>> that's right, but there is this growing backlog that is tied to international type two allies and not just ukraine. the world in general we talk about it so much has become a much more dangerous place and the geopolitical risks have heightened. >> that's going to do it for us on "squawk on the street" with the s&p down about 1.4%, let's get over to "tech check. good wednesday morning, welcome to tech check, i'm carl quintanilla with deirdre bosa a we're going to discuss microsoft's impact on macro. more results tonight, actionable tech bets after the bell, why investors are watching tesla, ibm, and service now later on, the quote, buy of the century. the ceo tells us why wall street is so bullish on that stock. >> well, those microsoft earnings, as you mentioned, carl, taking a toll on the broader indices, the nasdaq on

pace this year 25% removed from its most recent 52-week high with the three-week win streak, looking likely to end. see names like data dog, snowflakes, mdown 2% on the doj lawsuit over the ad business another drop this morning, though, is big tech gets hit early. the other earnings piece of the puzzle, of course s tesla. that is today after the bell against, backdrop of elon musk's court appearances right here in san francisco this week. that stock down with the rest o. ma -- of the market, up 30%. the street is expecting record results tonight. >> let's start with microsoft, shares are lower this morning but off the lows, despite an eps beelt. t -- beat the vn reason is really the guide, the

indications about what's going to happen with azure looking forward, and cnbc correspondent steve kolvach joins me to talk about that azure is going to slow more than the street expected and there are read throughs to amazon and others i think there's a big question about what happens to demand in the second half of the calendar year a lot less certainty from amy hood about what's going to happen with spending. >> and kind of what stuck out to me, john, was something amy hood did not say that she has been saying more full throatedly on previous earnings calls, our big clients are spending like crazy on i.t. and cloud and these services that was less apparent on the previous call. the idea here is before we saw the small and medium businesses taking a hit, cutting back on spend, and now we don't know where the big companies are. they are not bragging about it anymore, that's for sure, and

n again, three to four more points off the azure growth is scaring people they did beat estimates by a tiny little hair that was enough to send the stock up after hours until we got to the guidance on the call an hour and a half later. >> and a lot of talk about december microsoft talking about december was really what was soft, and they expected that softness to continue, which is what led to that guide if december hadn't been soft, that quarter probably would have looked really good i guess the question is when we look at the second half of the year, and we compare it to whwhat is starting to happen in mid-2022, enterprise software seems immune from the macro environment, because of the cloud and recurring revenue, et cetera, et cetera, what missouri said about december is really similar to what macy's, and lululemon said about how december played out for the consumer are we now in an environment where the macro is affecting

enterprise software as much as the consumer. >> and you want to talk about the regular consumer, it's not just lululemon, abc pants that people aren't buying it's computers, the money microsoft collects every time dell sells a computer, way down, 39% down that just shows a collapse in pc demand right there that's what we're seeing on the consumer side. growth is still there on the enterprise side, but man is it slowing and slowing dramatically a lot of that is foreign exchange but a lot of that is the reduced spend, and to your point, their fiscal year is going to end at the end of june this year, and the second half of the year or the beginning of their fiscal year, if things get worse, like we were talking about earlier, are those comps going to get worse or are they going to lapse themselves and things remain the same and the comps are looking better and this becomes a more attractive stock. >> sure. and you guys, if growth is decelerating at microsoft, we highlighted this at the beginning of the show, what does that mean for names in enterprise software? microsoft has sort of been this resilient play, best of breed

over the last year it didn't sell off as much as the higher growth, more speculative names in the space, so i wonder, john, if you think that some of the other names like mongo db, data dog, snowflakes, have they taken their medicine or does this bode poorly for them? >> in the near term, these names are going to get hit they have enormous opportunity for share gain in an environment where customers are looking to save money we can make you more efficient if you want to spend less on database oracle is not going to cut you a deal look how much you can save you're going to see players making that argument, and at least what we have seen in partnerships with some of these hyper skill or cloud providers like microsoft and amazon, they have been able to grow in their niches a lot of times, faster than the competing product from their partner, so what's bad for microsoft growth-wise doesn't have to be as bad for a best of

breed player the question has to be, for an investor, tell me if you agree, steve, are these things priced in the right place for somewhat of a slow down even if it's not the bigger place >> look, even if they're going to lose money capturing customers like, you know, creating better solutions dorks more -- do more with less. as they push that forward, as their sales team pushes it forward, you have to ask yourself, how long does that last but what he does say is we're going to capture these customers now. we're going to help them through this touch period now. we're heading for two years of worsening macroeconomic conditions if we can help them now, on the other side of this, that investment is going to pay off we have captured customers, i'm paraphrasing, that's the gist of what he told investors on the call last night. >> i'm glad he brought up that comment from a couple of weeks ago, a weakening macro, and he did seem to clarify it a little bit, saying he was talking about

global, not u.s., and even within a weaker macro, he's still talking about additionally fierce i.t. intensity, meaning a share of global gdp that's going to get spent on tech. >> that's exactly t and that has been his point for the last year or so during this whole, you know, when the concerns about the macro economy started last spring and into early summer last year, that's been his whole mantra, people are going to continue to spend on i.t., and that's true. we're seeing it. and again, like i said earlier, that's where the growth is at microsoft. the consumer side is not growing at all it's shrinking, and in a very significant way, so that's what he believes, is if we can just plow through this right now, even through slower growth, come out on the other side, and we're going to be much stronger than our competitors. that's the theory right there. and he did clarify his comments on the overall economy that he told us two weeks ago, but it's not good it's still not good. >> yeah, just how broadly is it not good is the question >> exactly we'll find out >> yeah, thanks.

our next guest remains bullish, let's bring in goldman sachs analyst, cash rangan, he has a price target of $315 a share. is this based on an expectation that things get better in the calendar second half even though that seems unclear >> absolutely. thank you for having me. this is something that's not widely discussed by software companies, but a measure of new business comps are insanely tough, not only from microsoft commercial cloud but for the entire software industry in this december quarter that just got reported from microsoft. why? because december quarter 2021, was insanely up against december quarter 2020 which was hit by the pandemic, soyou're seeing this exaggerated cyclicality because of the pandemic, and not only paying the price that the comps look insanely tough. the good news is that the comps look insanely easy in the second half of this year.

even if business conditions don't dramatically improve, just the comps becoming easier will become a good tail wind. >> you say the compsbecome easier, but what if the economy gets worse right? that's my question with that the comps get easier if things don't get a lot worse, but if they do, then the comps remain just as tough in a difficult environment? >> correct the good news is we have modeled implicitly in the decelerating azure estimates, the underlying potential worsening of economic issues we have azure from 26% growth rate to 22 the net new business of azure, we are expecting to be not up 50% as they were last fiscal year, to be down 10, 15% we're seeing business dynamics built into the estimates already based on what you said, the worsening economic conditions. >> kash, is microsoft at risk of

a salesforce/slack scenario, and by that i mean in this environment are investors going to focus more not just on top line growth but profitability for a hyper scaler means loading your cloud at a good margin, which could mean acquiring things, but acquiring them at a price that's going to allow you to monetize those well down the line talk about whether activision blizzard, whether they're paying too much for that or not but is microsoft at risk for their salesforce/slack scenario. >> the transaction you just mentioned but i don't believe they have to do a mega transaction to put more in the cloud. what's happening at microsoft is they're sitting on a massive enterprise installed base. talk to the big institutions, any other firm, the percentage of cloud adoption is very tiny, so there's still a lot of runway

ahead, and you throw in workloads, if you look, 55, $60 billion cloud business, enterprise is 1.4 trillion, plenty of room to go i don't think you really need to make a slack-like acquisition. that's my belief. >> not saying necessarily that big, just wondering if acquisitions are needed for margin boosting as the cycle continues. kash. >> the margin can come from the work force reductions, and also slowing down capx, if azure is slowing down, that's good, plenty of things. >> we'll see how that plays out, kash rangan, from goldman sachs, thank you. also ahead, how to play tesla, ibm, and service now, which all report this afternoon. we'll have some actionable tech bets after the bell. plus, we'll look at the doj's suit against google, and any potential impact that could have on the ad market "tech check" is just getting started.

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lows, microsoft's guidance did

brace the tape for the risk off session. mike santoli has a dgut check on what the impact is from the print. >> certainly the downside in microsoft's numbers and the stock have some coat tails today. clearly the conclusion that if microsoft can't sidestep the weak corporate driven macro pressures, maybe the rest of tech won't be able to either however, i would argue a fairly contained response so far, but here's how it's looked over two years for microsoft, relative to the pure play, cloud computing, etf, where you have smaller players, which have already priced in a much worse environment. over the last six months, microsoft and the etf have traded almost exactly in sync showing that the outlook was more about the price mover on the margin of microsoft. now, whether software itself is giving some kind of a macro signal or responding to broader cyclical concerns, it's not as clear to me. if you take a look at how

consumer discretionary, equal weight basis and industrials have behaved over the last six months, massive margin of outperformance over software, to me it tells you software, tech, expensive digital platforms are still in their own category. still working down the valuation premium, and they don't have a lot of leverage to whatever reacceleration in the broader economy we might be expecting. to me it doesn't change the story too much, and microsoft, you know, you also could make the argument that once everybody realized things were slowing, and microsoft is finally acknowledging it, that essentially quantifies things, probably everybody else was feeling it before microsoft was. >> yeah, that takes me back to a comment, i think it was last week, maybe out of b of a, arguing that if microsoft is getting humbled and taking their medicine, and netflix can do the print they made, that maybe there is some nascent leadership in technology, is that too much? >> no, i don't think it's too much, and it's just leadership

in the form of, you know, who has the defensible business, the more stable one, and the one that can basically power through on its own dynamics, as opposed to, you know, just kind of feasting off of the boon time. >> we know you'll watch it that's the software side we'll talk hardware later on mike santoli, let's continue the conversation with the next guest who's remaining cautious on names like microsoft, despite the optimism t do the opposite of the sell side, when it comes to big tech. joining us this morning, adam parker great to see you. >> thanks for having me. >> people say, a, this is not a surprise, if anything, it's sharpening models. would you say that >> yeah, people should owe the economy is eroding slowly from a high base. thises a comp this is a company that has a high base, however you phrase it, you're going to use a lot of stuff. whether they have the pricing power or core products to

continue to drive growth is interesting. my view is 51 buys one, five holds sell it's not like people are negative it's not like there's a throw in the towel, throwing out the baby with the bath water on these mega cap techs there's downside on the multiple, particularly as things accelerate it's not a bad situation, but you can't tell me sentiment is low. >> it's a great point. for example, jpm cuts their target $2. >> right >> or $10. citi cuts it $2. b of a raises their free cash flow number. you think there's more wood to chop >> yeah, i don't think you've thrown in the towel on these names and can stay clear where the risks were skewed to the positive you can't tell me confidently the next 10% is going to be up versus down. and so i would rather, you know, try to find an opportunity to buy things that have a lot more up side in a six or 12 month view in the tech space. >> which means

>> we're warming to the idea but not recommending yet a lot of mid cap software these were the craziest multiple stocks 18 months ago, the ev gross profits were at the 2,000 level, but they have come in a ton in my meetings, a lot of investors will say to me, i can't own businesses that lose money. pump the brakes a little bit because lots of businesses lose money now that turn out to be great stocks you could have said you didn't like salesforce.com at 2 billion, 3 billion market cap. with sentiment there and wanting to do the opposite of others, in the next six to 12 months, you're going to want to find companies that are growing gross profits, 20, 30% it's probably too early because of the fed i think we're getting at some point in 2023, you're going to have an up side scenario. >> that may be the most constructive thing i have heard you say in a couple of quarters. >> there's opportunity in tech, it was the most crowded, loved, they wanted to

believe the fed was getting dovish our call coming into the market was, hey, we'll stay up early and down later everyone else was saying the op s o opposite you know, markets worked a little bit until today, and i think there's a bit of a, you know, taking profits scenario. >> i mean, i'm glad you mentioned profitless tech, if you looked at say the goldman's, carvana, for the year it was up 40 stitchfix, affirm, is that healthy or how much can be built on top to have t-- of that stuff >> some of those businesses may not have value down the road it's software companies that were insane valuations 18 months ago but can probably still grow their gross profits between 20 and 40% this year, even in a declining economy. if i look six, 12 months from now and back ward, ev to gross

profit could be very attractive versus a long-term average if you have an eroding economy from a high base, the only real way to get paid and beat the market is stuff that can grow through it or super cheap cyclicals where balance sheet repair will be pretty good, so if you're looking at that from the tech only lens, probably you're a few months away from wanting to find some of the software companies that can grow the gross profits in the economy. i like it, too, i'm very bullish on energy, and i feel like it's an interesting portfolio construction, the correlation between software, and energy is really low i won't really, you know, i'm not making that where i'll be wrong on both. >> adtalked about energy last ni night. thanks for being here. the doj suing google over what they call its ad market monopoly we'll discuss the impact to a phabet stock, if any, and bring you alphabet's stock don't go away. we're back in two.

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alphabet tumbling 3 1/2% this morning amid a rough take, after the department of justice filed its second antitrust laut against the company in two years. the doj was joined by eight other states putting a spotlight on google's advertising business ju julia boorstin joins us now. the question today is it that or is it what's happening with the macro picture and is microsoft giving cover for investors to sell let's get hypothetical, what would a slice up of that ad business look at >> yeah, look, there are many things that have to happen before the doj could be successful, but what happens if the doj does succeed in breaking up google? the doj called for the spinoff of google's ad network business. that's the part of google's business that sells ads and other platforms, and generates about 12% of its total revenue while google says that the doj's approach would slow innovation

and raise advertising fees, the doj says that advertisers could actually see price hikes slow, and companies could feel less pressure to put up payrolls bec because the ad side of the business could become far more fair and profitable for them google spinning off its division could help ad tech companies, remember we interviewed that ceo back at ces, as well as pubmatic a crack down on google could provide an opportunity for meta, which faces less antitrust scrutiny given the rise of tiktok and also for amazon and apple to accelerate their advertising growth ever core noting that apple has the scale and resources to potentially compete aggressively in the ad space. now, the bad news for those same big tech players along with microsoft is that this latest lawsuit shows just how willing the doj is to challenge their

dominance. deirdre. >> and has been for years, with little to show for it. when i take a look at the ad tech names, trade desk, pubmatic, others, they're not seeing benefit in the immediate stock price, maybe skepticism they're going to benefit anytime soon, skepticism that the doj is going to enact real penalties on back of this what do you think the agencies what to see here, julia? google makes the argument that this is going to make the industry less efficient and could ultimately raise costs >> yeah, i mean, that's definitely google's argument if we look at the fact that these stocks are down today, i do think that reflects the fact this it will be a long road for the doj to get some of the things that it's calling for to happen but i would point out that google has already been facing a lot of antitrust scrutiny, particularly out of europe the eu has been very aggressive in this area i think the agencies like having

a lot of options one thing i always hear when it comes to the streaming wars, whenever there's a new player, that's fantastic that they have more options that creates more competition in terms of, a, there are options to reach consumers but also competition between those platforms. that was something i heard a lot when netflix announced its ad supported platform, and disney plus announced its ad supported platform i think the proliferation of these ad tech companies, such as the trade desk, are another example that options are good if you're a buyer, and efficiency is incredibly important. it's interesting, traditionally the criticism of google is that it dominates search. this is a shift in a different type of criticism of google, other types of ad dominance is unfair as well. >> it links together it seems to me possible that the government is trying to address the regulation and enforcement, something that might really take new laws, something similar to

what the clayton act, and you know, the follow on in 1950 did for newspaper ownership. like if you really can't own the exchange and the network and other pieces in the digital ad ecosystem, doesn't it have to be codified somewhere if you succeed in breaking up google, it's going to be appealed like microsoft back in the late '90s and somebody else might put together something similar while all of that is going on >> yeah, a lot of commentary yesterday afternoon and today, also about how the most effective way to end up having that kind of impact and breaking up google would be through legislation, not through this type of doj action, john so i think part of that is just because of the amount of time it takes to get this through, and then also the fact this it wille likely challenged. >> congress not exactly getting things done quickly these days julia, thank you. up next, actionable tech bets after the bell, we're going to break town what to expect from

tesla, service now, and ibm as they report back tonight "tech check" is back in two. wi. harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible. because investing isn't one size fits all. allspring. purposefully divergent.

welcome back to "tech check," big fall, microsoft earnings weighed down tech stocks index off the lows of the session, on pace for the worst day of the year, but it's still january. one of the biggest laggards, the

weak ipo market, and a big decline in index revenue is hitting nasdaq ceo dina friedman warning on "squawk" that another volatile year for the markets could be coming take a look at shopify, that stock up 8%, bucking today's downward trend after announcing a price hike for the first time in 12 years ago as a customer i felt that. deutsche bank, just upgraded that stock monday. time now for news update, bertha coombs has that. >> we are all shoppers, john, here's what's happening at this hour for the first time, amazon workers have gone on strike in britain. warehouse employees in central england have walked off the job after months of talks over pay hikes. workers say recent pay increases are not keeping up with inflation. norfolk southern reported mixed quarterly results and raised its dividend but the stock is down about 6%

investors are focusing on rising expenses and weak annual revenue guidance railroad says a weakening economy will limit shipping volumes. and natural disaster around the world caused $132 billion in insured losses in 2022 making it the fifth most costly year ever for insurers that according to a new report hurricane ian accounted for $50 billion of the losses. on a positive note, the death toll from natural disaster remained below average for a 12th year in a row they just don't seem to stop, carl. >> a business you know well. what does the microsoft warning mean for the likes of tesla, ibm and service now. three stocks investors are watching closely for actionable tech bets after the bell margins, twitter, of course on top of mind for shareholders

morgan stanley today makes it a top pick cnbc's phil lebeau is watching that. >> and adam jonas has been pounding the table about tesla and the advantages he believes it holds relative to other ev companies as well as other auto makers, the legacy auto makers three things to watch for today when tesla reports its q4 results. first of all, gross auto margins how much of a hit did they take because of price cuts, particularly because of china in the fourth quarter elon musk, we haven't heard much from him about his outlook, specific questions regarding tesla's outlook, and then there's the annual delivery guidance their guidance has been for a couple of years that they will grow annual deliveries by approximately 50%. doesn't mean that every single year is a growth of 50%. it means they expect to grow over time on an annual basis 50%. if you take a look at their annual deliveries, they did not hit 50% last year. i think they were up about 40, 41%. do they change that? do they bring it down a little bit? remember, delivery wait times, they dropped in the fourth

quarter. all of that said, do not be surprised if you see this company report record profit for the fourth quarter they have amazing pricing power and the average approximate price is close to a record high for tesla. you combine that with the fact that their cost level is still well below their competitors i think we probably, we could see, carl, i wouldn't be surprised if we do see some type of a beat on the top and bottom line it's really about the guidance that's what's going to drive the stock after hours gl. >> and you mentioned adam jonas, they expect the company to say, look, the price cuts are a sign of strength. we think they are going to be a response to slowing incremental demand, and even though he makes it a top pick, he talked about net slower adoption for the space overall. >> correct he thinks we're entering a period where things are going to shake out. for the last five years, it has essentially been any ev company or legacy auto maker saying we're going to build electric

cars very few people were saying how many are you going to deliver, and will there be a market there. there's always more demand than supply there's still more demand than supply, but adam jonas and others believe we're entering a period where things shake out. and tesla is going to put pressure on the lucids of the world. they're already losing money how do they get the profitability if they have to deal with lower prices. >> and what tough choices do they make. phil, thank you very much. our phil lebeau. next up is ibm, after the bell, reporting of course the hardware company trading down about 1% this morning. hardware and software company, i should say the street expects revenue to slip about 3% from the year ago quarter, but analysts have been cautiously optimistic. recently upping, despite historical underperformance it believes it can grow consistent revenues morgan stanley, downgrading to equal weight, despite the name being the best among the i.t.

coverage, they think comps could get more difficult in the year ahead. it has outperformed its peer like western digital over the past 12 months john, we have talked about how it's out performed the buzzy names of the past few years, like snowflakes by a wide margin the question s what are you owning ibm for, low single digit revenue growth are you owning it for innovation are you owning it for services its big consulting work force it has in the environment. >> stability and dividends don't hurt, especially in this environment. i'll tell you what i'll be looking for, and you're right, it's more services and software now than hardware. the mainframe cycle we'll continue to watch. ibm has is still got a massive labor force. a lot of it in consulting and services are they able to get more efficient with the labor force in order to have improving margins, and is that government business of ibm a significant part of what they do, and some

of those kind of standard, strong industrial businesses that they do work with are those providing more stability relative to some more volatile software names? i mean, it's kind of hard to call microsoft more volatile when you look at the percentage of government business versus ko corporate, i mean, you might see a different kind of stability in ibm. it's the margins, and that profitability that's going to have a lot of people's eye. >> it's the keyword, stability, that's maybe what ibm offers it's been an outperformer in the last year. we have to remember over the past five years and longer time frame it has been a bit of a value trap down 10%, versus the s&p 500, 42% over the past five years. we'll see if that changes in this macro environment in the longer term. >> let's close out our actionable tech bets atb, get it, with service now. take a look at what the street is expecting after the bell. revenue of 1 p.94 billion in q4. eps just over $2, the stock like

many others react to go microsoft's latest results it's down about 1 1/2% we're going to watch what bill mcdermott has to say about i.t. budgets, enterprise demand, see what the pipeline looks like, and bill is going to be on "squawk on the street" tomorrow. >> i can't wait to hear what he has to say, the tone that he struck at davos just feels so remarkably different than what we hear from some others, like sa satya nadella. he was asked as a recession in i.t. spending, he said, not a chance layoffs, they're hiring. he said the cycle looks nothing like 2008 or the dot com bubble burst. what's so different than a huge company or ceo leading microsoft? >> well, i mean, optimism and bill mcdermott, don't expect to see bill mcdermott singing a woe is me tune he's going to find a silver

lining everywhere. we're going to have to go line by line in this report to figure out not just what's happening for service now, but what's happening, more intelligence on what's happening for the whole software industry, you know, expectations are out there we see what's happening with misso microsoft so far today. >> he's optimistic but he's a straight shooter last year, he was the guy that came out and said, listen, we're going to face weakness what he says tomorrow is going to be so fascinating we'll see. verizon rallying after posting results this morning at&t doing the same ahead of t-mobile next week the sector bright spot in a down market we'll break down those numbers en "tech check" returns in just a moment. laying] ♪ imagine something of your very own. ♪ ♪ something you can have and hold. ♪ ♪ i'd build a road in gold just to have some dreaming, ♪

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at&t defying the tape. julia boorstin has more on the numbers. good morning, julia. >> good morning, carl. at&t shares are up about 5% this morning. earnings of $0.61 or $0.04 better, falling short of what analysts amend better than expected subscriber growth was a key factor here the company saying they expect to continue growing mobility subscribers. now, they also forecast that wireless service revenue growth would be 4% or higher for the full year.

at&t ceo john stankey joined us on cnbc in the last hour he said they made great progress in terms of cost efficiencies, and also noted they are investing in areas where they are under penetrating and under performing, take a listen. >> customers are using more of the product and service, and they're willing to pay more for the product and service because they're getting better performance and better use in that spectrum and the infrastructure that you just described facilitates that walk up and that occurring. >> stankey also talked about how he sees the company's investment in 5g paying off particularly in the enterprise space he talked about the opportunity in autos with autonomous vehicles, as well as in the medical space, and also in manufacturing talking about the demand they're seeing there. carl. >> it's interesting, julia, to talk about the company and not have to talk about what new shows hbo is going to -- or what streaming is going to look like,

or any o. -- of the cultural clashes reported in the "new york times" recently >> it's a dramatically streamlined at&t when it came to the land line business, all of these factors, whether the entertainment or more of the legacy businesses if the original at&t with land lines are so much less relevant to the business right now. they are so focused on mobility, on the consumer case, and also on the enterprise case and really trying to figure out how to compete in a world where you've seen the massive growth of t-mobile, they're also going up against verizon and trying to avoid price wars in an area where at least in terms of the consumer, the service is really seen as increasingly commoditized a very different type of company, earnings call, and an interview with the creo than we used to have, warner media, et cetera.

>> kind of hard to keep it all straight hasn't been that long. julia, thanks. julia. still to come this hour, ad spending on twitter fell 70% in december at least according to one research firm. we're going to have more on how elon musk is looking to win back advertisers. plus, the deal of the century, that is how wells fargo described the opportunity to buy shares of svb financials, silicon valley bank at these levels that stock up 25% this year. the ceo is going to join us on the other side of this break don't go away. i'm so glad we did this. i'm so glad we did this. i'm so glad we did this. i'm so glad we did this. i'm so... ...glad we did this. [kid plays drums] life is for living. let's partner for all of it. i'm so glad we did this. edward jones

just look around. this digital agewe did this. we're living in, it's pretty unbelievable. problem is, not everyone's fully living in it. nobody should have to take a class or fill out a medical form on public wifi with a screen the size of your hand. home internet shouldn't be a luxury. everyone should have it and now a lot more people can. so let's go. the digital age is waiting.

it's the deal of the ce century, at least that is how wells fargo describes the opportunity to buy shares of svb financial right now, shares popping to buy svb right now. it's not the first time we're hearing language like this when it comes to the bank since then the stock had loss more than 40% of its value the svb ceo joins us now on set in san francisco good morning thank you for coming into the studio we were talking about how we were sick of the zooms so what's different this time around if anything the macro backdrop seems worse, and you kind of foreshadowed what we heard from the team at microsoft last night. you've seen a deceleration, an uptick in cash burn from your customers in the last few months how does that bode for the

upcoming quarters? >> yeah, i think about '23 as a transitional year. i'm happy '22 is over. the second half was tough because it was hard to predict exactly what was happening as we saw towards the end of '22, we kind of felt that bottoming out, we kind of felt we were at that lower point, and lower point does not mean -- very important -- we're going to automatically see a big rise or a big improvement. what we're expecting to see in 2023 first half actually venture capital, actually a bit more decline even more than we saw in the fourth quarter but the second half was going to kind of create that modest improvement and really set the stage for a better '24 we're optimistic because our crystal ball is a little clearer than it was in third quarter last year. >> how is it clearer do you think you have a better idea what the fed is going to or not going to do?

and i know you've seen an uptick in debt financing. what happens to a lot of your customers startups if interest rates move higher or stay at high levels? >> maybe talk about why that crystal ball is a little clearer than it was. think about it in three ways for that clarity you need kind of three things, right so the first thing you need public markets, right, to kind of stabilize so while we're not there yet, we certainly think in the first half there's going to be more volatility, we're getting closer to that. when you look at multiples, when you look at software multiples, they're kind of getting slightly below where the historical average was. that's a good thing. second thing when you think about interest rates, we don't need interest rates to decline we just need them actually to slow down or pause, and we think we're getting close to that. and the third thing is you need expectations, right, to match up with performance and so we haven't seen that yet. that's the one that's a little more cloudy, but the first two we think in the first half maybe this summer are going to come into balance

when that happens that's the stability we expect is going to create that floor. >> now, you do have an incredible view into this. what makes you confident on that valuation peaks? we have this debate a lot on "tech check" and throughout the network, what is right level do we go back to post pandemic levels or further back when we were in a time of higher interest rates a lot of the companies and your customers of the last decade have been raised on growth, growth, growth, and not exactly profitability and free money >> well, profitability is the name of the game people are talking about it pretty much, you know, consistently every interaction we have. but you think about it, what drives valuations, right so it's the growth rate of the business, right? it's the margins that you have, the sustainability of the business model themselves, and all three of those are actually in better shape than you've seen at other cycles. we think it's going to go back to pre-pandemic so whether it's

17, 18, maybe 19 but certainly not 20 and 21. i don't see that coming back for a long time, maybe ever. but it doesn't need to -- it doesn't need to create a stable environment. >> how do you reconcile your optimism withwhat can we hear the kind of commentary at microsoft who see so many different parts of this economy as just business and he says things like we're in for two more years of pain what do your customers tell you? are they optimistic as well or bearing down for a longer downturn >> i'd say let's put this in relative terms look how much venture capital flowed into the capital market in 2021, $350 billion. last year was a round number, roughly $250 billion, and what we think for '23 it's going to be around $130 billion so that decline is a massive decline, so then you're going to see that stability start to happen so i would say in the private

markets it's going to actually be a more dramatic decline than public markets, and you're funding that floor and once you hit the floor then you can start to see some modest improvement. that's number one. number two, venture capitalists aren't investing in outcomes for six months, 12 months. for early stage they're thinking about what this company is going to look like in five years, six years, seven years and even late stage they're thinking about two to three years. that's the big difference between public and private markets. >> i know venture capitalists here see a lot of opportunity in the market because of that reset. as we head to break, check out shares of block, downgraded. down about 3.5% so far in today's trade. you can read more about that call on cnbc.com/pro and in the meantime follow and

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one more thing this morning, a new chapter added to musk's

twitter saga when it comes to advertising. ad spend at twitter dropping 71% in the month of december, that's according to some new data from standard media index that's as twitter looks to bring advertisers back to the platform after companies like general mills, audi, chipotle did pause back in november going to also mean more trouble for tesla which of course has seen shares decline 40% since musk's twitter takeover. john, we're going to watch that in the context of what it may mean potentially more selling or more distraction for musk himself. >> more selling, more distraction, or does twitter go bankrupt, and then what are the implications for that for the ad ecosystem should is happen we don't know if these ad numbers are quite correct, but we do know there's a lot of money. >> it's hard to extrapolate has you say, john, twitter's revenue declined to others in the space,

but it's a good question what does it mean if it goes away entirely tesla of course going to be the more meaningful one after the bell, too. and the nasdaq has come out its session lows >> dow down 200, microsoft down after the intraday low some key burnings reports as we get closer and closer to core pce later in the week. let's get to the judge all right, carl, thanks very much welcome to the half time report. i'm scott wapner front and center this hour the microsoft fallout. cloud stocks are sinking on that company's weaker guidance. and just as the tech trade was showing you, so is it in trouble again? we've got a full deck today. everybody at the table let's go to it wall and take you to market see what we're doing carl just mentioned we're off the lows and decid