Chipotle, S&P record close, Big Bank earnings preview: Market Domination Overtime

In today’s episode of Market Domination Overtime, co-hosts Josh Lipton and Julie Hyman delve into three key topics: Chipotle Mexican Grill’s (CMG) executive transition, record-breaking index performance, and a preview of upcoming Big Bank earnings.

The show begins with an analysis of Chipotle’s stock reaction following longtime CFO Jack Hartung’s plans to retire in 2025. This news triggered a sell-off in the company’s shares.

Shifting focus to broader market trends, the hosts examine the S&P 500’s (^GSPC) performance, highlighting its 36th record close on Tuesday.

To round out the episode, reporter David Hollerith joins the conversation, offering insights on what investors can expect from upcoming earnings out from major banks this Friday.

This post was written by Angel Smith

Video Transcript

There’s the closing bell on Wall Street.

Now it is market domination over time.

We’re joined by Jared to get you up to speed on the action from today’s session.

Let’s start with where the major averages ended the day.

Not too far from where they were about an hour ago.

When we checked them here, we’ve got the dow lower by about 53 points about 1/10 of 1%.

Here, we have the S and P 500.

Very little change to the upside.

But any gain today means another record close for the S and P 500.

That also means it’s, it’s 36 record close, 36 record close of the year.

The NASDAQ also finishing higher on the day by about 1/10 of 1%.

Part of what propelled stocks, well, not propelled exactly, but allowed them to rise, I guess is the fact that Fed Chair Jay Powell testified before the Senate Banking Committee and did not offer any commentary that dramatically changes.

What is the current market view that we could get to interest rate cuts?

The uh still this year beginning in September?

So all of that, uh allowing stocks to kind of drift here.

Um If we take a look within the market internals here and what we saw on the day, let’s uh take a look.

First of all, at the sectors here, we did see a drop in materials related shares here, Albemarle, which we talked about earlier, the lithium producer getting um some negative analyst commentary around lithium pricing.

That’s one of the things that weighed on that group.

Energy stocks also lower financials here as well as health care, health care uh trading higher.

And I like to keep checking on the NASDAQ here and on the majors uh the mega cap tech because we keep talking so much about what has been going on and how much these have been lending.

One I didn’t mention earlier is Tesla.

Now, as we talked about, there’s some new data from Cox Automotive that shows us market share in electric vehicles below 50% with Tesla for the first time.

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However, the stock remains on a winning streak and I believe we’re looking at nine straight days of gains here might even be 10 straight days of gains.

But you see this has been quite a run in the stock.

It’s up about 44% in that point uh point in time.

And it also means that Tesla over the past couple of days has now flipped back into the green for the year to date.

So this year to date return now looks like it’s about 5.5%.

Josh.

All right, Julie, thank you.

Big banks kicking off a new earnings season on Friday, including JP Morgan Wells Fargo and Citigroup for more on what we can expect we’re bringing in Yahoo finds his very own.

David Holli, David.

Hey, Josh, uh, ahead of second quarter earnings, uh, blowout, uh, operating results aren’t expected for the country’s, uh, biggest, uh, four banks.

JP Morgan Bank of America Citigroup and Wells Fargo.

Analysts have described earnings for this quarter um generally from what executives have guided towards as both conservative and subdued.

Now, the context is that for most of last year, the big four lenders particularly JP Morgan and Wells Fargo have benefited a lot from higher interest rates compared to smaller rivals.

And since the beginning of the year, all these bank stocks have been on an incredible rally.

They’re up at least 20% outperforming the, the rest of the industry as well as the S and P. Now, JP Morgan Wells Fargo Citigroup report on Friday, as you pointed out and Bank of America report report on Tuesday, um they’re all expected to show a high uh gains in their investment banking revenue compared to last year net income though is expected to be down on a year over year basis for all these institutions that’s based on analysts expectations.

And it has a lot to do with the main street operations of just taking in deposits to make loans, those are getting pressured by higher interest rates in terms of credit and deposit costs.

These banks are are paying so on the investment banking front, as I mentioned, all these banks are going to benefit, but it also makes for a different story for JP Morgan.

Uh excuse me, Morgan Stanley and Goldman Sachs, which are both more investment banking focused.

Uh They’re likely to have a much better quarter in terms of their bottom line profits.

Um But broadly, analysts are going to be concerned about um about what these banks are going to say in terms of guidance um based on how things are going with higher interest rates, uh especially credit, credit quality for these banks.

Um but also how they might fare if interest rates are lowered later this year.

Um This all has to do with their net interest income guidance, which again is their biggest profit um source and we’ll want to see if those banks can keep to it.

Uh as an example, JP Morgan has sort of said lately that it hasn’t, has been out earning on its net interest Income Bank of America.

On the other hand, has pointed to the second quarter as its bottom with a pick up in the second half of the year.

And David, I’m just curious as well, what we’re hearing around sort of the capital markets, businesses for a lot of these banks, right?

And, and how maybe those fared in in the second quarter.

Yeah, so Julie, um compared to a year ago, uh they look much better.

Um Goldman Sachs in particular, they’re coming off of a particularly uh rough uh quarter from last year.

But compared to last quarter, um the beginning of the year, investment banking is not quite as strong, but again, I this is all to say, it looks much better than anything that was seen last year.

Um and that has a lot to do with the rebound in the capital markets.

So that’s continued to, to look pretty good.

And obviously there’s going to be a lot of uh analysts asking about whether or not anything is changing uh given the current path of the fed.

All right.

Well, we’ll see what all the numbers show when we start to get them on Friday, David.

Thank you so much.

Coming up an exclusive announcement from Amazon in our latest episode of next, that is next on market domination overtime.

Amazon web services is releasing its fourth generation Graviton chip.

The company shares that news exclusively with Yahoo Finance and our own Madison Mills got a rare look inside the Aws chips lab to see firsthand how the company plans to compete in the red hot chips race.

What I’m holding up here is our fourth generation Graviton processor that will be launching soon globally.

This is the brand new Graviton four chip from Amazon, its most powerful and efficient one yet.

The company exclusively shares with Yahoo Finance.

We will have launched four generations of Graviton delivering four x improvement in performance over that time period, Amazon web services is currently the industry leader for cloud services, owning nearly a third of the total market with Microsoft’s Azure coming at 25%.

Now, Aws wants to protect and boost its profits in two ways.

One by designing chips that can power its own cloud and two by positioning itself to capitalize off A I demand but Aws is far from the front of the pack and they’re ok with that.

Aws says they’re not looking to overtake NVIDIA that could allow them to take a profitable slice of the massive and rapidly expanding A I driven chip market.

This is what’s next in the chips race to understand Amazon’s new chip.

It’s helpful to understand what chips do chips are in almost any device that has an on off switch, whether it’s a dishwasher or a car or the most sophisticated A I system.

Aws offers two main types of chips, those that power A I and general purpose chips, which is where chip like Ravi four comes in.

Some are focused on doing database, some are focused on doing web, some are focused on doing A I and Amazon not only buys chips from the people you would expect like a MD and Intel NVIDIA, but they actually design their own chips in house.

That’s Patrick Moorhead, a former A MD executive.

Now as a CEO and analyst, he has exclusive access to Amazon’s chips lab.

Among the most important factors for new chips, power and efficiency, we get about three X amount of compute and three X amount of memory, about 75% more memory bandwidth.

And this will deliver about 30% better performance versus Graviton three and then further targeted workloads that now can benefit from the larger memory footprint.

We can receive up to 48 40% of higher performance improvement to do something like in memory analytics or databases.

That’s where this product will shine a lot more.

We need a lot of system memory available for you on the host node.

It’s not just about performance, it’s also about the bang for your buck Aws.

Customers can use Graviton four to cut their bill for it.

And in most cases with the same performance or higher performance at the same cost, Aws would not disclose details about Graviton four pricing but says processors are rented out at $0.02845 per second of compute power.

Aws says in-house testing speeds up chip delivery by eliminating the need to ship chips out for debugging.

It’s an evolution getting the first silicon out to actually making it production ready and it starts right here with looking at the silicon and sort of seeing how functional, how performant, how power efficient that process starts in Aws Debug lab at the automated test equipment station.

When we first got a Graviton four chip out of the manufacturing line, we install it in this machine.

Here, we are looking for manufacturing defects and that gives us some early insight into the health of the silicon.

From here.

Engineers place each chip on a board there, it undergoes several tests that assess signal integrity and find any issues.

Lastly, the boards are placed in servers where Aws uses them to power things like their own large language models.

We basically take fully installed servers and racks and do more high level testing to make sure that we build them at the similar sort of logical concept that we would deploy them in our data centers.

Chips are a staggering part of the global economy because they’re needed to run practically everything we use.

This was acutely evident in the wake of the pandemic, global supply chain disruptions caused massive backlogs in chip production and shipments.

The chips industry is currently valued at $544 billion and it’s expected to be worth more than a trillion dollars in less than a decade.

That’s according to president’s research, that trillion dollar estimate driven by one thing demand.

There are two major sources for chips, chip makers and hyper scalar companies like Apple, Google, Microsoft and Amazon, they’re developing chips to meet their specific needs to cut back on costs and offer customers more affordable alternatives.

All of these companies are spending a lot of money on developing chips.

Uh They won’t talk about how much they’re investing.

But what they do have is they have these giant R and D budgets and let’s say you can save $200 a chip and you’re buying a million of them a year that adds up and that’s a lot of money that you can pour in to do.

That.

Development is expensive.

Aws would not disclose its overall chip spend.

I’m not convinced yet that it is a net money winner.

NVIDIA is currently viewed as the dominant chips player with a market capitalization to prove it.

But there’s enough demand to go around.

According to analysts and executives, all of America’s biggest tech firms depend really fundamentally on chips that today are primarily or in a lot of cases exclusively manufactured in Taiwan by the S MC.

The Biden administration passed the Chips and Science Act in 2022 to bolster domestic chip manufacturing, investing $53 billion in to the sector simultaneously.

A I is driving demand for chips.

That’s because A I algorithms require complex computations and workloads which powerful chips can handle.

That’s where Aws hopes to find their.

Lane.

Amazon does uh the design, they do the testing, they do the validation in house themselves as opposed to having an Intel and a MD or an NVIDIA do it and that allows them Aws to lower their cost and pass that on to their customers.

Aws has to make chips for their infrastructure.

A MD Intel and NVIDIA have to make chips for everybody’s infrastructure, right?

With every passing Graviton four, our goal is to make sure that it’s the cheapest option relative to other offerings.

But then collectively it’s delivering more price performance, which means for every dollar spent you get a lot more performance, which is why customers really care more about price performance as a as a value metric um that they focus on the new Graviton four chip is not an A I chip, but it’s an essential power mechanism behind the Aws chips that do power A I via and Ranum trainum competes directly with Nvidia’s A I chips.

The upcoming Blackwell chip from NVIDIA is expected to cost between $70,000 according to Morehead does Aws stand a chance against NVIDIA.

I like to call it coop.

NVIDIA needs Aws.

Aws needs NVIDIA.

Nvidia’s chips are the fastest and most powerful in the market driving the A I behind large language models like Chad G BT.

That performance is in part driven by NVIDIA prioritizing A I early for context on the timing, Amazon launched its cloud computing business in 2006.

The same year, NVIDIA released CAA programming language that can enable machine learning.

NVIDIA Bowls argue that A I was built off of the chip giants tech so it’s harder to transition to competitors.

Companies are willing to wait an entire quarter to get their chip orders in that timeline is according to U Bs.

So where does this leave Amazon and its Graviton chip is the goal to get Nvidia’s customers to come over to Aws.

Not necessarily, there are different types of use cases that are better suited for different products.

If a customer is more focused on time to market NVIDIA based products that we offer and we offer the latest and the most diverse offerings and the largest scale of NVIDIA based products on the Aws cloud, that is a great option.

So it’s not a zero sum game.

I think we will eventually find a spot for all different customers to operate regardless of what their choices for investors.

Earnings expectations from chip development may impact company profits more than the actual chips in production among Amazon Microsoft and alphabet analyst.

Earnings expectations are highest for Amazon, the profit margins just for Aws hit 38% in Q one of 2024.

Aws has a lot of credibility uh in, in the semiconductor space.

And I mean 10 years ago, I I had questions, right?

How can a company like this do chips when you have companies investing multiple billions of dollars to do that?

But it is very good.

That approach could fuel price reductions across the industry?

I do think it’s a risk mitigator to potentially get better pricing from Intel ad.

And N Aws hopes the Graviton four release alongside new servers that are four times as strong as current ones will position them as a formidable chips player in the competitive market.

It sounds like a big part of the competitive advantage you have is related to cost.

Absolutely.

And that’s what we can get with G and our train and influential product, we can tune the product, tune the silicon to just focus on things that really matter for customer workloads.

That evolution could not only fuel future gains for AWS, it could potentially lead to more price diversification across an industry that continues to grow from silicon chips to tortilla chips.

Chipotle is announcing that its chief financial Officer, Jack Hartung will retire after nearly 25 years with the company.

22 of them as the Chief Financial Officer, he’ll continue in his role through the end of the year and then will be replaced by Adam Rymer who is currently Chipotle’s Vice President of Finance.

Hartung will remain with the company through March of 2025 to help ensure a smooth transition.

Again.

He has served as Chipotle CFO since 22 since 2002, we have talked to Jack many times.

He’s a lovely guy, obviously, um you know, has piloted um helped pilot Tripoli through enormous growth since 2002 to be sure and the stocks up something like 25% this year.

Yeah, he points out he actually started working there.

There were less than 200 restaurants truly of course now, uh more than 3500.

So he’s been there a long time, a true veteran.

Uh Adam Rymer takes over, he’s a veteran as well.

15 years uh at Chipotle served in a number of different roles most recently here.

Uh VP of Finance, the, the company does point out he reported to or directly to and has been mentored, in fact by Mr Hartung.

So um obviously a lot of experience there to your point.

I mean, Chipotle investors have died in the stock, you know, the company continued to perform well against what isn’t, you know, an easy broad restaurant ba backdrop um and analyst bullish as well.

A lot of bulls on Chipotle on the street.

So he was the CFO of the company before it even went public.

It went public in January of 2006 at $22 a share today.

It’s trading at 5748.

That’s where it closed today.

Um So obviously he has uh been through a lot with the company.

One more management change that they mentioned.

Uh Jamie, uh mcconnell is going now become the chief accounting and administrative officer uh as of January 1st, she’ll report to the new CFO um and she’s been there for, it looks like about uh six years or so and, and, and earnings coming up here.

J does report second quarter results Wednesday, July 20 four, I guess Jack will still be on that call until the transitions out of that role.

Well, that’ll do it for today’s market domination over time.

Be sure to come back tomorrow at 3 p.m. Eastern for all of your coverage leading up to and after the closing bell.

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