Coinbase Partners With BlackRock, Confluent CEO Jay Kreps on Earnings & Equinix CEO Charles Meyers on Data Center Ecosystem 8/4/2022

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I'm Carl Quintanilla. You're listening to CNBC's Tech Check. Our show is live weekdays at 11 AM Eastern. Listen in. Good Thursday morning. Welcome to Tech Check. I'm Carl Quintanilla with John Ford today. Coinbase spiking. Why shares are up— were up 30-plus pre-market, currently up 18. That stock's on pace for one of the best days since its IPO. Then, our ears to the ground on earnings results from Baba, Booking, eBay— what they all tell us about the current macro environment. Later on, the CEOs of Confluence ServiceNow and Equinix all this hour. John, busy hour.

Busy hour. And yeah, we're going to kick off with Coinbase, as you mentioned, up about 18%, though it had been even higher on a new crypto trading partnership with BlackRock, the world's largest money manager. For now, the partnership gives BlackRock's institutional clients access to own and trade Bitcoin, with possible expansions to that deal dependent on demand. That said, given Bitcoin is down 42% since early April, Remains to be seen just how sustainable institutional demand is. But hey, Coinbase is down 60% for the year. For now, though, Coinbase shares today having their best day since the first day of listing on a percentage basis, up more than 45% just this week. Here to help us break it down, Kate Rooney. Hey, Kate.

Hey, John. Yeah, this is definitely a sign of legitimacy for Coinbase. So it is good news and it's really been trying to grow the more institutional side of the business, the retail trading side. Has slowed down with the crash in Bitcoin and crypto prices in general. They've struggled with just trading revenue in general. That's the bread and butter for a lot of these brokerage businesses. Robinhood as well. The reason, though, I'm told the stock is skyrocketing is a short squeeze. So about 22% of the tradable shares out there, the float, are sold short. S3 Partners put it closer to 21%, but they say that's nearly 4 times greater than the average US stock right now. Coinbase is the 36th largest short right now in the US market. So some short covering going on this morning, likely accounting for that huge rise in, in Coinbase shares. Also one of the most mentioned names on Reddit. So we may have a little bit of a meme stock situation going on here, but the stock has had a pretty rough run in 2022. It's been down significantly. So this is sort of a relief rally we're seeing and likely some short covering.

And not just Coinbase, right? As we look across the more speculative Fintech names, they had a real downtrend right until the end, through the end of June, or was it the, yeah, end of June into the beginning of July. And so now there's kind of a nice one-month marker. For example, Affirm is up close to 90% in the past month. Similarly, so there's more going on perhaps than just today's short squeeze. There's also this risk-on environment.

Exactly. You're seeing it in tech stocks, PayPal as well, Block, which reports earnings later today. A lot of the beaten-down fintechs had a pretty nice rally in July. So there does seem to be a little bit of a reversal, potentially a better risk-reward as those valuations came down. But fintech across the board is really getting a boost here. And some of the crypto-related stocks, which had been hit the hardest out of the entire fintech sector, Coinbase included.

You know, Kate, it's funny, people are going back now and reading the Q2 call with Larry Fink from BlackRock a few weeks ago, in which he said the crypto asset has witnessed a steep downturn, but we are still seeing more interest from institutional clients about how to efficiently access these assets. And clearly he wasn't messing around.

No, no. And then in hindsight, that he clearly was working on this behind the scenes. But it's interesting if you look back to 2018 as well, which was one of the last bear markets in crypto. A lot of the institutional interest kind of quietly came in during those couple of years where Bitcoin languished around the even $15,000 mark. So some of the, the long-term investors, the institutional money tends to come in when prices are depressed, when they see more of an opportunity versus what we saw in November when Bitcoin was around $60,000. That really was what drew the retail crowd in. Seems like moments now where Bitcoin prices are relatively stable. They might see it as a long-term investment and a long-term opportunity. That seems to be sort of the hallmarks of the time that institutional money comes in. And this is a big example of a block. BlackRock is a big deal for Coinbase here.

Very big. Kate, thank you. Kate Rooney. For more on Coin, let's bring in longtime bull Moffett Nathanson partner Lisa Ellis, who calls the company, quote, the phoenix. And has a $200 target. Lisa, this definitely backs up your case.

Yeah, we couldn't be more excited. Obviously having to reset our outlook for Coinbase a bit in the last 6 months given the crypto winter. But we highlighted— we've been highlighting in our research that we are hoping, anticipating that this crypto winter should be less severe, maybe even shorter in duration, specifically because of what Kate was just referring to and what we saw this morning with BlackRock, which is the institutional money that sort of stable that stabilizes the market and creates support for it starting to come in. And we love this play for Coinbase. We've been kind of pushing them on these types of partnerships. So couldn't be more thrilled to see them announce a big one with BlackRock today.

So at this point, do you want it to, to remain stable through an institutional lens? What happens if retail decides we're in love with it again?

Well, yeah.

Well, I guess from Coinbase's perspective, a lot of retail participation is never a bad thing because that's how they make a lot of their money. But look, you know, when you hear this from Brian Armstrong and others, the major players in this space as well, in many ways the retrenching that happens, the focused investment that happens through a downturn helps the industry and helps these companies over the longer term because they're not sort of just scrambling trying to keep up with demand, but rather actually have the time to put some of the long-term infrastructure in place, get some of these big partnerships in place, get that all the regulatory compliance infrastructure all built out. That then really creates the building blocks for the, you know, for the mainstreaming of crypto over the long term. So as much as it's painful, it's, you know, it's a bit healthy for a longer-term investor.

Lisa, I'm trying to understand how durable this bounce is. With today's move, Coinbase is up more than 50% in the past week. And really the beginning of that move, I think, was the reaction to the Fed rate hike. The Fed has been trying over the past few days various regional presidents to talk down that risk-on market reaction based on the idea that they're going to be cutting rates next year, saying we don't see that really possibility right now in the data. So based on that, the sort of disconnect between by what people heard the Fed say and what the Fed is saying that they intended to say is are fintechs, is Coinbase maybe particularly risky even after this bounce?

Well, look, as, as you guys have highlighted and Kate was highlighting, every sort of move or comment by the Fed whips the fintech sector around a lot because of their interest rate sensitivity in their core businesses. And as high-growth businesses, they're particularly sensitive to it. But that said, The other key point or event from earlier this week that has driven this boost in Coinbase was the bill introduced in the Senate proposing that the CFTC officially regulate Bitcoin, Ethereum, and some of the other major cryptos, trying to eliminate some of that regulatory uncertainty and officially shift some of the major cryptos under the purview of the CFTC. Just clarity on that, that regulatory clarity is another thing that, you know, is the anticipation expectation that we might see some regulatory clarity is the other thing that's been giving Coin a big boost this week.

And that clarity, is it the idea that they're not equities? That they are, you know, is that the clarity that that would be causing that bounce?

Yeah, that debate, I mean, will still wage on, I'm sure, and will take, take longer to sort out. But, but yeah, the CFTC has already previously asserted, at least from their perspective, that the big decentralized cryptos like a Bitcoin and Ethereum, a Litecoin, etc., are commodities, should be treated as commodities and regulated as commodities, as we already see Bitcoin is. And, and so that alone, I think, would help just to have that clarity and sort of move it off the whole debate with the long tail of hundreds and thousands of other coins, of trying to figure out what the rule set is to determine what's exactly a security versus at what point is it considered decentralized enough that it's a commodity is something that still has to get hashed out. But I think that what investors like is just to see the Senate, Congress, the government moving forward on this coming. You know, they kind of keep saying, look, we can handle whatever regulatory framework you want to put around this and we can operate within that. We just need clarity on what that is so the industry can move forward.

Yeah, we've, we've tried to pin them down. It hasn't been easy. Maybe in the months to come, Lisa. Fascinating day. Appreciate it very much. Lisa Ellis over at Moffett.

John.

Yeah. And speaking of rallies, check out the Nasdaq, up more than 12% off of the July lows, heading for another positive week despite today's small move lower. Senior markets commentator Mike Santoli joins us with a breakdown. Hey, Mike.

Hey, John. Yeah, obviously coming out of the depths there, that slingshot was pulled back pretty tight, especially at the mid-June lows that sent The Nasdaq 100 up about 20%. Here's where a lot of the bulk of the gains have really come from. If you take a look at some of the biggest components and contributors to that 20% move, Amazon and Apple. This is since June 16th. This is from the broad market low that we experienced. And Amazon and Apple have been responsible for about 40% of the, of the net gains. The total points are added to the Nasdaq 100, and they're only about 20% of the weighting. So it shows you that kind of a rush into one, a beaten-down mega-cap, and the other just kind of the quality leader. And then I do have up here the XLK, the main S&P tech ETF, but also this is the equal-weighted NASDAQ 100. So all stocks being equal, it shows you while it has been a broad rally in the sense that almost all stocks are up substantially, it has skewed a little bit to the mega-caps right there. To me, it seems like people feeling underexposed to the market in general. It's a very quick and efficient way of grabbing index-like exposure that moves a little bit faster at this point.

Mike, interesting to me though, both Apple and Amazon were bucking the trend in earnings in their respective categories. PC industry overall slowing down. Apple's, you know, Mac business still healthy. Smartphones slowing down. iPhone business still healthy. E-commerce really seeing some headwinds, retail in particular, with mainstream consumers. Walmart talking about that margin pinch. Amazon didn't seem to see that. So is it curious that, you know, they're doing better than others, but that others are doing well kind of despite those headwinds where those two seem to be bucking them?

I mean, the rest of the stocks obviously getting kind of washed higher in the general move of this relief rally, macro relief, I would argue, with yields coming down, peak Fed hawkishness potentially behind us. Obviously gasoline prices coming down to just negative sentiment that really got extreme at the June lows. What's interesting though, in terms of the Amazon-Apple dynamic, yes, definitely both kind of outperformed their groups and outperformed expectations. But with Apple, it's not as if the stock had really been punished leading into those results to where people felt like there was a lid on it and people were expecting grim things, whereas for Amazon, I do think you had over the course of a year and a half of that stock really frustrating the bulls. People had essentially walked away and, and were sort of rediscovering it when it seemed as if they executed pretty well in the quarter.

Mike, thanks. Great explanation for what's been going on and why we've been rallying here last couple of weeks. Get a quick gut check on Datadog today. Stock slumping despite revenue up 74% year on year. The company, like many others, getting hit on their guidance for next quarter. Coming in lower than expected. Shares are down 5% this morning and massively underperforming since the beginning of the year. Now 45% off the highs, although BTIG still bullish, calling it, quote, best in class and at least for now maintaining a target of $175. John, they did say some customers are beginning to, quote, manage costs in response to macro concerns. And that did impact usage growth among some existing customers.

Yeah, interesting whether we're going to continue to hear that kind of bubbling up of cost concerns as we've been talking about all week. Coming up, speaking of enterprise software demand, ServiceNow's Bill McDermott on where the growth is and his competition. Plus, speaking of software, CEO Confluent as those shares skyrocket more than 23% this week, up significantly again today, more than 8%. TechCheck's just getting started. ¡Hola!

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Get a gut check on Fortnite today. Uh, starting to be a habit here with some of these names. Similar to Datadog, down big on, you guessed it, a cut to revenue guidance. Today's double-digit or 17% plunge taking the stock down to a double-digit loss since the beginning of the year, although RBC does like the stock at $69, about $10 higher than where it trades today. Definitely some thematic purity today, John.

Indeed, Carl. Meanwhile, a software grower we've been watching closely in this market is ServiceNow. The nearly $100 billion market cap enterprise software company has warned of longer lead times on deals. In this macro environment. But during a Fort Knox one-on-one I taped with him yesterday, CEO Bill McDermott told me he's bullish on growth in markets like Europe.

The European economy needs to go for the cloud. If you look on a per capita basis, the United States or the U.S. economy has gone for the cloud much faster than Europe. Europe is doing that now, but Europe has a sensational opportunity to get to the cloud. To take what it's invested in in the past and innovate around it, on top of it, and really drive productivity. And they have to drive productivity. We are a deflationary force because we take so much cost out of the equation. The work doesn't go away, so you have to automate.

I also asked him about the need for productivity from workers in this environment, specifically mentioning Alphabet CEO Sundar Pichai. Pichai's recent comments to employees about the need to do that.

I think Alphabet's a great company, and I think Sundar's message really was scarcity brings clarity. And no matter how great a company is or how much a company is growing, once in a while you just have to take an inventory of things. How's the house doing? You know, are we really investing in the right Are we taking the long tails out of the equation and really focusing on the next vectors of growth? Where are we going the next 10, 20 years? And who can argue with that track record? They've done such a great job.

Carl, it's like a little almost parlor game when I talk to Bill. I try to see if there are any cracks in his optimism, right? I mean, the guy is so focused on his mission, on his message. He's still on it and sees growth just a matter of focusing on the right things.

I think people say about Bill, he could sell ice to igloos to Eskimos, ice to Eskimos. That's probably true. But, John, he is— part of his pitch is acknowledging the macro risks. Right. And clearly the idea that if you're going to cut headcount, you need to somehow keep the client experience the same. And he would argue that's through software.

Tough choices both within organizations and he's arguing among customers. They're going to be choosing what they can implement more quickly. And his argument is that they're relatively quick to implement versus some of those legacy software names that haven't built out for the cloud to the same degree. Carl, I'm going to stream out that Fort Knox one-on-one today or tomorrow. Getting that together. He talks about his personal story as well. Definitely one to watch. Meanwhile, one big enterprise winner today is Confluent. As we mentioned, the data infrastructure company seeing a post-earnings pop. After beating on the top and bottom lines for the second quarter, including more than doubling their cloud platform revenue. Joining us now, Confluent co-founder and CEO Jay Kreps. Jay, welcome. How, how difficult to read is this macro environment when you're dealing with customers and how much of that is perhaps moderated by the fact that you're clearly such a young company growing share?

Yeah, it's definitely a more difficult environment. There's no question about that. I mean, we saw increased pressure on deals, things taking a little longer, you know, certainly a handful of companies are just putting a little more inspection on where money is being spent.

Um, but we came through it, you know, I think it helps.

I think times like this, it kind of reveals, you know, which things do you really need to have and which things are actually helping you save money and free up, you know, critical employee resources to put on the, the most important things. And we felt like we benefited from that in the quarter.

So how are you recalculating that in this environment and how is the partner ecosystem influencing that?

Yeah, this is definitely a situation where anything that helps give leverage to the organization is useful. And so we've had strong partnerships with the cloud providers, with other tech companies. We won, you know, Partner of the Year awards from Microsoft and from MongoDB, we talked about that in the earnings call. These obviously help us, you know, being kind of part of the stack that is being put in place that's allowing more efficiency. That's the thing that customers want to get to is definitely a good place to be.

Your number of customers with annualized recurring revenue over $100,000 was up close to 40%. What does that signify about this market? And even about net revenue retention.

Yeah, the exciting thing for us is there's a major new paradigm around data, which is data in motion. You know, when we think about data, we mostly thought about, hey, how do I store it? How do I keep it locked up in different places in an organization? But the problem now a lot of companies have is how do you put all that together? How do you build something holistic where all the parts of the company act together? And that's what we do. And so, you know, what that means is It's a big market opportunity. Our expectation is to grow even through harder times. And that means we're continuing to add customers. We're excited about all the new customers coming on board with new use cases. And we were excited to see that through the quarter.

How's the market affecting competition for talent? Seeing a lot of hiring freezes, some layoffs, some calls, as we were just mentioning, over at Alphabet for increased productivity out of employees. You know, stock is a big part of comp in the Valley. How are you managing that?

Yeah, you know, that's one area where things have gotten a little bit easier. You know, we've been able to hire great people through every up and down, through the pandemic, all of that. You know, I think that's ultimately about what's the opportunity for the company. And people are excited about what Confluent's doing. But, you know, in a situation where there's less hiring happening, where a lot of companies are freezing or cutting back, that does mean there's more great people out there. And so, you know, we're continuing to hire aggressively and that's a great thing for us. It means there's amazing talent out there and we're happy to talk to all those people.

All right.

Continue to hire aggressively. The stock is aggressively higher this morning by almost 10%. Jay Kreps, CEO of Confluent, thank you.

Thank you.

It's been a rough ride for Lucid, down almost 10% today, cut in half since January. We'll get some more on these results that are sending the shares—

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There's even lower. Stay with us. Welcome back to Tech Check. I'm Carl Quintanilla with John Forte and Julia Borsten, checking in on things a couple hours into the session. We've been back and forth, but currently Dow's down 85, 4146 on the S&P. Some more on the key names you might be buying or avoiding ahead of results tonight. Oil below 89. Let's get a news update first, though, with Contessa Brewer. Hi, Contessa.

Hi there, Carl. Good to see you this morning. In the last hour, the U.S. Justice Department revealed it's charging 4 current or former Louisville police officers the civil rights violations that contributed to the death of Breonna Taylor during a drug raid in 2020. The DOJ also accuses the officers of trying to cover up illegal conduct after Taylor was killed. A Moscow judge has just sentenced Brittany Greiner to 9 years in prison for bringing cannabis oil into the country. A U.S. official says Russia has not responded substantively to Washington's offer of a prisoner exchange And it's clear the judge just rejected the WNBA star, her excuse that it was an accident. Neither Donald Trump Jr. nor Ivanka Trump invoked their Fifth Amendment right against self-incrimination when they testified in New York State's civil tax fraud probe of the Trump Organization. That's according to a report this morning from NBC News, citing two sources close to the investigation. Now, NBC says the son of the former president appeared last week And Ivanka testified yesterday. In West Texas, liftoff for the 6th Blue Origin suborbital flight with people aboard, among them the first folks from Portugal and Egypt to reach space. Unbelievable. All right. I'll send it back to you, John.

All right, Contessa, thank you. Now, Lucid and Tesla headed in opposite directions this morning. Phil LeBeau is here. Opposite to tell us why. Well, not quite opposite, I guess. Tesla's at least flat though, Phil.

Yeah, Tesla's not really moving ahead of the annual meeting that's going to be happening a little later on today. Let's start first off with Tesla— or Lucid, excuse me. The reason Lucid is under pressure, and it started after the company reported its Q2 results after the bell, it's all about the production guidance. They cut it by 50% for the full year production, down to a target of 6,000 to 7,000 vehicles. Remember, at the end of last year, they were planning to build 20,000 vehicles this year. The primary issue right now, logistics. And when I talked with CEO Peter Rawlinson after the numbers came out, he said, look, we have an immature logistics system right now. We're going to improve it. They're bringing in a new head of operations, bringing them in from Stellantis. They believe that they're making the changes necessary to improve their production and hit that 6,000 to 7,000 target. As you take a look at shares of Lucid, Keep in mind that their reservations for the Lucid Air have gone up to 37,000, but it's going to be farther out before many of those people, if it stays at 37,000, actually get their Lucid Air because they simply have not increased production as expected. Meanwhile, with Tesla, the annual meeting is today at about 5:30 Eastern time, and the main thing that people are going to be asking is when Elon Musk talks, will he give some kind of an update in terms of what's happening with production, particularly at the Gigafactory down in Austin, Texas. Is the Cybertruck still on schedule? And then again, they're going to be voting on the stock split, 3-for-1 stock split. Remember, they did a stock split last year. So now you're getting another stock split. And I— my guess is that it's likely going to go through. This will not change the valuation of Tesla as you take a look at shares of Tesla, but certainly it gives them a lot more opportunities. Makes the stock obviously much more affordable or brings it down to the average investor. They might be more comfortable buying it at $300 a share as opposed to $900. But that's what we're waiting to see after hours, guys. What does Elon Musk say during that annual meeting?

And Phil, I know we talked about this yesterday with Kramer. Pelosi's visit to Taiwan, in the words of Morgan Stanley, sort of resets the global battery race and will force investors in Adam Jonas's view to think about Tesla differently. Not necessarily all bad, but clearly acknowledging their China exposure.

Absolutely. China has been the growth engine for Tesla really over the last year and a half, and it will be a big part of future production and future deliveries. Remember, it's the largest auto market in the world, the largest EV market. And a government that is pushing, pushing hard for EV adoption. It's much different than here in the United States and in Europe where, yeah, there are incentives and people are trying to help the industry move towards electric vehicle adoption. It's way different over in China. I mean, over there, the government is saying, oh, we're going electric come hell or high water. And that's why Tesla has done so well with the production in the Shanghai Gigafactory.

Well, watch it, Phil. A lot more headed our way. Of course, that's our Phil LeBeau talking some EVs this morning. Let's turn to the latest slate of tech earnings. Investors trying to work through results from eBay and Booking, bracing for a few more out today from Expedia, Dash, and Lyft. Our next guest has a lot more on this, Mark Mahaney, of course. Mark, it's great to have you back. Evercore ISI. On Booking, I do wonder whether or not you think the Street's making too much of what's being called room night deceleration.

Well, Carl, there is room night deceleration and Airbnb showed it too. So I don't know why you wouldn't see that from Expedia tonight. There is also a little bit of an extra warning for Expedia in that bookings seem to have— Booking Holdings seem to have relatively strong North American growth. So not only are you going to have this kind of deceleration across the industry, the travel trade is over, but you're also going to probably have market share pressures on Expedia. So I'm cautious on Expedia going into the print tonight. Then you've got to ask yourself, you're a trader or you're an investor. If you're an investor, the The action question now is, has Booking— Booking and companies like Airbnb done enough innovation so that they can grow faster post-COVID and with economic normalization? I think they have. I think they put in enough innovations to do that. That's why I like both of those stocks.

So that explains you're trimming your target, but you keep the outperform.

Yes, that's right, Carl, especially with a name like Booking. Look, this is a high-quality asset. It trades close to a market multiple about 19 times GAAP earnings, bulletproof balance sheet. They buy back stock. 30% margins, well-tested business model, very geographically diverse. And I particularly like some of these newer initiatives. They're really better incorporating flights into the offering. And then they've rolled out payments as a segment for the last year and a half. Those are the two things that I think helped them come out of all this growing faster than they were then, than they were back in '19. That's why you can have a multiple where it is now or even re-rate a little bit higher.

Mark. Where have Uber and I guess to some extent Just Eat Takeaway set the bar for DoorDash tonight? And to what extent is that food delivery and just general delivery growth trend normalizing back to pre-pandemic or not?

Well, so, so there's a lot that's going on in DoorDash, though the biggest risk I think you have is the recession risk. And all of us have to answer, ask that question, you know, are people going to are you going to do as much delivery? Are you going to pay $80 for that? No, that hamburger delivery that you did, you know, 6 or 9 months ago as the, as the family budgets get tighter. That all said, you know, we are seeing continued signs of market share gains by DoorDash. It's the fastest grower in the delivery business. Uber guided us all to flattish delivery bookings, you know, for the, from the June to the September quarter. And what's in the Street numbers, if you can work out the Wolt acquisition that they recently did, a European delivery company, if you strip that out, The Wall Street numbers seem to imply a sequential decline for, for Dash. And so I don't feel like there's dramatic risk to Dash estimates. I just don't think we're going to have a lot of upside. And I do worry any of these high multiple stocks that miss now, they will get punished severely. So just in terms of the trade, I don't think it's that attractive. I like the investment long term on Dash and I think they continue to gain share. So I'm willing to stick around even with short-term volatility.

Uber also seemed to say that driver supply had improved. It was at a, at least a recent high, and gas prices have eased off a bit. DoorDash was trying to help Dashers out with those kinds of costs. Could that be some kind of a margin signal?

Yes, it could. But I do think that trend is actually starting to turn now. So all of these companies, the delivery companies, had to impose this fuel surcharge about 3 months ago they put it in, it was like 50 cents per each order. It did help their couriers, they needed it. But now with whatever we are, 51 days in, the gas prices are dropping every day. My guess is that the next move there— so let's talk about the next call. The next move there is my guess is that they could take away those fuel surcharges. And then there is a little bit of a hedge in all of these business models. You know, the, the upside to the downside, the upside to a weakening economy is that more people are going to need that side hustle, that extra earnings opportunity. And Dash Cash is a real food delivery and rideshare are really easy ways to get that extra income if you need it. So that's a little bit of a hedge in these models.

Hey, overall, Mark, I'm just wondering, as you gauge client interest in tech right now, are you getting a sense that this rally is beginning to spur more belief or more disbelief that it deserves to be turned around?

We had a buyer strike, Carl, in the first 6 months of the year. No question about it. This segment, consumer tech, got shellacked. That's the past. I have definitely sensed people doing much more homework in the space. Are people, you know, in there buying with two fists? No. But are they starting to step in on some of these dislocated higher quality names? Absolutely, yes. Especially if they can put up an inflection point print. I think I've had two of them so far. Amazon shocked everybody and they just showed what the, what the, what the power of like real innovations in their business model can be. Faster delivery, greater in-stock inventory. And then Uber gave you an inflection point Here we go. Free cash flow finally. But now it's going to ramp materially. You get a free cash flow inflection point, including with free cash flow on some of these names, and these stocks can really rip. I like both of those names going forward to Amazon and Uber. And I think, yeah, to answer your question, I'm starting to see more interest.

That's interesting. And one of the trading desks this morning said they were trying to explain this outperformance in tech. And they said if we have seen the high in yields and don't forget, we were at 3.48 in June. But we're going to remain in a low-growth environment, then mega-cap tech is arguably the best long irrespective of the shape of the yield curve. I assume you'd go along with that.

Yeah, but make sure you stick with the high-quality names, Carl. So we don't want, you know, all these ships aren't going to rise. I've been waiting for two things for consumer tech: estimates cuts and that moderation in inflation, therefore that moderation in interest rate pressures. Well, we're getting— we got it now. Is this the bottom? I don't know, but it certainly feels like we're, you know, within months of this. But it's not a '23, you know, tradeoff. This, this growth equities can start coming back. I think maybe now, maybe it's happening. It's so hard to know or it's this fall, but the timing is very near-term.

Mark, great stuff. Certainly we got a lot of fuel to work with this week especially. Thank you, Mark Mahaney.

Thank you, Carl.

Paramount shares having a volatile ride after results. More on those numbers and reports of changes at at Warner Bros. Discovery. That's next. Don't go away. We'll be back in two. It has been a morning of media headlines with Paramount reporting results and lots of talk about shelled content, strategy changes coming at Warner Bros. Discovery ahead of its earnings this afternoon. Julia Borsten is here to help us break things down. Julia. We ever going to see Batgirl?

I don't know about that, John. Before we talk about Batgirl, I'm going to fill you in on Paramount because Paramount reported a better than expected 19% revenue growth and a $0.03 per share earnings beat. And that, of course, is all bolstered by Top Gun: Maverick. But Paramount shares first dropped first on those streaming subscribers that missed estimates. Now we see that Paramount Global shares are now nearly half a percent higher after some optimistic commentary on the call about streaming and also advertising. Paramount CEO Bob Bakish noting that with Paramount+ addition of nearly 5 million subs, it had the most signups and net additions of any premium, premium US streaming service in the quarter. And while Pluto TV, that's the free ad-supported streaming streamer, its 70 million subscribers was 3 million short of expectations. The company reiterated its top target of topping 100 million streaming subscribers by 2024 and also the expectation that its direct-to-consumer losses would peak next year. Now, also amid concerns about an ad recession, Bakish said that advertising headwinds are short— a short-term problem. He also said that there's actually some ad tailwinds, such as strong ad spending around travel as well as around political ads. So now the question is what kind of an outlook we're going to get from Warner Brothers Discovery this afternoon. We are expecting CEO David Zaslav to share his plan for combining HBO Max along with Discovery Plus. We got some early signs of that today in announcements that Discovery's Chip and Joanna Gaines Magnolia Network will launch on HBO Max in September. Similarly, CNN content coming to Discovery Plus. And we know that Zaslav will likely be pressed on his plans for cutting $3 billion in costs across the company. And John, back to your question about Batgirl. The company decided to shelve its $90 million Batgirl movie rather than release it on streaming. A lot of backlash there. But I'm hearing this is due to a number of factors, including the fact they did a test screening and the reaction by fans was not positive. And then, of course, they do get an accounting benefit if they write it down as a loss rather than releasing it on the streamer.

Guys, yeah, I had, I had heard the tax excuse. Interesting about the test screening. Just an amazing story, Julia. Meanwhile, The Journal puts on page 1 this piece about Netflix building this ad machine that they had spent years resisting and talking about CPMs that would rival the cost of, say, NFL games. And I wonder if you think that's too optimistic or not.

It's very optimistic. I mean, look, you have to break down why would it be a good thing for Netflix to be showing off how expensive its ads would be? What they're basically messaging with that is saying our ads are going to be so effective, we're going to have such, such amazing ability to target and also measure those ads' impact that we will be able to charge these kinds of crazy high prices. That you would really only see for a premium sporting event. That's saying that they're incredibly confident not only in the types of content that they're going to be showing, but also in the effectiveness of the platform. But we're still a ways out from them actually having something to launch. So that's very much the vision of the future. And remember, CEO Reed Hastings and co-CEOs Hastings and Sarandos talked about how their ad-supported business is going to be an evolution. It's going to take them a while to get to what it's ultimately going to be like. So it'll be a while before we get those kind of CPMs.

There's so much media news this week and we're going to get a lot more in the days ahead. Julia, thanks. Julia Borsten. It's been a volatile ride for Corvo today. The chipmaker originally gaining nearly $10 a share after that beat on results. Shares plunged, then recovered, leaving us pretty much where we left off. We'll get a lot more on the market's action after the break. Don't go anywhere.

Time for a gut check, courtesy of Stephens. Changing its best idea to CrowdStrike following the Toma Bravo, uh, an acquisition or intent to acquire Ping Identity that was announced this week. Says the stock has strong competitive positioning across all facets of the security industry and is well positioned for a recessionary environment. That said, CrowdStrike's down about 6% today. Tech Check is back after this. Don't go away.

If you want more Tech Check on the go, be sure to follow and subscribe to our podcast. You can listen anytime, anywhere you are, wherever you download podcasts. Meantime, choppy action continues. Dow's down 81. We're back in a moment.

Welcome back. What is the forecast for data centers? If you ask investor Jim Chanos, it's cloudy at best. At the end of June, he revealed a short position in the space targeting names like Equinix and Digital Realty, arguing their problem is, quote, technical obsolescence, and their 3 biggest customers Amazon, Microsoft, and Google are turning into their biggest competitors. Since that call, Equinix is up about 3.5%. The stock popped last week after the company posted its 78th consecutive quarter of growth. So is there opportunity here or not? Joining us now, Equinix CEO Charles Myers. Charles, welcome. So, um, part of the argument here seems to be, yeah, you're growing, but you're not growing nearly as quickly as the hyperscalers. And, you know, if we get into a bad economic environment, if demand comes down, the hyperscalers are going to keep using their own systems, but maybe not those of outside data center providers. Why is that wrong?

Well, first of all, thanks for having me. I mean, I think that really the premise that the cloud is really just these large-scale compute node facilities from a handful of hyperscale providers is just it's just, you know, not accurate. It's— it represents an underdeveloped understanding of really how the cloud actually works, how it's architected, and the role that— and how enterprises are really re-architecting their IT for digital. And so I think that, you know, right now we play a very critical role in helping them— companies move to hybrid and multi-cloud. And I think our business is showing that.

Well, I guess the question, though, is valuation. I certainly do understand, and I think Chanos would say that he understands that the cloud isn't just about the public cloud, that there is hybrid, that it's distributed across both their owned and operated data centers and others. But when you look at their rate of growth and you look at the amount of capital investment that it's taking you to do what you do, the question is, is there enough profit in the model for these valuations to make sense? Well, absolutely.

I mean, I think one key thing is the segmentation of the data center market between, you know, the, the set of providers that are working to provide these hyperscale data centers, these large-scale, dedicated, committed centers versus those that are building this sort of intercloud, interstitial data center that are really the digital edge points of aggregation in the digital ecosystem that really allow the cloud to work effectively and allow the customers to extract the value from their digital transformation. And, and our business is growing very nicely on that bit on that. And, and we think we have the balance sheet to drive that. And and the returns. And if you look at our returns, they're exceptional in terms of, you know, how we're, how we're delivering AFO per share growth.

Very capital intensive, this, this business is, though, and interest rates are rising. So when you talk about your balance sheets and you wonder what demand is going to be like, how much are you going to have to outlay to continue building? And is that going to get more expensive for you over the next couple of years?

Sure. I mean, at some level, I think that will inevitably— we're an investment-grade rated company, so we can raise debt under very attractive terms. Definitely the cost of debt is going up a bit with interest rates. But I think that our ability to raise a combination of equity and debt to fuel the business and our ability to price services in accordance with the value delivered to our customers and therefore maintain consistent returns, even in an environment where that capital might be slightly more expensive, I I think is extremely robust.

Well, if there's an advantage to having a very prominent short seller on you, it's gonna bring a lot more attention to your model and to your growth. Charles, thank you.

Thanks, thanks for having me.

CEO of Equinix. Now one more thing, and that is more tech earnings this afternoon. Some key reports we're watching: DoorDash, Lyft, Square, Dropbox, Expedia, Also Warner Brothers Discovery, as Julia Borsten mentioned, Twilio, Chegg, AMC, and Skyworks. Carl, that's just all over the place in industries, but a lot of those growth names that did well during the pandemic and then fell off. Chegg comes to mind. Dan Rosenthal has joined us a number of times. You sort of wonder, with the jobs picture easing, are people looking at education again more as a possibility?

Possible.

The—

definitely the incentive to invest in an education for a while there was being called into question, as you point out, John, because the job market was so strong. I will add that this is really the last big push in terms of maximum number of earnings prints per day. We're going to get 50-plus today. From here on out, you're going to get maybe 10 a day at the most. So we've made it through the hardest part of earnings season. I'd also keep your eye on oil for a moment there, John. We were below $88. Unbelievable. Believably, and that might, you know, have some ancillary effects on the consumer, their ability to spend on things other than gasoline, which obviously would tie back to some of the tech names we talk about.

Yeah, DoorDash comes to mind. We mentioned this with Mark Mahaney. I mean, if it's— if driver demand is up like Uber saw, right, they got a good supply of drivers, and if they don't have to pay as much for gas, maybe that's good. But if the consumer doesn't have as much to spend on eating out, maybe that's bad.

We'll see, Yeah, actually, totally unwinding the premium that oil had built in after the Russian invasion. Gas prices down 50 straight days. Of course, jobs number tomorrow. We'll watch the wage component ahead of CPI next week. You've been listening to CNBC's Tech Check. You can always catch us live weekdays at 11 AM.

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