breadth, maybe, and it has been getting better, the leadership is not quite as narrow. dave, thank you. morningstar. final check now on the markets. another solid session setting up after, really, some outsize gains yesterday to new highs. another 175 on the nasdaq. make sure you join us tomorrow. "squawk on the street" is next. i think the reddit guy is coming up. ♪ good thursday morning, welcome to "squawk on the street," i'm david faber, live from post nine at the new york stock exchange. jim cramer is at our office at one market in san francisco. and carl has the morning off. let's give you a look at futures as we get ready to begin trading one half hour from now. looks like we may get a can'tca continuation of yesterday's rally, and that is where our road map begins this morning. the s&p topped 5,200 after the fed said three rate cuts still likely this year, and this

morning, we're still waiting for that reddit ipo right here at the new york stock exchange. chip stocks also bouncing this morning, micron saying it is benefitting from chip demand. also upgrades broadcom. and apple's regulatory headwinds, the doj looks ready to file -- looks like it's ready to file its long-anticipated antitrust suit against that tech giant, perhaps as soon as 11:00 a.m. this morning. jim, let's start with the markets. get your take here. of course, after that very significant post-fed meeting, fed press conference rally, what are your thoughts on the broader market here? >> well, i think what happened yesterday was once the fed was clear that you're not fighting it, because the fed is fine, i didn't want to go into two cuts, three cuts, i think that dialogue is a parlor game. i'm not there. take fed off the table. what immediately happens is we go back to earnings. if we go back to earnings, there are so many groups right now

that are putting up some good numbers, and what we really ended up focusing on in the evening was micron, which said things -- i was going back and forth with the ceo -- said things is that have never happened before, which is high-bandwidth memory chips are already on allocation. you can't get them for 2025. and that's why that stock is up the most, and that's why it's the umbrella that's going to give tech another good day. >> so, the long, negative trend in nand and d-ram prices is over? >> correct, correct, a quarter earlier than i thought. sanjay is a ceo who's not given to hyperbole. this was a time where he just said, look, there's nothing i can do with the high bandwidth. i wish we could make many more, and they make a lot more money for those, those are a.i., but yes, the other parts of nand are doing better. there's getting to be a kind of

a cross the board sense that there's demand for everything tech, whether it be pc, server, datacenter, anything connected with nvidia, so these are all systems go when you hear something about micron, building block of all tech, saying good things. >> you want to explain a bit more? i think it's good when we can kind of connect everything in to this ecosystem that we talk so often about, jim. so often leads, ultimately, to nvidia chips, but when you're talking about high bandwidth and micron's role in that, can you just give us a little bit more of an explainer? >> sure. when you have artificial intelligence, it requires tremendous amount of power throughout your whole system. whether it be with broadcom, which is soaring today, whether it be with micron, whether it be with arm, these are all companies that are affiliated in the network grouping with nvidia, so as you bring in the new chips, in this case, it was blackwell, everything has to be accelerated. everything has to have -- require more density. you just need better chips, faster chips. now, micron has a lot of what i

would regard as being good stuff, just that goes into your pc. this is the stuff that goes into this super computers that nvidia is creating. so, these are all -- look, nvidia is at the epicenter of this next generation of technology, and anyone who's connected with it, which micron is, which broadcom is, which arm is, cadence, synopsis, those are the companies that are soaring here, because we know from what jensen said, and what jasanjay said last night, we can't meet the demand. the demand is too strong. everyone is on allocation. when he used the term allocation for 2025, i was thinking, david, this can't be, and he checked in with sanjay, and they said, no, it's never happened. they've never had allocation through 2025 for something this big. that's why you can see the stock up $18. nvidia, you can see micron is going to be up more than it is right now. it's amazing.

>> andit follows on from yesterday. i mean, back to the broader market, although yesterday it was -- it was not just big tech that was a beneficiary. >> no. yesterday, we had really good numbers at retail ran until chewy reported -- i mean, chewy and five below. we'll have to talk about that. it was a jailbreak, david. everything moved, with the exception of some health care. >> justified, though? i mean, again, we didn't get reduction in the dot plot from three to two. we still got the expectation of three. perhaps he was less hawkish during the press conference than some had anticipated the fed chair would be. is this move justified based on the prospect that we still maybe get rate cuts starting in june? >> if we do that, yes. but i want to be clear that the market -- there are two markets. there's the markets that are really being driven by the demand of customers, okay, and that happens to be tech.

and then there's markets delivered by animal spirits because the fed was less hawkish than we thought. that's everything else, and i think the everything else is just okay, david. i mean, i'm not going to come out and say that, you know what, i've been talking to a lot of retailers and things are far better than expected. i've been talking to williams sonoma, and things are better than expected. we've got, frankly, the downer of apple. apple was getting some really good talk with nvidia, but jonathan kanter at the justice department is not raising numbers at apple. he is not taking -- he's not going to buy apple today. he's slashing it to underperform. >> let's talk about apple, then. we can see the stock is going to be down a bit, at least, when we open 24 minutes from now. there are any number of reports out there at this point that, in fact, the doj is getting ready to bring a case against the company. in fact, they've -- i think they've sent a -- i've gotten a release sent to me by any number of people. they don't say what it is, jim, but everybody assumes that it is going to be related to them

finally kind of coming after them in terms of what they say is their stranglehold on the app world, so to speak, the 30% take in the app store. these cases can go on for years, and there are any number of them already out there. we've obviously referenced the doj case against alphabet many times. what are your expectations here? >> well, look, i think the main point is it's going to go on for years. if it's the apple store, i remember when i started thestreet.com, which is now owned by the five hour energy guy, very interesting piece by eamon javers this morning about the fella. your decision is, do i go to the app store and let them have 30%, or do i do it on my own? unless you're a huge brand, you get -- let them have 30% of what you make, because you may get nothing doing it on your own. i've always regarded the

regulators as not yunderstandin the way small and medium-sized businesses work. forget the fact that they take a percentage. you won't have a lot of sales if you don't have the app store, but the government has been after the papaapp store and hat how much money apple makes. >> they make a lot of it. >> they make a ton. it's a busy. >> every earnings season, i sit there, mouth ajar, at the numbers themselves. the size and the power of these platforms is hard to comprehend sometimes, whether it's microsoft or apple or meta or amazon. the expenditures on capexs are -- i mean, all the numbers are incredible, including the bottom line numbers. th that said, it's not -- >> trillions versus billions. >> say again? >> it's trillions versus billions. that's the problem. i want to analogize to costco. if you want to sell into costco, you have to take less, but in the end, you take less of a big

volume. if you want to sell into apple, you take less but less of a big volume. should we talk about norfolk southern? do we talk about macy's? >> sure. >> i know you and i -- >> well, macy's, i guess, you know, yeah, maybe a little. >> paramount? >> i'll talk about paramount later. maybe, like, seven people care at this point. >> don't say that. >> these companies -- listen, i kid. i kid. do you know how much time i've talked -- >> my kids are watching now. don't say that. >> paramount compared to amazon or apple and what they're doing, you know, i mean, that's the world that they're kind of competing in, not to mention even netflix, far smaller but so much bigger. >> we're big, but only the stream got small. >> don't feel bad. it's okay. it's all right. you've had a great week. feel good. >> it's not done. >> you sat with the man -- >> i have a special tonight, 8:00. >> man in business right now. >> let me go have ten five-hour

energy drinks during this vacation of a commercial. >> leaders tonight, it will encompass all the fascinating conversation that jim had with jensen huang, including the concerns i know that jim now shares with me about what this all means for society. >> i do, i do. >> all right, when we come back, though, jim, we've got reddit, because it is gearing up for that public debut today, and we are going to have the ceo of the social media company right here at the new york stock exchange. let's give you another look at futures and get started with trading 20 minutes from now. got a g owhe f y.bish aadorou don't go anywhere. does it mean? maybe rich is less about reaching a magic number... and more about discovering magic. rich is being able to keep your loved ones close. and also send them away. rich is living life your way. and having someone who can help you get there. the key to being rich is knowing what counts.

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social media company reddit getting ready to make its public debut right here at the new york stock exchange. reddit ceo steve huffman and our own julia boorstin are here with me at post nine ahead of the opening bell. julia, let me turn it over to you to begin the questions. >> thanks, david, and steve, thanks so much for joining us here as we await the opening trade of reddit shares.

this has been a long time coming. reddit is a 19-year-old company, and you're taking an unusual approach to the ipo itself, opening up 8% of retail allocations to your active moderators and also your active users. what kind of interest did you see from them, and are you concerned they're going to sell today because they've no lock-up period? >> sure, so, first, thank you for having me. it's truly an honor to be here. it's been a journey, and to be surrounded by our employees, i just -- i'm overcome with gratitude, and for our communities to make reddit what it is. so, in this ipo, yes, we invited a number of our users and have a healthy retail component beyond that, and our goal there was to bring in, i think, as the ethos of reddit, level the playing field, bring people in on the same terms that professional investors would. and so, it's a free market. i hope they believe in reddit

and support reddit, but the goal is just to get them in the deal, just like any professional investors would. >> well, there has been a lot of chatter on wall street bets, which is obviously a very popular reddit forum, that has not been so positive. you mentioned this as a potential risk factor in your s-1. are you concerned that having this very big presence with those retail investors, very high-profile presence, is going to drive volatility in a bad way? >> first of all, look, i love wall street bets. i'm a user. i've seen their comments over the last couple of weeks, so i just send them my regards. and again, that's reddit. reddit is people. reddit is a fun and special but sometimes crazy place, and so i wouldn't expect anything less from our -- >> it doesn't upset you, though? wait a second, we're going public, you guys are a part of this, you've helped us in terms of our success, why aren't you more supportive? >> that's exactly, i think --

they've helped us get here. reddit is nothing without our users and communities. and i think that's the beautiful thing about reddit. they tell it like it is, but you have to remember, they're doing that on reddit, and it's a platform they love. it's their home on the internet. and look, i think it's such a privilege for i and the team to get to work on reddit, but they really are reddit. >> steve, one of the questions that's come up a lot is the company's been around for roughly 19 years and has not been managed to be profitable in any of those years. what will change or has changed if you haven't been able to figure out how to get to profitability over that period of time? >> that's not exactly true. we have been around 19 years. i came back to the company, though, in 2015, and that's when we really started to build the business of reddit, and that hit high gear in 2018, really, when jen wong joined as c.o.o., and she's really been my partner in running reddit and building this

business. but we were -- we made a profit in the back half of 2023. we grew revenue three times as fast as costs last year, and so what's, i think, beyond the community of reddit and the platform of reddit is actually a very nice, special business here. our gross margins are very high. the high 80s and have been for a long time. so, even small improvements in revenue go straight to the bottom line for us, so this is truly, i think, a special company in profitability is -- you know, it's an important milestone for us, and we're getting closer and closer. >> i know jim has a question as well for you. jim? >> first, steve, thank you for being on the set. it's fantastic. >> thanks, jim. great to see you. >> absolutely. i wanted to know, you know, when you and i talked, it's just really important, i believe, that people who have been so important to your company, that the redditors get stock if they want stock. were the brokers' houses understanding of that? is it placed with people you think that actually have done so

much, and might want to hold on because it could be a great stock? >> you know, honestly was not a controversial ask at all of our bankers and of the investors. what we've been pitching -- and look, we've been pitching reddit for two years, telling them why we do this, why it's special, and we've met so many investors who get reddit, who understand reddit, and know that this is -- including our users in a moment like this, it's the most natural thing we could do. >> to make it clear, it's not just wall street bets that wants stock, right? those people might be sellers, who knows? you're talking about hard-core people who have really helped build your brand away from stocks. i imagine that they want to be long-term holders. >> look, i hope so. i think the best investors of reddit are people who use reddit. and so, i want our investors to be users, and i would love our users to be investors. i think, look, we all -- we're all building this together.

we're building the platform, and now we get to build the company too. i think that's such a privilege. >> so, speaking of building the company, your business is currently 95% advertising revenue, and with those -- for those ad dollars, you're competing against the giants. we're talking about meta, google, it's an incredibly competitive space, and you're very small compared to these other players in terms of the number of daily active users you have. what is your strategy to be able to grow market share in such a tight environment? >> sure, so, i have two answers to that. first, the digital ads market is so huge. it grows by five to ten reddits per year on its own. and then, what's special about reddit is whatever you're into, whatever you're going through, whether you're getting into college, getting your first job, relationships, ups and downs, whatever health malady you have, and everybody's got one, it's all on reddit. and so, reddit is all about context and interests.

so, literally every brand's customers are on reddit somewhere, so i think it's actually a very good fit, and for us, i think there's really no constraint on how big the ads business can be. >> but you haven't been able to monetize them that effectively yet. i mean, you know, i'm looking at a bernstein piece, monetization well behind peers despite starting to sell ads in 2006. you had $804 million in 2023. that's not exactly a huge number. >> well, look, we had $12 million in revenue in 2015, so we're getting there. and i like the way our business is scaling. i think our advertisers are rooting for us. reddit is -- it's not about personal and private information. it's about connecting with your customers around shared interests. and so, we're seeing, i think, a lot of momentum in the market. we've got to start somewhere. >> but momentum in the market, but your 20% growth last year was still slower than other

companies at your sort of age in terms of monetization, but this raises a question about your new revenue streams, and you have talked about how you're emerging revenue stream is licensing your data to train a.i. models, and you made a deal with google. but then the ftc started an inquiry, saying maybe you hadn't secured the legal right to do that with your community. what do you have to say about that ftc inquiry, and how much of a threat it could pose to this new revenue stream? >> so, that's not what the ftc said at all. in fact, they didn't say anything other than, we'd like to know more. so, you know, they -- this is a -- i think it's a new, exciting space, and data licensing is hardly new. we're not doing exclusive deals, and in fact, in any contract we do, we include protective provisions for our data and our users' privacy. it's very important to us to be considerate about where our data goes, what it's used for, and prer preventing people from using it to, for example, reverse

engineer the identity of our users. the status quo, before this moment, is everybody is crawling everybody using the data for who knows what. right now, i think locking that down, making it safe and predictable, that's been our goal. >> so, you're confident that this data licensing for a.i. trending will become a meaningful revenue stream and over what time period? >>, so i think what we know for sure is that the value of reddit's data is increasing. historically, we've looked at reddit as our core business, and look, this is still our core business, community and conversation. but the value of our data is growing. in a world where more and more content on the internet is created by artificial intelligence, the premium on actual intelligence, which is what reddit is, continues to grow. and so, look, it's a new business for us. we just started doing this, like, this year in 2024. we'll see where it goes. but i mean, i like the shape of it so far. >> i learned a new term, nsfw, not safe for work.

i wasn't aware of that. >> of course. >> apparently a good amount of the platform includes content that is not safe for work. there's a question. can that be monetized? if it can, that might be a positive thing, but these are things that advertisers may not want to be associated with. how do you viewthat? >> it's kind of beside the point whether it can be monetized because our answer is, no. we don't monetize it. we have no plans to monetize it. and honestly, that just keeps things simpler for our advertiser customers. we just say, there's no ads there. there won't ever be ads there. and i think that content is important, like sex and sexuality is an important part of the human experience, therefore, you can find it on reddit. but not all of reddit needs to be monetized. and our users who look at that sort of content also look at the entire rest of reddit, and the commitment we make to advertisers is, you know, you will be where you want to be. we're in the happy customers business. there's a portion of reddit, the vast majority that i think is great for advertisers.

and that's where we do our business. >> finally, net proceeds. come in 450 or $500 million to the company to use. what are you going to do with the money? >> look, grow the business, number one. you know, maybe there's m&a opportunities here and there, but first priority is grow reddit, continue to just make this company bigger, better, healthier. >> well, we'll watch today, the debut coming up, and we certainly appreciate you joining us. thank you. >> thank you both. thank you. >> julia, thank you as well. coming up, we're going to have jim's "mad dash," we'll count you down to the opening bell as well. more "squawk on the street" straig aad hthe.

>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. all right, welcome back. we're going to get to a "mad dash" and have an opening bell. expect loud cheering very soon here, of course, as reddit gets ready to have its debut. jim, five below is what you want to talk about. >> yeah. they had a good quarter, but david, the shrink was incredibly bad. they just had so much theft that it really crushed their quarter.

and by the way, on the conference call, the analysts just were after these guys, saying, how did this happen? and one of the reasons why it happened, david, is something that you and i have talked about before that i think is a big mistake for all retailers, including cvs, self-checkout. they had a huge problem with self-checkout, because you also are supposed to pay when you do self-checkout. a lot of people seem to not want to pay, and it was a remarkable conference call, because five below is a very good company, they're philadelphia-based, but the amount of stealing just wrecked the quarter, and they didn't seem to be able to make it better. >> it's so interesting, jim. >> i put it out there. >> that's -- to your point, that self-checkout seems to be self-defeating in a way. you can pay for a few things but not all of them, or i forgot, you know, i didn't do that one. put it all in my bag, and who's going to stop you? >> so, they're putting more associates there to try to stop

this, but they admit it hasn't worked yet. the shrink jump was actually such that i want to double my efforts about seeing who's having problems with self-checkout and stealing. i thought that when brian cornell at target talked about that we've seen a high watermark in shrink, i did not think we'd see a company that would have bad numbers versus last year, but unfortunately, five below did, and it's a very well-run company. it's a good growth story. so, it takes more looking into. i think people have to rethink this self-checkout. i think it turned out to be something that is not good for retail, and retailers were so anxious to get rid of people. bring the people back. >> it may be worth it when it comes to the bottom line. all right, jim, the brief time we have before things get very loud here, you seemed kind of positive, just judging from your questions on reddit. are you? >> i think it was placed well. yes. i mean, i think that there are people who love reddit, and they're the kind of silent majority, to use an unfortunate nixon term, and then there's the rabble rousing people who

really, genuinely feel that reddit should be more of a greyhound bus, like kind of a -- a common carrier of stories, and it shouldn't necessarily be making so much money. i think that the people who own it and have owned it for a long time want the stock and want to own it and not trade it. if those people got a lot of stock, then the stock goes higher. >> all right. there it is. the opening bell this morning. doing the honors is reddit, celebrating that initial public offering today. over at the nasdaq, graph jet technology. celebrating its listing via spac. they priced at $34. company could raise as much as $748 million at the top end of that range, which is $34. roughly 22 million shares. of course, first social media ipo since 2019, and the company was selling 15.3 million shares. other selling stockholders, jim, to your point, 6.7 million. long time, some people have been waiting for liquidity at reddit,

given how long it's been a private company. >> how about that "conde nast" home run? >> yeah. >> that was nice. nice investment. it's good to see someone from the print world actually have the foresight, even though it took a long time to get the payoff, but i always think it's such a shame. i saw yesterday, the breakdown from associated press, and look at these institutions and saying david, what the heck happened? we had a really powerful press in this country. i don't think people realize at home how fractionated, how unimportant so much of what print is, and so seeing that someone from print got in on this and made money, think, hallelujah. >> yeah, it has been a difficult road to say the least for so many, particularly not the national but the more local brand of journalism. so incredibly difficult. >> did you see the piece by moffett nathanson yesterday, by mike nathanson, the numbers and how they're worse than we

thought? >> i usually do, but i'm not sure i laid my eyes on that one. >> don't, because you'll want to slit your wrists. he's talking about just linear being -- he said linear is now at its radio moment. the radio moment. >> radio moment. >> the radio moment. >> well, radio's still around. >> yeah. radio moment. >> think of the positives. i mean, we can say anything we want. nobody's watching. i'm kidding. they're still out there. >> do you know, i made a joke today about how the justice department is going to go after nvidia because they're so powerful, and some people actually believed me. one of the problems that i'm finding, david, is that there's no sense of humor about anything involving nvidia. if you just -- nvidia, like, it's a national treasure. the government is not going after nvidia. the government is going after apple, and david, we do have to focus on this, because i think that in the end, you're seeing this pattern of who this government goes after, and it happens to be the big companies that a lot of americans know and like. >> yes, they do, but there's

also a belief that they have enormous power, even though it, by the way, may be very difficult for the government to prove that in court, at least as such that it violates any of the antitrust and other laws that are on the books in terms of trying to curb that power. that said, it is not as though meta and amazon and alphabet and apple and microsoft are not incredibly powerful companies with reaches into so many different areas of our lives. they are. >> but the ftc has hated amazon, okay? lina khan has hated amazon. i had adam selipsky on last night, amazon web services. every year, they lower prices for amazon web services. is that good or bad? are people saying they lower prices in order to get everybody out of the business or do they lower prices in order to make it so you and i, as prime members, do better? i believe it's the latter. >> and it conceivably is going

to be a very strong argument they're able to make in terms of withstanding any of the antitrust litigation that's brought against them, because some of it is simply based on whether it is good or not for consumers. i mean, they are going to be making somewhat different arguments, aren't they, though? as well. that's been part of the problem overall in terms of the ftc's record thus far and some of the high-profile cases. going down roads that the courts are not willing to follow. >> right. if you're tim cook, who's in china right now, or any of the great people at apple, where you have brought this product that everybody has and everybody loves, and all you ever hear about is from justice that, listen, we got to sue you because you're so powerful, i mean, they're powerful because everybody loves them. you can get a samsung fan, for heaven's sake. they got a.i. you can go into the samsung app store. what do they got? >> i don't know. i'm an apple guy like you. but that said, listen, eventually, you could see some sort of legislation come out of

congress, i think, that conceivably could -- >> so it's something we can all agree on. they can all agree on. let them go focus on the tiktok thing. let them do the tiktok. >> tiktok, we'll see. by the way, we're watching the senate when it comes to tiktok. we'll see if and when they come out with that bill or what happens there. i guess it's less certain that they are going to pass the ban, but certainly very -- still quite possible that it will. and then be signed by president biden. and then, of course, it will probably all end up in the courts the same way that apple's litigation is going to and so many other things do. >> to bring it back to stocks, broadcom is up big today, in part because they got bytedance as a potential customer. they didn't reveal who it is. they already have google and meta, but apparently bytedance is bringing the stock up 46 points, and i think that -- joe kernan today said younger people vote and therefore congress will

not go against tiktok. >> there is a question as to that. and any number of people who are in their living on tiktok, the many influencers we talk about, the brands that are dependent on it to a certain extent. that's why i think it's a fascinating story. again, i think if, in fact, there is a ban, i think it's unlikely the chinese are going to allow the technologytransfer that really would have to take place for significant value to be ascribed to tiktok's non-china businesses, because by the way, when mnuchin's out there raising a group, he's talking not just about u.s. but all of the businesses outside of china, trying to bring them together and buy them. without the source code, i don't know what you do. it's very much unclear if you don't get access to that source code that you really have a business. jim, you mentioned nvidia. it's up, although backed off already in the last couple of minutes from where it opened, but nonetheless, i saw $2.3 trillion briefly on there.

may be a new market cap or close to it. >> there was an ipo yesterday for estera labs, semiconductor, connectivity, a.i., i went to their website. that was the beginning, david, of what you and i don't want to see, which is just, yeah, an ipo that, you know, right from the get-go, starts out, $10 billion market cap. wait a second. you go and look at their numbers, they're almost nonexistent, for heaven's sake, but it doesn't matter, and people get excited. we don't want this. intel-backed, okay, great. please let people understand we don't want 2000. we don't want 1999. buy companies that are doing well. >> yeah. >> these companies have -- you know, david, we're going to get -- i have a.i., you have a.i., let's go buy me. >> it's following through today. >> i know. i'm just -- i was hoping it wouldn't. >> significant liftoff after its ipo yesterday. >> i was hoping that it wouldn't, because when i went to the website, i said, look, they've got all the buzzwords, everything that you need to be able to say, hey, i'm in a.i. it's like we watch every

morning, soundhound, all their a.i. i mean, nvidia gave them the a nod. we don't want to be in a world where you can say you have a.i. and then your stock goes higher. >> are we in that world or not? >> we're getting there. >> every company felt obligated to mention a.i. in their conference calls. then they seemed to die down. now we seem focused on a handful of companies that are the true beneficiaries right now before this thing gets into the enterprise in terms of all applications that haven't yet been invented, frankly. >> right. that's why micron is here now. they are on allocation for their high-bandwidth memory chips that go into this. that's a real a.i. play. that does make sense. cadence, synopsis, they are real a.i. plays. they make sense. i don't want everybody to come public who's ever done anything a.i. and then claim that they're the next nvidia. everybody wants the next nvidia, and there isn't. there's just nvidia. >> nvidia is the next nvidia.

i think we've said that a number of times, haven't we? >> yes. apple's being -- i stepped into the omniverse streaming into the vision pro yesterday and saw some remarkable things, including a car that when i got out, it was actually a chair, but i lifted my leg like i was in a car. if apple adopts what nvidia is saying they should do, it can be big business-to-business for apple, but right now, i have to explain to people, it's still in its infancy, and many companies haven't figured out how to use what nvidia's doing, except for then you get companies like amazon that have figured it out. meta's figured it out. alphabet's figured it out, and, of course, microsoft's figured it out. that's me looking at a nissan car and selecting colors for it and later on getting in the bucket seats, thinking i was in it when i was really just in a chair in a room. >> interesting. yeah, look at that. >> you see, there's one picture where i'm trying to get under the hood. i'm trying to actually open it. and then i go under the hood.

and i'm looking at the engine. the engine looks fantastic. but does apple even know what jensen's got going? i'm not sure how apple even understands -- of course, they know. but how big this could be. >> yeah. >> big. >> waiting for some news here, jim. i just got it on the disney proxy fight. >> oh, the -- the ceos who endorsed nelson? did you get that? >> no, i got iss, and iss is an important proxy advisory firm, and they are advising to vote for peltz on trian. not jay rasulo, but they do go for peltz. >> iss for peltz. >> well, one board seat there is what they're recommending. that's not insignificant, by the way. that's certainly a positive sign for nelson peltz and trian's efforts to be seated on the board.

so, louis was in favor of disney. iss says, go peltz, not rasulo, so one seat, and you know, again, it will come back to many of these large institutions and how they choose to vote, how influential -- i haven't seen the actual report itself in which they explain their thinking, but there it is, jim. so, certainly as we track this closer and closer to the april 3rd date for the actual vote, that's another significant data point. >> david, are you surprised at how ugly it's gotten or do you think that's just what happens? >> that's what happens. i mean, you're in a contest. >> it's so personal. it's so visceral. >> but it is personal. it is visceral. and you know, i think, as well, something that i have kind of hit on, bob iger takes it personally too. there he is. and you know, i do have a question as to whether, in fact,

peltz gets on that board, how long iger will stay at the company. >> raises a good point. >> there is a view, rightly or wrongly, that peltz is operating for ike perlmutter, and ike perlmutter is out for bob iger. again, i say, rightly or wrongly, that is a view. and so, i think, you know, we'll watch this closely, because it may impact at least mr. iger's tenure as well. >> were you surprised? that board, katz, parker from nike, calvin mcdonald, and james gorman, total heavyweights, would they, together, do better with peltz? because the board is not done the shareholders a great service in terms of succession, one of the most important things they do. wouldn't they do better? i don't know. i feel like at this point, they've spent a lot of time and energy, they should just add him on, move on. this is so disruptive. >> it has been very disruptive. it is coming to an end, and to

your point, you have that view. that view is not shared at all by the board, and top management at disney. >> great story. i mean, great business story, because these are some of the greatest business people in the world, and it's an iconic company, and bob iger did really well for a long time, and you would think, okay, listen, let's get all the great minds. i know peltz, but it's the opposite. it's like, hey, nelson, please, let it alone. >> listen, there's still great confidence in the disney camp that they are -- i've got the report in front of me -- that they are going to prevail here. but again, iss's decision, at least s not an insignificant one. it depends, doesn't necessarily -- it's not definitive in any way, just because they say, "we think peltz should be on the board." do i have time to get to these faber reports? can i do them now? let's do them. >> please do. >> jim, i'm going to start with one you may not expect, and we watch reddit go public. next week, we're going to have a

de-spac of a company that is starting to once again get a bit of attention, and that is digital world acquisition corp. dwac. >> dwac? oh, you're on that. i'm not home. >> i have been on it for some time. i've talked about it last week, i think, briefly as we feel, in part because of the conversation around former president trump's legal bills and his need to post a bond of somewhat $454 million here in new york. and the access that he potentially has to what would be billions of dollars of shares if current prices hold in dwac. why do we mention it now? because tomorrow, they're having their vote. and they're going to vote in favor, obviously, of the deal to merge with trump media and technology group, and that's the math. i'll come back to it in a minute. you can see, digital world has had a very nice run of late, and let's call it 44 or so. you want to do the math, i can

take you through it, because mr. trump will -- t pmtg will he 87.5 million shares right away and another 40 million on a so-called earnout. the earnout looks pretty good right now. it basically says, if in any 20-day period following the de-spac, which will happen next week, by the way, that's when we're expecting it, any 20-day period, the stock stays above $17.50, there are various numbers along the way here, but 12.50, he gets another 40 million shares. you can do the math. that's 127.5 million shares, multiply that by 45, you get about $57 billion, maybe more. i've got 169 total shares out. you got 30 million shares for dwac. you've got 12 million from the

other bucket that's $24 million, but half of those are warrants, roughly. and by the way, i'm not including any number of converts and warrants which will take the share count up, so let's assume 169 million shares, over 7.5, $7.8 billion market value. company right now, $3 million in revenue from truth social. that's the main entity that it will be operating under the tmtg banner. and you can see there's been a great amount of enthusiasm among certain shareholders. by the way, you can't even short it at this point. the borrow is simply through the roof in terms of how expensive it is. but i have also heard, as you might expect, and have not been able to confirm, that at least there have been some conversations around, is there a way for donald trump to use some of this enormous stake as c collateral for a loan that would

then be posted tomeet this bond requirement? he has a lock-up. it's six months. it's not clear, though, whether that would have to remain in place, fully, for that six-month period. there may be some ways to work around that. but i did want to bring that up. you know, i've been talking about it a little bit, and looking at it for quite some time, but it's certainly worthy of some note, given this is going to be an $8 billion market value, of which he will control some $5.7 billion. when you include the earnout shares, the 40 million earnout shares, which i'm assuming the stock doesn't collapse after it goes public, but we'll see. we'll see. >> i was stunned. i'm stunned. i think you're right. he will have a borrow against it. some bank probably would lend him money based on the shares, but the company, david, what's -- if you value it on earnings, sales, anything, it's not worth anywhere what we're talking about. >> no, it's $3 million in revenue. >> you get $5 billion out of a company that's doing $3 million

in revenue? >> that's the numbers as they currently stand. i encourage people to read the s-1. >> this is an -- let the facts speak for themselves. i don't know what to say about that, david. it's -- it's fan phantasmagoric. >> we got existing home sales due at the top of the hour. first, it's manufacturing and services pmi from s&p global, so let's get to rick for that. yes, these are march preliminary, david, so in a couple weeks, we'll get the final reads, but it's very interesting. if you look at manufacturing, we're expecting 51.8 to 51.9. 52.5. this is the best month over month change, the most above 50 since june of '22. june of '22. manufacturing might be on the way back. now, services, expected to be at 52.0, comes in at 51.7.

51.7. that's the weakest number since last year. now, granted, that isn't that long ago, but it does underscore that what was highlighted as the best portion of the economy seems to be slowing a bit and, of course, this has ramifications for the fed, because of services slow, maybe some of the price structure, of course, will be altered with respect to the rate of change of inflation. and finally, the composite number at 52.2 is right in line with the last several months. we had 52.0 in january, final read of 52.5 in february, so of course, we'll continue to monitor. interest rates have moved up rather dramatically, and most of that, of course, was claims very well behaved in some of the early morning data that was economy-friendly, of course, which means economy-friendly has fed implications, pushing rates up because, of course, if the economy's a bit strong, maybe that means that inflation isn't going to necessarily be under control. david faber, back to you. >> all right, thank you, rick santelli, as we take a look at a

broader market that's up another 0.5%. this, after, of course, that significant move higher yesterday. the latter half of the day, certainly following comments of the meeting and then comments from chair powell during his press conference. jim, i wanted to come back to a story that broke in the last few minutes, which is the disney spd we'll continue to given the high-profile nature and the battle that's under way and continues. here's the quote from iss, constitutional shareholder services, a proxy advisory firm that tells large shareholders how they should vote. in the past certainly the index funds which control so many shares have often taken these kinds of proxy firms and used them to make their own decision. that's changed a bit. a lot of them have become more active in making their decisions along the lines of a blackrock, for example. here's what they say. peltz's significant shareholder could be additive to the succession process, assurance to

other investors the board is properly engaged this time around and future allocations and multiyear concerns around the role as a compensation committee member strengthen the case that peltz's addition on balance would appear a net positive. >> look, i think that we forget what a board is supposed to, and a board is supposed to offer guidance at the highest level and supposed to have a succession plan and i think that this board has not been able to do that and you get someone like nelson who says the board is not helping the ceo and succession and makes sense. >> the critics, obviously, disney chief amongst them have argued there was no real plan there, he didn't come up with any specific things other than saying the board oversight has been lacking as we pointed out and that's the reason he should be elected.

jim, you mentioned paramount. i'll hit it briefly here as well, given we're on the subject of these companies, obviously, disney so much larger than paramount but a report in the journal that apollo, the large alternative asset manager that does private equity is looking to buy the studio for $11 million. i would point out 10% higher than redstone paid for paramount 30 years ago. you know, 10% gain over 30 years. but it's not going to happen. it's sort of what i'm hearing. there's no plan in place at this point to sell the studio. it's too tied in to everything else that paramount is trying to do and so while it may have been linked to the journal it may be of interest it sets a price, it's not something that seems actionable based on my reporting at this point. i continue to hear that they are trying to move down the road with that david ellison-red bird

plan to try to acquire national amusement paying a premium to shari redstone for the control stake and merging sky dance and ellison studio in the paramount studio and issuing as well, potentially dilutive to give them what they need to grow the company. unclear whether that deal makes it or not but this one doesn't appear to have much life to it. >> one thing people recognize that people still watch is live sports. if you get paramount global do you get the live sports that they have? because that's actually worth more than the numbers we are talking about. >> the contracts in place for cbs and the nfl, of course. >> why wouldn't you want that? i mean we know that nfl had great numbers this year. >> yeah. >> that seems like a -- a no-brainer to get. >> you get cbs. cbs is the one that has the contract to air, you know, so that's what you get. >> but that's -- i mean why people watch the masters and march madness and the nfl. that's worth a lot to a google.

that's worth a lot to amazon and they can't do that. >> no way snoov not with this ftc. >> if amazon could buy this and was willing to they would all sell to it. zaslav would be on the phone right away. >> he would. >> he would be. >> yeah. >> because we mentioned it. >> i don't know. those guys still watch. hey, the linear guys still watch. >> it is a nonstarter. >> it is a nonstarter. >> amazon is not going to be able to buy warner brothers discovery and paramount, i mean the buyer for the studio is netflix. that by the way antitrust wise shouldn't be an issue. they're not selling the studio. >> tv. >> they want to make a bid for the whole company but nobody has. so that's where things stand. >> i like traders. i'm watching traders with my kids. >> traders? okay. >> traders. it's trai.

>> it's great show. >> are we at the point where we make our programming recommendations. >> i'm sorry. >> that's okay. >> i've been -- >> gentleman on netflix been enjoying that. >> my sister is watching that. told me to watch that. how about chewy. >> also slow horses on apple. great. >> i watched all. i watched it twice. >> i pretended to my wife i watched it without her. >> now you want to finish this up. >> chewy. >> we like dogs. >> hit stocks we haven't hit and why. >> okay. chewy numbers and you start going through the conference call and turns out that, you know, the pet adoption is lower than people thought and the growth there is going to be almost nonexistent. pets went out of fashion on the wall street fashion show. >> they did? >> we have a no growth industry. the pet business. which is interesting, general mills had good numbers not

because of pet adoption. pet adoption has run out as a theme and the humanization of pets theory i don't know. it may have -- that may have slowed. >> really? my dog still -- yeah. sleeping in the bed. >> you got to show discipline. >> all right. >> you have to show discipline and kick him off the bed. every night. >> what do you got on the big program from san francisco tonight? >> i got palo alto net which is important. we want to be sure what -- whether cyber security is as strong. there's a lot of people who feel it's not and then medtronic talk about the revolutionary things people are doing in ai and medical which is not talked about nearly enough and i don't know if you saw what elon musk is doing in neurostimulation. we're going to talk about neurostimulation with jeff martha from medtronic. probably the company. ge health care endorsed it. j&j. they understand ai and understand here and now it can make money for them. >> and then your leaders program tonight as well. >> yes.

at 8:00. >> fascinating conversation with jensen huang. so that's at 8:00 tonight. >> david, he's smarter than all of us. but he's also nicer than all of us. >> and soon his artificial intelligence will be smarter than all of us. >> that's you and i when we get back, you, me, and mini david and mini jim will have a conversation and see who is more important. mini us or us. >> got it. all right. jim, see you later. >> congratulations to nelson peltz. >> he hasn't won yet. >> no. >> not going to congratulate him yet. there's jim cramer. i'm here for another hour. more coming on the busy thursday morning. keep it here.

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♪ welcome back to "squawk on the street." rick santelli here live at cme hq. breaking news, leading economic indicators for the month of february, remember, we've had 23 consecutive months that have been negative month over month changed. that all ends here. up 0.1%. up 0.1%. that is the best number and the first positive number going all the way back to february of 2022. so it makes pretty much all the data this morning better than expected which really does explain why interest rates have been moving higher and we also have our february read on existing home sales and for that

we turn to diana olick. >> and rick, talk about better than expected, existing home sales surged in unexpected 9.5% in february from january to 4.38 million units. the street looking for a slight drop. sales down 3.3% year over year, but this is the largest monthly gain since february of last year. northeast unchanged. the realtors point to increased supply for the gains inventory rose 10.3% to 1.07 million homes for sale at the end of february. it's still a two-month supply considered low but the highest amount since 2022 and that pushed the median price up 5.7% from the year before to 384,500. the eight straight month of annual gains and all-time high price for february. 20% of homes sold over list price. now important to note these sales are based on closings, so

contracts that were likely signed in december and january and that's when the 30-year fixed rate dropped to the mid 6% range. now we're back over 7%. first-time buyers did not surge with overall sales, just 26% of buyers in february down from 28% in january. 40% is a historical norm for first-time buyers. all cash sales at 33% up from 38% the year before and the realtors are saying that this is now buyers perhaps getting used to a new normal for mortgage rates but, sara, we like to see the next report when we're looking at sales in the 7% mortgage rate range. >> yeah. good-point. diana olick on good economic data. good thursday morning. welcome to another hour of "squawk on the street." i'm sara eisen with david faber, live from post nine of the new york stock exchange. carl has the morning off. record highs across the board, the dow, s&p and nasdaq. the rally continues. s&p up 0.5%.

financials are interestingly in the lead today up 0.8%. consumer discretionary strong, too. every sector is higher. another broad one. the nasdaq is up about 0.7%. big cap tech including micron is a big mover up 15% on results broadcom also helping fuel the gains there. take a look at treasuries as rick mentioned they're selling off with yields a little bit higher on the back of stronger economic data. 10-year yield 4.28%. the 2-year note yield to 4.6%. we're 30 minutes into trading. here are big movers we're watching. micron, look at shares rallying hard on the back of a surprise profit. revenue in the current quarter came in better than expected thanks to soaring demand for ai memory chips. the stock has gotten at least a dozen price target hikes today. heading in the opposite direction, five below, missing earnings estimates due to higher than expected inventory shrinkage and guidance coming in lower as five below takes measures to combat theft including introducing new limits

to self-checkout service and shares of accenture are falling beating earnings estimates but cutting full-year revenue guidance. accenture's ceo will be on this hour to break down the numbers and where the business goes from here. it's a good macro tell about what enterprises are doing with spending. also important to note, watching apple today under a little pressure after reports of a possible doj anti-trust lawsuit that could be filed as soon as today. we're going to bring you the latest as soon as it happens with that. but we have a lot to talk about as we digest the federal reserve, the market rally he helped super charge which continues, you don't always get the same reaction on the fed day as you get the next day. >> no. >> but this is follow through. i figured it would be best if i go through a bench of wall street research notes. >> that would be. >> how they interpreted fed chair powell. goldman sachs, a narrow jama

jorty of the committee feel not delaying cuts targeting the june meeting for the first cut. goldman expects june, september, and december. so three cuts in 2024 which part of the reason why the market is thinking this is because the fed kept the three dots. >> you brought up that risk that could go to 2 but they didn't. >> one went to 2, one stayed the same. the median stayed at 3. >> i see. >> a slimmer margin for three cuts this year but yes, that did happen. jpmorgan says overall the meeting supports the view that fed will initiate a gradual pace of easing in june. deutsche bank the timing and pace of cuts could be a regular this cycle which i thought was interesting and highly data dependent as we have argued up front mid-cycle adjustment and extended pause is a reasonable lens through which to view this cycle. morgan stanley interestingly picked out this one because they're outside the consensus on cuts and expect more. the difference between -- they think four cuts. the difference between our four

cuts and fomc cuts will come down to core inflation. we expect core pce inflation to which 2% this year. they upgraded their economic forecast for growth, the federal reserve, and a little bit there in inflation forecast as well. they also took the longer rate, the neutral rate a little bit higher on the back end. the most important comments came from powell when he had the opportunity a number of times to express more worry about the stickier inflation numbers we've been getting, and he didn't. he wasn't all-out dismissive but characterized them as bumps in the road on the path of 2% and didn't seem like he was swayed away from rate cuts and that's why party on in the markets, that's why economists are expecting june, and that's why we haven't really changed our thinking as a result. because he didn't really change his tune on it. >> no.

and that was a bit unexpected. >> i think a bit unexpected. some investors were expecting him to lean more hawkishly and could have cut the dots, you know, the other members, and could have expressed a little more concern about the hot inflation numbers and better economic data, and he didn't necessarily do that. i will just say it's a global story, bank of england paused interest rates but sounded a little more dovish on their message about progress with inflation and the swiss national bank with the surprise of the day, cutting interest rates. >> they cut interest rates. >> they cut interest rates. >> most never figure them out. >> so the swiss franc is weakening and their stock market jumped more than 1%. here's the bank of england changing their tune as well for all these members of further accumulation of evidence on inflation persistence would be required to warrant a shift in the monetary policy stance with members differing on the extent of evidenced that was likely to be needed.

they would continue to consider the degree of restrictiveness of policy at each meeting. translation, they're trying to figure out when to cut and that's what everyone is doing now. they're all in it together like they hiked together and now the easing cycle has begun. >> except in japan. >> except in japan where they're always kind of going against the grain and now they're trying to be a little more hawkish as the yen has weakened substantially posted hike but they're still the easiest around. >> yeah. let's talk more stocks, shall we, with the s&p up 6%. we were above 5200 the first time we've ever seen that. the question, of course, can it keep going? research ceo adam parker joins us at post nine. >> good morning. >> good morning. >> of course. >> thank you. that was great segment. >> yeah. you know, it's just to me i listen to that segment and think, great that all can tell me what i can read that fed said. it would be better if they could

predict what they were going to do with any accuracy six months in advantage and they can't do that. i can't either. i don't waste my -- >> neither can the fed. >> not a good use of time. the bulk case is three pronged. the average company is showing gross margin expansion. you want to short stocks when gross margins are going up, have at it. i don't think that's a good idea. i think it's reasonable that stocks will grow. earnings will go up. three, whether they do two, three, one, zero, four the fed is going to be accommodative and as you pointed out, except for japan, mostly a synchronized process across the globe. i'll just keep it simple. fed -- if you want to fight the fed and stocks when gross margins are going up, go ahead. i don't want to do that. i want to own stocks with the margin going up. i think the risks are u.s. consumer slows more than people think, the liquidity issue on the tightening part of the

balance sheet becomes more of an issue than the front end accommodation, or china continues to be awful and the companies we look at in the u.s. tell us that demand is degrading. those are the bear cases i see. the positives outweigh the negatives at this point. >> and in part led by margins. adam, it's a benefit for us that you are a frequent guest here, but that said, i remember many of the things that you said and i do recall you seeing a trough sort of you did not think that earnings would grow significantly, if i recall. >> yeah. >> 24 over 23. do you see it differently now? >> what you're talking about was injanuary of 23 when we forecasted earnings for 2023 and 2024 where we were way above consensus on 2023 but didn't see a lot of recovery in 2024. we raised our numbers 5% for 2024 since the beginning of 2023 mostly because the top 20 u.s. equities produced way higher earnings growth than i thought. it's a hard game to forecast,

but i think we did okay there. we're still below consensus. the bottom up numbers are too optimistic. what people get confused about, oh, the estimates are too high and downward revisions and that's bad for stocks. that's not true. all the time the estimates are too high in january and get down and the market can go up. all that matters is you think in the middle of this year earnings are higher next year that's what matters. there could be downward revisions this year and there will be. as long as earnings grow and keep growing, in absolute terms, usually equities work. >> we were in the makeup chair together, not in the same chair -- >> i'm glad. >> you were telling me that companies were being more wish-washy on conference calls. >> yeah. we do -- there's this famous notre dame professor, like the merriam webster of language process and we took their words, noncommittal uncertain words, i should have, could have, i don't know, uncertain, we analyze every earnings call transcript of every company back for ten

years and we look for management teams that get uncertain in their language and it is a enough harbinger if they get more uncertain and positive if they get a little more certain in their answers. a lot of work being done on this topic as people parse every word of every transcript and traditional quant hasn't worked for a decade in terms of longer horizon. we're trying to get more creative about ways to gauge management confidence -- >> those levels are up, the words. >> they spiked during covid, made sense, came down on average, you know, management teams and human beings use words all the time. to the extent they're getting less certain, makes sense to me that that would be a negative, you know, predictor of the return. it works particularly for value stocks and low quality stocks where you're really not buying a quality business today. you're hoping it improves in its quality over the six or nine months and if the management team is a little bit more confident makes sense that would be a value stock worth, you

know, taking a shot on where they're getting less conf confident -- >> what are you using, ai, chatgpt? >> we have our own proprietary tool. this one i described is not generative. so it's more extraction. >> right. >> but, you know, it's amazing, you know, the firms have been out with research notes saying 50 analysts we all got together and we think it's going to be 50 basis points of net margin expansion of ai. somebody forwarded me that report and i thought that is crazy. it's going to be like 750 or 1,000 basis points. we looked at companies that are doing and mentioning things related to ai not semiconductors, the obvious beneficiaries and their margins are 300 or 400 basis points up. that's the dream. people want to talk about the fed and valuation. they're just missing what's going on. what's going on is a multidecade trend towards massive productivity in margin expansion and i just don't want to be the guy that runs a portfolio --

advises people to run a portfolio saying i'm so smart that i'm going to, you know, not participate. that's dumb. >> to be continued. >> yeah. any time. >> glad we ended there. >> i'm always happy to hang with you guys. >> glad to have you. >> be well. as we head to break more road map for the hour. apple in the cross hairs, the biggest drag on the dow. department of justice reportedly going to bring antitrust suit ps we're going to discuss. accenture shares under pressure on the back of its earnings and outlook. the company's ceo going to join us. >> reddit going public as we await the first trade. we'll talk to one of the ipo underwriters. "squawk on the street" back after a quick break. they're waiting for you. hey, do you have a second? they're all expecting more. more efficiency. more benefits. more growth. when you realize you can give your people everything, and more.

thank you very much. [applause] ask, "now what?" here's what. you go with prudential to protect, empower and grow. with everything you need to deliver, you guessed it... more. one more thing... who's your rock? learn more at prudential.com ameritrade is now part of schwab. bringing you an elevated experience, tailor-made for trader minds. go deeper with thinkorswim: our award-wining trading platforms. unlock support from the schwab trade desk, our team of passionate traders who live and breathe trading. and sharpen your skills with an immersive online education crafted just for traders. all so you can trade brilliantly.

my name is oluseyi and some of my favorite moments throughout my life are watching sports with my dad. now, i work at comcast as part of the team that created our ai highlights technology,

which uses ai to detect the major plays in a sports game. giving millions of fans, like my dad and me, new ways of catching up on their favorite sport. accenture slumping despite beating earnings estimates coming shy of revenue forecasts but slashing its annual guidance from to 1 to 3% growth. the company saying on the call that update reflects further constraint on smaller projects due to macro uncertainty. generative ai remains a bright spot. julie sweet joins us to talk about all of that. good to have you. >> great. thanks for having me again, sara. good to see you. >> you too. what's happening on the growth front that led you to cut guidance? >> it's pretty straightforward.

you've got a lot of macro uncertainty, budgets get finalized in january and as the page turned on the calendar year, we saw another tightening of the dial on overall spending, including on our services, and particularly on the smaller projects which, you know, for russ the ones that turn to revenue more quickly, so, you know, we always call it like we see it and we updated our guidance. as you sort of turn to how we're doing against this backdrop, we took market share, our clients are prioritizing the big complex deals, right, so we're seeing an ongoing momentum in our strategy to help them reinvent with a record 39 clients with bookings over 100 million and for the first half we had $40 billion of sales which is also a record. of course, with gen ai our clients are focusing on the future and choosing us. they chose us to be reinvention

partners, choosing us on gen ai and we're excited for the first half we hit a billion dollars in generative ai sales. >> your signings are strong, and it looks like strong relative to expectations, so why isn't that contributing more to organic growth? >> so the way our business works the larger, transformational deals convert to revenue over a longer period than the shorter projects. it's a pretty basic formula in the industry, and what this demonstrates is the fundamentals are strong. in a tight spending environment, clients are choosing to do the things that really materially last. they're building their digital core. for example, mondelez, a leading snacking provider, makes one of my favorite snacks oreos, they're doing a major reinvention of their digital core in order to enable them, among other things, to maximize

profitability, get to clients faster, reinvent their supply chain, and to use technologies like generative ai. so clients are prioritizing reinvention, doing the things that are material, and as i've talked about often on this program, there is much more reinvention ahead than behind. there's so much more to do to be able to use technologies like generative ai, create the new data foundation, really build out the technology and then, of course, our big opportunity is to help clients then reinvent every part of the enterprise using ai. >> so julie, talk to me about how the generative ai business translates into revenues in the future? how much of the business is going to be and when does it really start to move the needle? >> well, in order for generative ai to be able to be used, you do have to move to the cloud, create the data foundation,

update your platforms, have the right security foundation, and then have the talent and process change and responsible ai. so we're talking about a lot of growth over a number of years, and, in fact, one of the things we just announced this last quarter is that to help clients with their talent rotation, we've invested in learn services, buying a company called udasty to help us scale that and drive that talent rotation. we see a lot of growth ahead in the next several years, as we help our clients drive their ai rotation, do their talent rotation, and really change the way they work and serve their clients and customers. >> what's the best use case you've found for an enterprise customer? >> the early use cases are things like what we're doing with best buy. using it to reinvent the customer experience. with best buy we're using ai and

generative ai and their context centers to personalize the experience for both customers and employees. that's really an early very impactful use case. we're doing it in marketing, for example, as well, so it's really exciting. remember, these technologies are using combination with other technologies, so, for example, with exxonmobil, we're doing marketing operations, which uses ai and generative ai. anything about customer is a great early use case. >> julie, just back to where we started in terms of the macro, is there a sense, especially based on past experience, at what you think clients will have more confidence and/or what do you think it's going to take for them to change what has been some of their reluctant recently to spend? >> you know, it's a great question, david. you know, i really think about 2024 as, you know, spending is pretty much set when they run -- when they set their budgets, right. we're kind of expecting that

what we're seeing in spending is what we're going to get. it's tied to the turning of the dial it's tied to that uncertainty macro, so, you know, we need to see more certainty in the macro from a geopolitical and economic perspective both, because both things are weighing on it. we've all got to wait and see. what we're doing is focusing on in this environment taking market share. i think that's what's really important for both us and our clients. our clients are saying, we need resilience through an environment like that, and accenture help us build that resilience, cut the costs, and grow. >> i'm curious what you're also doing, julie, on hiring and jobs? i always like to ask about your workforce because you employ more than 700,000 people more than 100 countries. you did announce job cuts last year, i believe it was 19,000 or so. are there going to be more cuts this year? >> sara, we're investing in the

business at this point. we did $2.9 billion in the first half. more than all of last year in acquisitions, so bringing on more people. we're investing in learning, so we did, again, an average of 14 hours this quarter to upscale our people to go where the growth is, particularly in generative ai. and so really we're focusedon investing for the next waves of growth. that's our competitive advantage. we took great steps to optimize our business, we've got a strong balance sheet, and we are investing to grow. >> julie sweet, thank you very much for joining us with all that color on the quarter. stock down about 7% on the news. appreciate it. >> thanks for having me again. >> and we are just getting word, david, that there's an 11:00 a.m. antitrust announcement and there will be an event. >> i wonder what that is going to be? >> we don't exactly have the details or the attendees yet.

we have been waiting on reported company apple to be in the spotlight. as soon as we know more details we'll bring that to you. >> the market expectation is fully. i've got an press release from any number of people saying it's apple, of course. we'll wait for 11:00 and we will get that press conference. >> some news on disney. just gets more back and forth. >> we can have more of our back and forth. disney, as you know, and we reported in the last hour, consti institutional services shareholders has come out and said nelson peltz should be added to the board, not jay rasulo. i've talked in the past it's been a while, about the power of these firms and whether they should have any real power. you would think shareholders should make up their mind and don't need to be advised by an outside firm what to do one way or the other. i've discussed that in the past

many times. there is influence, although a flchl passive investors have taken it upon themselves to be active in terms of making decisions on these important proxy decisions. but it's a win for peltz. they have backed activists. >> they've never gone against him. >> they have split the ticket as they are in the past but disney would have loved to have had this in its column with glass lewis which it did get earlier in the week. >> today is the day for peltz he got iss. the letter we talked about earlier in the week the other ceos that have worked with nelson being supportive of him. now they are sending a letter to disney board and just want to read a snippet of it. they say some of us like you are skeptical about nelson and were initially opposed to the notion of having him on our boards, and he might derail our strategy, however, after we worked with him, we know our concerns were misplaced. >> who signed the letter?

>> a number of ceos, david taylor is on the letter, ali dubaje, director of janis henderson, a number of these prior ceos, heinz company, leg mason, i mean all companies that ppg, francis blake, former director of procter & gamble. >> yep. >> daniel bearford, ceos that have been in fights with him, been on boards in fights with him and have ultimately worked with him. >> it's coming down to it. april 3rd as we reported last week. both sides have been actively in front of their shareholders, in front of disney shareholders including bob iger, any number of cities last week talking to large holders about his view and why he does not believe the company would be well served having either one of those gentlemen on the board. and peltz making the argument.

april 3rd. i hear strong confidence from the disney side that they are going to be able to pur severe here. not -- it's a win for peltz getting iss on his side. very much unclear how much influence it will have. but we'll start counting the votes pretty soon. >> i think it's worth mentioning disney's stock has done well this year. >> yes. >> basically since they came out with all those announcements and the earnings. >> it was after earnings in particular. of course -- >> it's crept higher. >> another area of contention, disney says peltz had nothing to do with our strong earnings the fact that we're on our way to save $7.5 billion in costs, the fact that direct to consumer disney plus showed fewer losses than it had previously. peltz said it's because i've been putting pressure on you. >> for sure. >> we know that companies spring into action when there's an activist, right? >> yeah. some do. some do. others, again, bob iger would say it had nothing to do with it. we were doing this.

and this is part of his plan since he came back some 15, 16 months ago. he would disagree with that. >> it's been a strong market. i think what would also be interesting if disney's confident and they prevail, what would happen? does nelson leave the stock? what would happen to the stock? that will prove who is right about what's keeping the stock higher. >> breaking news here on apple. out of the doj. eamon javers has it. >> this is a civil antitrust lawsuit filed in the united states district court for the district of new jersey, and it alleges by the doj that apple illegally maintains a monopoly over smartphones by selectively imposing contractual restrictions on and withholding critical access points from developers. the department of justice alleges apple has broken the law specifically section 2 of the sherman antitrust act in five specific ways. one, by blocking innovative super apps. they say apple has disrupted the

growth of apps with broad functionality. the second by suppressing mobile cloud streaming services and say apple blocked the development of cloud streaming apps and services to allow consumers to enjoy high quality video games and other cloud-based applications without having to pay for expensive smartphone hardware. the third by excluding cross platform messaging apps. the department of justice says apple has made the quality of cross-platform messaging worse, less innovative and secure for users so it's customers have to keep buying iphone. the fourth is diminishing the functionality of nonapple smart watches. apple, they say, has limited the functionality of third-party smart watches so users who purchase the apple watch face out of pocket costs if they don't keep buying iphones. the fifth category is limiting third-party digital wallets and say apple has prevented third-party apps from offering tap to pay functionality inhibiting the creation of cross

platform third-party wallets which is important in the whole paying ecosystem here. now, the court process is expected to take months, if not years here. guys, there's a political overlay to all of this. because if president biden is to lose to donald trump in the fall, it's a trump department of justice that could be in charge of handling the end game of this case not a biden one, depending on the election outcome. it's not clear how that would play out, although some of the trump people were involved in instigating this investigation into apple in the first place back during the first trump administration, so a lot of moving parts here, guys. the department of justice now suing apple on antitrust grounds. back over to you. >> right. they started looking into this in 2019 under the first trump administration and really, eamon, it's part of a number of monopoly cases or it's -- david laughed at that. >> yeah. >> the original trump -- >> are you protecting something already. >> just stating fact.

part of the other monopoly cases i was going to bring up against other big tech companies, amazon, alphabet, they've all been filed as well. >> yeah. i think if you talk to the people at the department of justice, what folks involved here have told me is that they knew this really as the app store. you've got google and android apps and apple apps and those two are the onlyway for every other company to get to market here. there's a lot of concern on antitrust grounds that's not enough. if those two control the gateway for apps to get to consumers, then they can expert monopolistic power over those apps and there's a couple reasons why apple might want to do that. right. because if you sell -- if you're in the business of selling expensive hardware, like iphones, you don't necessarily have an incentive to want apps that don't use the iphone or compute power that's bigger than what's available on the iphone.

so think about cloud based apps or ai based apps or super apps that use multiple apps within one and allow somebody else to be the gate keeper there. all of that is something apple has an incentive to keep control over. what we're looking at is the early stages now. we'll see the official announcement coming up shortly. then the very early stages now of what will be a months and years long illegal battle between apple and the united states government. >> yeah. that was going to be my question. i mean, you said it years, most likely, right, if history proves any guide given microsoft and everything else. >> yeah. one excerpt here, david, from the case, that gives you a sense of the tone from the department of justice. they say, rather than respond to competitive threats by offering lower smartphone prices to consumers or better monetization for developers, apple would meet competitive threats by imposing shape shifting rules an restrictions in its app store

guidelines and agreements to allow apple to extract higher fees, thwart innovation or lesser experience and throttle competitive alternatives. you get a sense of what the doj is going after there. >> all right. standby. let's get over to steve covac who has more on what it means for the company itself with the stock down 2.5%. >> david, i actually got a statement here from apple responding to the doj's lawsuit. i'll read it out loud here for you. quote, at apple we innovate every day do make technology people love, designing products that work seamlessly together, protect people's privacy and security and create a magical experience for our users. this lawsuit threatens who we are and the principles that set apple products apart in the fiercely competitive markets. if successful it would hinder the technology people expect from apple where hardware, software and services intersect. it would set a dangerous precedent empowering government to take a heavy hand in designing people's technology. we believe this lawsuit is wrong

on the facts and the law and we will vigorously defend it. just other interesting things here, david and sara, that stuck out to me. i'm looking at excerpts from the doj lawsuit and i have not had a chance to dive through the full thing, interesting stuff on the super apps that eamon was mentioning. this lawsuit doesn't appear to go after the app store directly as a whole. instead it's focusing on the super apps that eamon was describing. we've seen this lawsuit between epic games and apple kind of play out through the courts and basically kind of answered the question about apple's app store policies the visa charges and so on being the only exclusive way to download software to the iphone. we've seen what happened with that in europe, but that doesn't seem seem at least based on excerpts i've had, to be what the doj is chasing. they're not proposing saying there needs to be another app store or anything like that. i would also point to the messaging thing. i know eamon talked about this a little bit, but basically making the argument that by keeping

imessage sort of exclusive and degrading the regular text message experience, that is anti-competitive. they used an example of what if you buy your kids an android phone and can't really talk to them as seamlessly as you could if you bought them an iphone and things like that. also the cloud streaming apps. another concession we've seen apple make in the european union allowing services like microsoft's xbox cloud streaming service on those devices. that could be one potential easy concession, same with the payments. they made the same concession, letting third-party apps access the communication for the tap to pay mobile payments. little bit of difference between what the eu is attacking apple for and what we're seeing here in this doj case. of course, we've got to read through the whole thing. >> although last week i think when we talked to the eu, she didn't rule out they would be looking into a potential violation for apple on the

digital markets app with the concessions that might not go all the way, especially if they still continue to impose fees. i guess, the biggest question investors will have with the stock down 2.5%, what does it mean for the growth of the services business? >> yeah. >> had been a strong grower. >> the apps are so important because i'm not seeing them call out the app store, the -- this is what's pointed at so much. if you want to download an app to your iphone you only have one choice the apple app store. doesn't seem like they're saying that here which is the opposite of what we've seen in the eu where apple allowed other app stores on the phone. i see them talking about the super apps and the cloud streaming apps and messaging apps. if they go in a more full way against the app store the way the eu has there's the services business. the app store is lucrative for apple, high margin business, largely due to the fees that they collect from the other developers. that's been the main complaint. i can see the spotifys and

matches and other antagonists of apple being less than happy with this lawsuit. >> steve stay close as we monitor the justice department there in the window next to you waiting for the announcement. let's stick with apple. our next headed at the doj from 2013 to 2016. let's bring in former assistant attorney general of the antitrust division, bureau of competition, good expert to talk to here. what do you make of the case so far based on what you've heard and seen? >> you know, it's a little early to predict exactly what's in there. we'll know in 10 or 15 minutes. this is, obviously, a very serious case. it is suggesting that apple, which is dominant as a provider of cell phones, 65 plus percent is the number i've seen bandied about, used that power, the lock in it gets when we buy an

iphone, to restrict what we can do with that phone, restrict what app developers can do outside of an internal apple system, and what the government is saying, i think, is this is not competition on the merits. it's unfair to consumers. it restricts app developers from innovating. it limits the ability to pay outside of the apple system, and that these restrictions are not justified on security or privacy bases. they are intended to profit maximize for apple, and its shareholders at the expense of the american consumer. >> you know, unlike a lot of other companies, apple has literally it seems almost unlimited resources. they could spend a billion dollars a year on this and it would represent 1% of their net

income. i'm curious their ability to fight, how long it will go on, given again, it's not like they need to give up when it comes to spending money. >> that's right. actually part of what my quick look at this complaint summary tells me is that, you know, they spend a lot more on shareholder buybacks than they have on innovation over the course of the last five or ten years. they have the resources to fight this. they have every legal right to fight it. but at the same time, as you were talking about a minute ago they are needing to comply in the european union with some restrictions on what they can do and they have no option but to comply with them. debate about whether or not they are trying to evade some of the requirements of the digital markets act that just went into effect in the european union, so i expect them to fight whether

there's a settlement that occurs or not. it's way too early to tell. as you were discussing earlier, this is going to go on for years. >> what about the timing, bill, the fact that now we're, what, how many months until the election? >> you know, it's -- the timing tends to be irrelevant in terms of when these cases are brought, when they're ready to go. the government, the antitrust division, the federal trade commission goes. it is interesting this is a case that the investigation was initiated under bill barr's justice department. indeed he wrote an editorial in the "wall street journal" a couple weeks ago when the case was rumored close to being sprung, basically largely claiming credit for the case, without actually knowing what was going to be in there, so whether a trump presidency results in this case being sidetracked, we don't know. what we do know is the

investigation did begin when donald trump was president. >> years? will it take years to resolve this in your opinion? >> absolutely. there's always a possibility of settlement. one of the interesting things in this complaint, 25 years ago the justice department sued microsoft, the first challenge to the dominant operating system, and using its power over the operating system to limit the opportunities for others, to get on its operating system, to compete with it. case involved browsers initially, but the settlement that doj entered into with microsoft after it lost in the court of appeals, basically was what gave the ipod the opportunity to interoperate or get access to consumers using microsoft's operating system.

so there are potentially some -- there's an irony here in what apple benefitted from 20-some years ago, is now being accused of doing exactly what microsoft did to throttle apple's opportunities. >> i was just going to ask you if there are other parallels to cases? q. that's an interesting reference. we've mentioned the recent actions and suits against amazon and meta and alphabet and whether there's any similarities there that are important to note. >> it is. it's basically this notion that a platform, reasons its successful, it's ubiquitous in our economy, consumers rely on it, and then does google, does amazon, does meta, basically maneuver to restrict any competition with the platform, prevent advertisers or sellers from going off platform and

reaching consumers in a dinner way? there is that common thread of you've been successful, great, we applaud success in this country, but now you have no competition and you are profit maximizing for shareholders, but at the expense of consumers. >> bill, i mentioned earlier, foreign relation to takeovers and the ftc's actions where it hasn't necessarily gotten the courts to agree with it because it may have been making arguments that didn't seem in line with the law. i ask that because from your sense here, are they trying to, you know, sort of plow new ground so to speak with the antitrust laws or applicable to the case being made as you understand it? >> as best as i understand it today, it is really a squarely within the law relating to bad conduct by monopolies, and the microsoft case decided by the

court of appeals in 2001, 23 years ago, is a good example that was a unanimous opinion by the court of appeals, laying out behaviors by a dominant firm that are anti-consumer and subject to challenge under the antitrust laws it looks to me like this square fits in that old. >> we'll learn more from the attorney general about the contours of their suit. we don't know how apple is going to argue it, but they say they are going to vigorously defend against it and we have this statement and while it doesn't go into details of the case, they do make the point that it would set a dangerous precedent empowering government to take a heavy hand in designing people's technology. the ideathat it will hold back innovation and it is government over reach. is that an effective case for them to make? >> first of all, i've never seen a defendant on the day they're accused saying oops, you caught us, right. >> of course. >> the fact that they would be

saying we did nothing wrong is no shock to any of us. but, you know, the case, as i understand it, doesn't say we get to take over what you do with your technology. it does suggest that there are things you do to restrict competition that need to be prohibited and that's different than what the apple press release seems to suggest. >> finally, bill, technology moves quickly and sometimes actually can make in a sense, you know, these kinds of lawsuits no longer as relevant as they seemed at the time. do you think that's a threat here as well? >> it's always a risk but at the same time look back to the microsoft case some years ago, it produced some restrictions on microsoft's behavior which have resulted in increased competition. g going back 20 years before that when the at&t monopoly was broken up, we got competition in long distance lines. that case was pending for four

or five years before it was settled and the breakup occurred. so i do think these cases are worth bringing in order to change behavior, but also they have benefit in terms of advising dominant companies about when they run into trouble under the u.s. antitrust laws. >> thank you so much for joining us with your instant reaction. very valuable to have you here today. >> thank you. >> we appreciate it. the former assistant a.g. >> for antitrust as well. competition. good guest to have. let's get stock announcement in terms of what this may mean for apple. morgan crockett joins us. stock down 3%. what's your take? >> i think the history of the antitrust actions generally has been one where the stocks shrug it off. so for apple to react negatively today, i'm not sure that over the long term this is really going to be a defining question for apple. i think apple's stock hinge much

more significantly on their device traction, recovery in the iphone and their ability to, you know, put up a meaningful kind of brand presence and future presence in ai which is becoming a key kind of driver of consumer purchases according to our reporting. microsoft, the thing to remember with microsoft is, yes, they were slapped with restrictions but those didn't stop microsoft in recreating itself and becoming an incredible stock. you know, so this doesn't necessarily impinge upon, you know, the opportunity at apple. we still have a neutral rating, but it's not an antitrust that our concerns lie. it's elsewhere. >> although could you not put together some sort of discounted cash flow model that says four years out these guys have to break up their alleged monopoly around the app store, and what that would mean? >> well, that's a question, right. i mean, is it a breakup or is it

behavioral remedies which is what they did with microsoft, the behavioral and, you know, behavioral remedies, you know, the history of that i think is that by and large it can manage that. obviously, we don't know many things here, but history suggests that behavioral remedies are not something to b concerned about. >> even for apple and its tightly held ecosystem around its software? >> clearly, you know, apple has been leveraging the app store and the complaint, i think, is provocative with what it's raising. and, you know, we'll have to obviously learn more as this plays out. i think history would tell us that they'll probably be able to navigate this. obviously still early days so we'll have to see how it develops. >> what would make you concerned? it doesn't seem like you think this is a big headwind for the stock? we'll have to hear from the department of justice in ten minutes, what would you have to hear for you to have a different

view on it? >> you know, obviously i'll have to see what they have put together in this case. i haven't had a chance to probe through the details. we'll have to see how egregious the conduct is, we'll have to look at what the government is looking for. if it does look like apple is losing badly and the government is going for the jugular, you know, obviously, you could rethink. but that hasn't been historically what's happened that, you know, companies can lose, but they don't necessarily lose their heart and soul, their ability to kind of grow the business. so, you know, if they're taking that out of apple, then it's a different story. >> barton, thank you for joining us with your instakt reaction, with shares down almost 3%. tim cook, by the way, which we haven't mentioned n shanghai, opening a new store. >> that's right. he's there. >> and participating, i think, going to beijing next for the china development forum. so, probably doing many things at once right now. >> yes. well, my guess is they were ready for this potential

outcome. of course, we have years to go here. let's move on. another big story we've been following this morning is the ipo of reddit. it did price at the top end of its range last night. it would be set to become one of the largest public debuts in years, certainly for social media company. stock will begin trading later today. the ticker is rddt. let's talk to one of the underwriters, mark lehmann, citizen's jnp securities ceo. give us a sense in terms of your expectations once this thing opens, how is the book, what does it look like in terms of people coming in and whether this is a stable shareholder base being created. >> great question, david. we had a very successful road show. if you see pricing at the top end of the range, some things i see in terms of allocation, this is saying all the right things for a stock that will successfully go public today.

obviously, one day does not make a public company, but all the things they needed to do on the road show. and i think they have created some of the buzz in the marketplace. it's created some of the buzz in our community. and i would expect this ipo to be a success, like we saw with yesterday's tech ipo. potentially be a harbinger of better things to come in the ipo market. >> we've been wondering where they are. when you say they did the right things on the road show, what do you mean? what did they do right? >> i think they laid out their growth plans, i think they laid out for institutions how they plan to monetize their community. and i think they really laid out a vision of why they went public now. and i think that was really important. i think there was a lot of skepticism for this road show, for obvious reasons. a private firm for 20 years. the with pricing, the lead underwriter, they did all the

right things. again, i expect a successful launch when it starts trading shortly. >> what about conversations around valuation and what the direct comps are there? >> it's the right question. obviously, it's not as large as one would have expected given its 20 years -- or almost 20 years. but they're hitting the growth curve now. i think they understand the communities better than ever. they are growing faster than some of their peers, their relative peers. if you're going to be a buyer, you have to understand that growth and monetize that. they have positives but lots of questions as well. that's what makes a stock, for sure. >> yeah. that growth curve, as you say, the ceo earlier talked about that, but some people are given pause by the fact they've had 19 years to conceivably make some money, and they haven't really succeeded in doing that. >> david, that's exactly the

right question. we've seen other companies that have tapped the public market at a certain juncture of their growth. uber, which was private for some time. but i think there's a larger message here that they chose now. they were, again, had some skepticism behind it. it's this back drop of this tech revolution that we've all been talking about. we had our own tech conference here at citizens jnp in san francisco. i've been on the street for 30 years. i heard portfolio managers asking private companies, when are you going to go public? usually it's the buy siders who say, it's enough. for the first time in a really long time i heard some of those buy siders saying, why are you staying private? >> let's expand on that question. why has there been a dearth of ipos given so many positives, not to mention a stock market that's up 10% this year alone? >> listen, we've had a digestion of private market valuations for

the last three years that has taken place. we've had a nine quarter drop in ipos. we've also seen the public markets explode. i think there's some private companies saying, we want to test that market. and i've been much more op optimistic we'll see more in the second quarter as well. i think now is the moment because they're getting those phone calls. just down the street in san jose, we had the ceo of nvidia, the governor of california talking a.i. and all the back drop of technology as if this is the dawning of a new age. frankly, that's a hard thing to say and such a grandiose statement but i think we might be starting one. >> thank you for your time. appreciate it. of course, sara, we're waiting for the press conference at the top of the hour on the doj's actions against apple. keeping an eye on a market that is doing quite well. not to mention the likes of our leader, nvidia, for one. >> our leader. >> our leader, yes.

1.2 -- >> or over lord. >> over lord and leader. that's the way i think of jensen huang eventually. he's such a nice guy. we'll look back and say, how did it all happen? >> very low key in his interview with jim cramer. actually, nvidia is doing well, but you have micron up a lot. that's helping. >> yes. >> broadcomm, microsoft, amazon. >> doj top of the hour. stay tuned. hey you, with the small business... ...whoa... you've got all kinds of bright ideas, that your customers need to know about. constant contact makes it easy. with everything from managing your social posts, and events, to email and sms marketing.

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coming up, reddit respects for its first public trading. ceo joins us for what the debut means for the market. a dovish fed on stocks. josh friedman and how he's deploying his assets. how espn executives plan to survive the demise of cable tv. a first look at a brand-new cnbc documentary and exclusive sound from bob chapek. remember him. >> i hope it's decline and not de