 1994, more recently, in 1994, the last time you got a 75 basis point increase by the fed, you know, multiples contracted really, really hard, and it was very difficult to fight that and i think you're in for that again. i mean, the multiple went from about 27 times trailing to 15 times trailing on the s&p during that, you know, early '90s tightening cycle
i think that's what you have to worry about at this point happening again. >> well, rather dire prediction from dan niles who has been -- a downside dan niles, thank you. >> take care. >> your take on the market, take care. let's bring in tech investor and former -- partner benedict evans. we're going to talk about digital ad market. in the context of twitter, and the recent moves there benedict, welcome. first of all, twitter's fun, but business-wise and technology-wise, it's a side show tiktok is huge in china owned, it's expanding its ad targeting capability and we're going to get earnings from meta this week as well. what should investors really be focused on when it comes to digital ads and what, if any, relevance twitter as a company has in that market >> i kind of agree with the earlier comment, that twitter is a rounding error in the ad business it's kind of like the music
business, the cultural impact is vastly bigger than financial impact it has 38,000 usa. you could argue that's why no one bought it. so much unrealized potential in there if you can run it properly and work out what it should be the others for the border market, i mean, the -- the general state of the online ad business is that on the one hand we've got this decade long kit from analog formats to digital, and in particular the next decade is the shift to tv, to digital. basically google has to do anything except do that to the next decade. the ad business hasn't been touched. but on a micro level, prove say is changing, apple is changing you the platform works eu is coming with laws maybe even america will have privacy laws like all the dynamics and the levers and balances of how you do advertising, last 20 years, they're breaking apart, and no one really knows what they're
going to look like next. so you've got, you know, people putting markets down, and people grabbing -- and people building product but kind of don't know what weather tech -- are going to be in two, three years time. >> how do investors best position themselves if they're trying to figure out who's got the best ideas and the best technology in this market, on the one side we've had apple making those changes to ios, that have had a big impact then you see tiktok, again actually focusing in on targeting, you see netflix moving into advertising, with reed hastings saying we don't have to worry about handling the data ourselves, there are others who can do that. certainly some big players are seeing opportunity in the ad targeting business, or at least making money from the result of it. >> yeah, i don't have a view on this week's results. my general appeal -- is nobody in tech understands it unless they work on an advertising team it's like working in a -- it's a
world into itself where everybody is climbing over each other for an advantage and everyone else pretends it isn't there. which is it doesn't exist. why you get elon and jack saying we hate the advertising business we'll get a subscription there they feel like you can see product that you can hold and you can make a decision based on product quality. as opposed to, you know, points on a conversion. i didn't answer your question, but that's the way that tech people tend to see it. >> fair enough we're continuing to watch markets. the nasdaq is down about 3%. this is expected to be a tough quarter already for ad-based businesses because of the macro environment. google largely seen as the best house in a currently not so good neighborhood if you're looking for opportunity at the moment, though, and google shares already have actually been beaten down over the last few weeks, does alphabet look good at this point? are you looking for smaller ad
tech players >> we've seen a divergence within tech between the super high quality giants and everybody else so you've got, you know, the small number of companies down 5'10" points and a bunch of people down 50 plus. and, you know, certainly google is in the former category. not so much as apple, which has barely moved and it is relatively insulated from the stuff that apple's been doing and relatively insulated from privacy shifts. it has so much of its own first party data i just think this is a really volatile space for the next couple of years until we work out what the -- has looked like, and of course the other side of this is going to the rotation out of covid as we work out where all those budgets go, what the macroenvironment looks like as well. we've kind of had like ten years of straight line growth. and now in a kind of bogey consistent environment the environment is broken apart, microlevel, and microlevel. >> that's for sure benedict evans, thank you. >> thank you now up front, our next guest
is out with a piece yesterday titled why silicon valley loves and hates elon, that is elon musk, at the same time with us slow ventures general partner and facebook exec samlesston it's great to have you back on the show elon musk has said he's not necessarily interested innic maing money off this deal. buzz he need to? the way it was structured, this leverage buyout, the amount of debt that's being used, the company's free cash flows barely will cover the interest payments that es. so even in the near term, what he witness and what he needs to do, it's kind of that conflict, isn't it >> i mean, it depends. it depends how much you think of elon as a financial buyer. elon can afford to lose money on this for a long time i'm one of those people who believes in his free speech narrative. the details are complicate fed t pull off if this is his evangelical bet, in some ways form of
philanthropy he doesn't have to make it a stunning success has to make enough money to cover most of the bills. >> elon musk is fundamentally a capital raiser, and he has brought spacex and tesla in the public markets, raised a ton of capital during a bull market, when the fed was in a very different position than it is now. with tech under so much pressure, and the rising rates, does that kind of put a danger that idea, or risk, the idea of him as a capital raiser? >> look, end of the day, it's funny. i always think it's an ironic line he's great at the sales side he's great at the narrative. you know, he's not, you know, the tinkerer, doing the engineering himself on this stuff. he's the best in the world at raising capital, and that's incredibly valuable. does it become threatening my view is that stuff like elon
does won't be the last to get hit in at least the private markets. the reason is, people love hope. when hope gets crowded out of host things. hope has to go somewhere prudent investors, a lot of people go in the basic stuff i'm a seed investor, we do the last thing to get hit by any cycle. the lead times are spurp long, and people love hope you want to bet on the future. elon is the best at telling the narrative of the future. even if he oversells it dramatically at times, so i don't think it's going to be a huge deal, i mean, i do think there could be cascading problems, but, you know, if elon can't raise private capital for some of this stuff we're in a big world of hurt. he's the best capital raiser in the world. >> sam, speaking of hope, is meta's ad business in as rough a shape as a lot of the public market investors seem to think >> i have no idea. is the honest answer i do know that we as a fund are betting a lot on creators. there's no question that the
last, you know, decade of the rise of dtc brands was largely driven by a lot of the targeting that was available on things like facebook and microtargeting, as that shifts for the rules around that changes, how do you reach new audiences is going to have to move into creators and cults in a lot of ways. that requires a shift. there's no question we're also in the midst of a format shift where this ends up winding up, i mean, i personally never bet against mark zuckerberg long term he's incredible at what he does. every time people have bet against him, they've been wrong. but i'm not in the details of exactly where the ad business is. >> every time. isn't that too early to say, sam, every time the people have bet against zuckerberg, they've been wrong he's facing a moment of truth right now. >> he's faced a few before, whether that was is shift to mobile, acquisition of instagram. we can go through the history books here, and i think the reality is, is that betting against facebook, meta, is generally a poor call in the
long run like elon, there are moments of bringsmanship. his has been with the capital markets, why he has trouble with the s.e.c. as a capital raiser he's constantly running that line marks has been on the product and platform side. >> he's making a $10 billion bet so far on the metaverse. sam lessin, thank you so much, talk to you soon. nasdaq down 1%, s&p down 1.75 in the last few weeks megacap names like apple, amazon, nvidia, have had an outsized influence on the daily swings. senior markets commentator mike santoli joins us to break that apart. >> of course they still represent an enormous slug of market cap the project of the markets this year really has been taking this group of stocks that was overloved. overbelieved, overvalid, and having that premium all across the board bleed out of it.
here's where the valuation sets up of the nasdaq 100 names, which of course are even further nominated by those big five or eight stocks, against the equal weighted version of the s&p 500. so when all the stocks in the 500 are counted the same, what you see here is still a very large gap in terms of forward price earnings multiple. we've had a lot of work done on the downside in terms of nasdaq 100 value wrags. it was up around 30 times at the highs, now down around 23. and what you see here from the equal weighted s&p, we're down around 16. now, it doesn't niecely screen out, though, as cheap on a long-term absolute basis 16 active in something of a ceiling before we got into the pandemic so that's why it's unclear what the destination point is, on all this, of course earnings growth has a lot to say about this valuation. if they keep growing, that does part of the work the alphabet story is fascinating. it's looking quite cheap it's actually 19 times forward earnings going into the report tonight. but the question is, is that fair for a company that might
arguably have more macro ad demand risk than it used to. and you mentioned apple, giving way a little bit today, maybe there's not going to be a lot of these kind of leaders that resist the pull of gravity as we suggested yesterday. >> so how common is it, mike, for some of the best known or best loved stocks in the s&p to be getting -- and large stocks, for that matter, to be getting that kind of valuation benefits? so i'm wondering how investors should position themselves if those big names that have high valuations disappoint? >> it's happened before, of course, john, you know, if you go back to the most extreme example being into the year 2000 it was much more extreme back then the megacap growth stocks had a bigger premium back then right now, i think, you know, you're part of the wave there. the question is, what's the fair price? nobody's going to deny that they are quality attributes of the
larmgest digital businesses we didn't used to see and they also at some level probably will be seen as being resistant to a recession, if that's what we're in for but i think right now, it's very difficult to say that we're there yet. >> mike santoli, thank you. we're going to continue to discuss how should investors play today's selloff our friend kanye -- joins us with answers the nasdaq has boinsed off session lows, down 2.8%, to the point that we were making earlier in the show, if tesla can have a stellar quarter last week, and only be rewarded by shareholders that stock 3% rise the next day how does that set up microsoft, and alphabet tonight, what do they have to show investors to move higher or simply not move significantly lower? >> yeah, it's really interesting because it feels like the market is waiting for the other shoe to drop bond deals are down, but the
market is still soft it's clear that there's, you know, there's already been a lot of selling across the market, it's clear that investors are sitting and waiting and trying to figure out when the other shoe is going to drop. one of the things i think about both alphabet and microsoft. the megacap earnings, they both have reasonably strong performance and strong fundamentals as your prior guest was saying, the the earnings are reasonably attractive cloud, advertising, and e-commerce, it's three big pillars for alphabet that look pretty resilient today. >> right, but kanyi, what you're talking about, those secular shifts that are still impact, especially when it comes to cloud names and even chip names, which are getting hammered in the current market environment so, you know, what do investors do in this do they hold onto cash do they sit this out typically, is this a time to look for opportunity >> if i were an investor looking
at the public markets right now, i would be ready to look for opportunity yet because i do think that we do still have a downside ahead of us and i think it was dan niles earlier who was saying that, i actually agree one of the unfortunate things about this, is that if either alphabet or microsoft underperforms, you're going to see a disproportionate affect on the market to the downside if they up perform very, very well, you may see, like you saw with tesla, only two, three, maybe even 5% gains. >> kanyi, three things i'm most curious about this earnings season, europe, inflation, and guidance, europe from the perspective of what happens to demand and sentiment with the tragedy that's unfolding in ukraine, inflation as a part of that, when you're looking at labor, and you're looking at supply chain, and then guidance with that uncertainty, and the inflation built in, and just the tone shift, are we going to see companies being more cautious? which of those things, or
something else if you're looking at something different, do you think is most important for investors to focus on this season >> in the short term, i would say guidance part of why, it's hard to understand what's happening right now when it comes to supply chains, when it comes to covid. you look for example at microsoft, the chip shortage is going to have a continued acute impact on their ability to be competitive in the pc market, and you look at google and coming out of covid, and you're seeing that there's a shift in advertising towards services, away from products, because more and more people are getting out. and so it's one of those things where so much of what's happening right now with consumer demand is moving, and so much of what's happening in supply chains is moving really dramatically that's actually making it harder to do really sharp guidance. in the longer term, however, there is a question as to whether or not the rate hikes that are almost inevitable over the course of this next year are going to result in us being able to enter into a recession nair environment. it's going to be really hard for us to thread the needle of keeping inflation down, while
continuing to, you know, raise these rates and cool the economy from the vantage point of the fed. in the longer term, over the course of the next year, to year and a half, i purposely feel like really being able to manage that inflationary trend is going to be most challenging. >> ground level, in silicon valley, right now, even with private investment, are we seeing a mood shift? >> yes, we're seeing a major mood shift and investors in the private markets are saying today that you should be doing a capital raise before the end of q2, possibly q3, and expect you can have enough cash through the end of 2023. what happens with private tech, it's downstream from the public markets, what's happening today in equities, nasdaq, and cloud, is going to start to affect growth investors, early stage in investors, and company formation. that's what private investors are advising their companies for. >> kanye, as we look at a chart of the top laggers on the nasdaq
100. you see tesla is down 9% how much of that do you think is due to the macroenvironment, and the broader market selloff, do you think you can attribute any of this selloff to musk's purchase of twitter, and when you look at actually investors in both companies, the big institutional ones, there's a lot of overlap. >> live by the mean, die by the mean so one of the things about tesla that makes it such an incredibly powerful company is is that the means are a capital way in the engine, when it's bombastic founder chooses to make decisions that might not be understood by the market it absolutely is making a big affect on the stock price. >> what types of investments are you not going to pull back on during this period, even aztec gets more cautious >> financial technology and infrastructure, continues to be an amazing, amazing boom the move from traditional big banks and traditional large
payment networks into decentralized networks and into smaller banks, continues to be an amazing trend cybersecurity. how we're thinking about data. how we're thinking about data in transit. you're seeing that with public names, favorite public names, cloud fair, sentinel one cloud strike are really leading the charge they're microsoft itself has an amazing cybersecurity business that continues to grow extremely well in the private markets, i think there's an incredible opportunity there as well. crypto the big reason, one of those areas, actually, where it's the best to invest because there's the least disstraks and the true builders were truly interested in building infrastructure that will change the world, and focusing those are three sectors we're really excited about. >> you can see some of the most interesting businesses be born we'll have you back on another tim for that thank you. time for a news update, morgan brennan has that for us.
>> deirdre, here what is happening at this hour shares of electric, general electric, are down more than 10% despite a stronger than expected first quarter. the conglomerate says full yield results come at the low end of guidance the ceo is citing supply chain issues for slowing growth. >> we were up 1%, probably would have been up closer to 7 if we didn't have those challenges but we saw a real strength in our revenues and services up 15%, again led by aviation, but power as well. so we were really pleased with that, it's a little less exposed to the supply chain constraints. >> 3 m cutting profit guidance for the year by one measure. the company seas weaker demand, 3m shares are down about 2%. sherwin williams stock is up 9%. profits fell less than expected. sherwin williams shares are down -- consumer confidence,
unexpectedly fell in pral. though it does remain positive despite high gasoline prices, intentions to buy big ticket items like cars, and appliances, actually rose. back to you, deirdre. >> thanks, morgan, keep an eye on the chips today, texas instruments reporting results in a few hours, the space here continues to see-wide spread pressure the smh 25% off of its highs of the year, the latest on this escalating selloff at the nasdaq down nearly 3% again, that's after the break. don't go anywhere. (vo) for me, one of the best things about life is that we keep moving forward. we discover exciting new technologies. redefine who we are and how we want to lead our lives. basically, choose what we want our future to look like. so what's yours going to be?
gut check on warner brothers discovery, the stock is down nearly 5%. the company cautioned its 2022 profit would be lower than expected, following the merger of warner media. the earnings report does not include numbers for warner media's business but new guidance is based on warner media's weaker first quarter and unexpected projects, such as cnn plus here's their cfo's take on the call. >> right or wrong, they've made a decision to invest a lot of the incoming funds into a number of investment initiatives. as i'm looking under the hood here, cnn plus one example, i don't want to go through a list of specific examples, but there's a lot of, you know, chunky investment that are lacking a solid analytical financial foundation, and meeting the ri hurdle i would
like to see for major investments. >> remains to be seen if they will offload more, quote, chunky investments. the average price target from the analyst, around $36 a share. there was a lot of bullishness on the name. nasdaq, meanwhile, new session lows, we're back in a moment trading isn't just a hobby. it's your future. so you don't lose sight of the big picture, even when you're focused on what's happening right now. and thinkorswim® is right there with you. to help you become a smarter investor. with an innovative trading platform full of customizable tools. dedicated trade desk pros and a passionate trader community sharing strategies right on the platform. because we take trading as seriously as you do. thinkorswim® by td ameritrade
twitter we lon musk at the helm, or at least in charge, what comes next for the platform's employees and business model, joining us now, former twitter chief operating officer and cfo ali rowghani with the leverage emonomusk is taking on, a cost to run a service like twitter, any way you keep 7,500 employees and the ones you want to keep, how do you do it without stock-based incentive? >> john, i think that's a great question i think this transaction is amazing as it was in its scale and its ambition and its speed, i think there are just a lot of open questions that, you know, obviously elon has to sort through. one of them is how do you retain and motivate employees
and how do you continue to fund the operations and investments and innovation that you want to make so i'm too far away from it to speculate about whether he needs to, you know, initiate a reduction in force, et cetera. i would say it's certainly possible one of the first order of business for elon is to make sure that the employees actually have direction, vision, and they understand like, you know, what they've signed up for with him as the owner of the company. >> what happens to a twitter that isn't tightly run and it's not like we wnt haven't seen a twitter that isn't tightly run before one where you have potentially morale issues, where you have a workforce that isn't stable. how does that show up in the service? how would we know? >> well, i think in the most extreme case you would see it in, you know, the stability of the platform you know, as key leaders and key engineers who understand how the system operates, if there's
downtime, or unexpected performance issues, i think that's the most extreme version. but, you know, i would measure it, really, based on the pace of change, and the pace of innovation that the company is able to achieve under elon and i think he certainly has an amazing track record as far as that's concerned, but, you know, i think most, if not all of the incredible endeavors he's been involved with, he started them from scratch he built the culture, he hired all the leadership and motivated the team this is a very different case where, you know, he comes in, and as, you know, i'm sure there are a number of people at twitter who are excited, and admire him greatly, but it's just a different challenge when you're buying an existing concern with 7,500 employees as some of whom may be on board with what you want to do and some of them may not be. so i think you guys are hitting on the right point it's one of the real complexities that he has to manage the company. >> ali, many have focused on
that 7,500 number in terms of the employees at twitter, and noted that that works out to significantly lower revenue per employee, and other tech companies like facebook, how many employees does twitter need to run why did that number grow so inflated if you think it is, or maybe it's not >> you know, to be honest with you, you know, i'm a little bit too far from the company, you know, having left some years ago. twitter was about 3,000 people when i left. it's grown substantially the business has gotten birger and more complicated as well and it's certainly globalized even more in the intervening years. so i don't know how many people twitter actually needs but i also don't know if, you know, elon, since the company is going private, and he has nearly unlimited personal resources, i don't know how much a priority near term profitability is to him. i think one of the reasons he wants the company private is to
be able to make the changes he wants to make, whatever those are, outside of the glare and accountability the public markets represent. so i think he's free to do whatever he wants. as far as, you know, you know, sustaining losses or, you know, presuming he can finance them. >> that's, yeah, the point, to be able to do whatever he wants. ali, i know that he left a few years ago. are you still close with jack dorsey he, you know, likes to say that he's focused on block formerly square and that's his first love but he's tweeting a ton about twitter becoming more and more involved do you think there's a scenario in which he comes back, and would that be a good or bad thing for the company, twitter >> oh, that's a great question look, the jack i know, he's an amazing person, and a real person of conscience, i think. and i know he cares a lot about the social good that twitter can do i would be surprised if he came back to the company. i think that he's a person of --
that, you know, values his ability to focus, and he has been quite public that he wants to focus on block. i think it's one of the reasons he left twitter. i would imagine he will stay engaged at some level with elon and with others at the company but sort of a real role at the company i would be surprised but i guess we'll all have to see. >> ali, there are some growth stocks that are just getting hit hard this morning, we see the nasdaq is down 3%. but, you know, underneath that number roku is down 9% tesla is down 9% roblox down 7.5. asauna down 7. the macro economy in the context of that, how investors should be thinking about it? >> well, i think inflation and rising interest rates are scary for the market, and we've had a prolonged period of run-up i think -- i still think, you
know, multiples, at least in the tech sector are still in many cases healthy when compared historical norms we're coming off of a period of extraordinary investors being able to play extraordinary multiples during the covid period for premium tech assets we're in the midst of a correction i don't think there's any reason to panic i think that -- my real concern is, you know, run away inflation that we can't get under control. i'm a supporter of whatever market volatility it may create in the short run of the fed getting inflation under control, and interest rates are obviously one of the main tools they have to do it. >> indeed. ali rowghani, thank you. if you want to put a slice of your retirement accounts in bitcoin, now perhaps you can fidelity the nation's largest provider of 401(k) plans, announcing it's introducing assets account the whole bitcoin, availability will depend whether your
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continues, the nasdaq a major underperformer today in a tough market a note of wolf research puts investor worries this broader faang plus/nasdaq 100 bubble is likely to burst as the overall economy slows. with us now us, megan shoe, hea investment strategy at wilmington trust really rough day the note the bubble is likely to burst. are we see that happen now how much more is there to go >> yeah, i don't know if the bubble is bursting or if it needs to burst quite frankly, but we're definitely seeing air come out of the balloon so to speak. we've seen a really big shift in the macro environment led by interest rates, real interest rates. nominal rates adjusted for inflation expectations moved off at one of the fastest rates we've seen generally when you see that, you tend to see within technology more profitable tech lead over
the more speculative, maybe newer tech plays we're definitely focusing on profitability segment. there's definitely price discovery happen investors have to figure out what they're willing to pay. >> even profitable, the mega techs are having trouble, a lot of air coming out. the nasdaq performance is stunning versus the other two major indexes. what are you recommending? do you think it is time for investors to get out of tech and into maybe defensives, even though they've become more expensive? >> yeah. we don't think it is time to shed your tech positioning we have been neutral to tech a little while now there are some areas of tech starting to look a little more attractive actually so i would be looking more at when is the right entry point to get a little more aggressive on owning tech rather than shedding tech at this point.
we think rates have done a lot of the heavy lifting that we expect so far this year though we don't think the move is fully over that's a lot of the pressure on long duration parts of the market like technology, but cloud growth is still strong and there are some areas within cloud, even within chips that might start to look like the price is right for a long term investor shorter term, we'll have volatility that's a theme that will be with us the better part of this year, so on shorter term tactical basis, i wouldn't be trying to time the bottom. if you are a three to five year investment horizon, cloud space and even chips are looking more attractive >> megan, you mention cloud. i'm looking specifically at software, enterprise software. adobe and sales force, two large companies that tended to do well over time when it comes to growth are also within 1% of 52
week lows which to me is interesting. and still, if you look at a two year chart, they're getting down into areas where they were two years ago. what does that say about sentiment in this market and is that the kind of company you're talking about in the long term >> it is the kind of company that i am talking about longer term and i think shorter term we're in the midst of a sell off. and i think investors will be less discerning on what they want to own, they're making themes by market movements and some points that you made, jon, that it is an all or nothing, in or out move now. we don't generally position in that way and we're looking for long term investments. i do think corporate spending, we are seeing signs that corporate spending is starting to level off a little bit, that's where enterprise software would be playing into that niche, but absent a recession and with the labor market as tight as it is, companies have
to spend on technology again, longer term, i think it is a safer place to be within the tech complex. >> earlier in the show i talked about europe inflation and guidance as particularly interesting to me for this earnings season on the earnings calls. how will do microsoft, amazon, apple, for example, have to do in those areas how bullish do they have to sound about those things in order for those stocks to hold up, do you think >> well, they're definitely a bellwether for the global growth picture, in particular you think about a company like apple, we're going to get some good intel in terms of supply chain disruptions. that's one area i am a little more focused on, not only in europe but supply chain disruptions that are likely to prevail emanating from china and the lockdown happening over there, you know. i think if you look back at a
lot of year ahead forecasts, including our own to start 2022, we were expecting dissipation in the supply chain pressure and lock downs in china, war in ukraine risks ramping back up, which is of particular importance to the semiconductor industry and play through to autos. >> meghan shue, thanks for being with us. talk to you soon >> thank you. the biggest laggers in the nasdaq 100 we'lltalk about elon musk's other company twitter after the break. more on the selloff. back in a moment to adapt in a fast changing world, you could hire a professional pit crew. go, go, go. sorry. nope. okay. fresh donuts - hot coffee! they deliver real time data and business forecasts when you need it. i think it was fine how it was. (air tool sound) to help you stay ahead of the curve... or you could use workday.
>> the shares are down 10% one reason might be two-thirds of the price is coming out of elon musk's pocket 12.5 billion from a margin loan that requires him to put up $65 billion of tesla shares. more than a third his total stake. he already pledged half his tesla stake for loans before this deal. depending how much cash he has taken out, could wind up leveraging 35% and more than 80% of his tesla stake tesla already ranks as the most leveraged company by ceo share pledges. 10% of outstanding shares are pledged. you look at the fortune 500, he accounts for nearly half the $237 billion total companies and boards have been tightening rules around ceo borrowing after margin call operations two-thirds of the s&p 500 forbid all share pledging by executives and directors.
helping elon musk, even as he is pledging shares, he gets new millions of options as part of his 2018 compensation plan more money going out than coming in >> home quit line of credit he has there. that does it for tech check. half time starts now thanks so much welcome to the half time report. scott walker judgment day nor tech. biggest names getting set to report earnings, the first in the coming hours the nasdaq is under heavy selling pressure we debate all that your money's next move with the investment committee joining me, stephanie link, amy raskin, pete najarian. look what the markets are doing. dow down by 600 points