Broadcom earnings, Alibaba.com President: Market Domination Overtime

The major stock market averages (^DJI, ^IXIC, ^GSPC) ended Thursday's session mixed as Wall Street and investors look ahead to the August jobs report expected out Friday morning. Market Domination Overtime anchors Julie Hyman and Josh Lipton recap the day's market moves.

Broadcom (AVGO) stock moves lower in extended-hours trading despite the semiconductor manufacturer topping fiscal third quarter earnings estimates, but ultimately falling short of expectations around its fourth quarter revenue forecasts.

Alibaba.com (BABA) President Kuo Zhang sits down with Akiko Fujita to discuss the Chinese e-commerce platform's strategy for innovation by integrating AI into the site to enhance consumer and seller experiences.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Luke Carberry Mogan.

Video Transcript

There's the closing bell on Wall Street.

Now it is market domination over time.

Let's take a look at where the major averages are ending the session here.

Still have this mixed picture that we've been looking at here for sort of the latter half of the day, the dow down about 219 points.

A little more than a half of 1%.

The S and P 500 off a third of 1%.

The NASDAQ up by about a quarter of 1%.

You've got equal weights uh that are under performing today implying that we are seeing the and P 500 being buoyed a little bit by large cap technology.

Indeed, that seems to be what's happening.

The Wessel 2000 of small caps also underperform today.

And as we talked about, we did get some mixed data today, jobless claims better than ex uh expected.

But the AD P jobs report for uh last month showing a more disappointing number than had been anticipated.

So all of that translating into a mixed picture on stocks as well.

When you look at the groups within the S and P 500 here, you've got health care industrials and financials doing the worst, only consumer discretionary and communication services in the green.

And I remember I was talking about the large cap tech sort of holding up things a little bit as the NASDAQ 100 composite outperformed among the magnificent seven only Microsoft Down Tesla gaining about 5% here today.

Amazon, another standout rising more than 2.5%.

Josh.

All right, Julia next day on Wall Street, investors are on edge as they wait on the August Jobs report and the data could dictate the size of the fed's rate cut later this month.

Joining us now is Jim Miguel se I Chief Investment Officer Jim is good to see you.

So uh major averages were mixed today, Jim, you know, we we you get mixed economic data too and that of course comes after uh that fed Beige book which was downbeat uh tomorrow though, Jim, of course.

Now all eyes on that jobs report.

What are you expecting to see there, Jim?

How important is that report for the market?

Yeah.

Hi Josh.

Thanks for having me.

I think you're right.

All eyes for sure on this report.

I I can't really remember the last time that I would be able to say that I do think a single economic release can actually influence policy.

And I think that's where we are with tomorrow's report.

If we come in with a 170 print or higher uh we're probably gonna get 25 basis points.

We come in with anything in the one forties or below.

I, I think you get 50.

I think that's how close it is.

Uh, and it's, it's unusual but we are awful lot.

There's 25 basis points writing on this report tomorrow.

Um And so how, as an investor do you begin to sort of frame how you anticipate it, how you react to it or do you just sort of try to focus on the longer term and say where rates are, you know, six months from now?

Yeah, that's, that's right, Julie, you look, you try to look right by it because the re the reality is if we look at 12 months or even if we look to the end of the year to the end of the year, let's look at it that way.

We have, we have three meetings between now and, and the end of 2024 and we have over 100 basis points of cuts priced in, that feels an awful lot of doves to us regardless of what happens tomorrow.

So whether we're talking 140 or 170 in our mind doesn't really matter.

You know, we, we need some real dire even more dire than the beige book today.

We need some really dire economic numbers in our, in our minds to get 100 basis points.

So kind of our view is that we're probably gonna underperform market expectations whether or not we get 50 in September or 25.

Uh, Jim, let's put your earnings.

You've got a name coming up here, uh, shortly Broadcom will, will be reporting results.

And obviously Jim, you know, that that stock has enjoyed a nice move in part because investors have, have seen it as a smart way to play the A A I trend at the same time, Jim, clearly, you know, in that earnings season, we saw some new questions and, and skepticism about that A I trade.

How are you as a strategist thinking about that, Jim?

Yeah.

So it's, it's, it's a great point and it kind of echoes what we're talking about here with these important single economic releases.

You know, it wasn't that long ago where everybody was huddled around waiting for NVIDIA to release.

So you're exactly right.

It has been a relatively strong earnings report.

Even NVIDIA hard to call that anything other than a very, very positive report, but it's all relative to expectations.

And I think the, you know, the wind coming out of the sales of the A IA I trade at this point in our minds is just the length of time that this is gonna take to have these applications actually be somewhat meaningful uh to the broader economy.

Our, our view remains the same.

We do think particularly if you're a passive investor in us, large cap, you're taking on a lot more idiosyncratic risk now than you have been in the past.

And we are looking for that kind of broadening out for that rotation to continue.

So we like things more along the lines of equal weights and active management with a little bit more of a value bent.

And what does value look like right now, Jim value looks like financials.

And you know, another, another big topic which we haven't touched on is we have a positively sloped yield curve for the first time in, in, in two years.

Iii I feel like I feel like we should be going out and celebrating that.

At, at this point, we have a whopping eight basis points between twos and tens.

That's a positive for financials.

You know, we have also, you know, loans haven't really been uh overly active uh for uh big money center banks.

We feel that that's gonna be kind of coming back uh uh into the into the market.

We had a lot of issuance in corporate debt over the last number of weeks, which was very, very well received.

And another theme that credit markets are really taking all this in stride.

So from a value perspective, that means financials, that means money center banks, that means a little bit of materials and, and even some industrials.

Uh Jim Trump speaking today at the Economic Club of New York.

I'm just curious, election front and center about two months out.

What kind of questions are you getting from clients about that, Jim just starting.

Uh Right now.

Uh Josh, interestingly, I think a lot of this news, particularly what's going to be going on tomorrow has really been front and center and the election has taken a little bit of a, of a backseat.

But of course, as we get closer, that is going to be more front and center.

You know, our, our message is actually to the investors has been kind of focusing on where do these, both, both of these parties actually agree.

Uh And you know, both of them are, are fairly protectionist and uh everybody still wants to spend like a drunken sailor depending on how, how you're gonna get to that spending, whether it's on tax cuts or whether it's just on outright spending itself.

So that keeps us kind of focusing on the levels of debt, the potential to have a little bit of a of an upward trend in longer term interest rates despite the fact that the fed is cutting.

So that keeps us and keeps our investors a little bit cautious on longer term yields.

That's kind of been the focus of our election talk.

And, and are you also focusing at all on, you know, things like corporate tax rates or is that something that is sort of beyond the election when we actually know what the composition, for example of Congress will be?

That, that's the, that's the big part is, it's like what you know what, what, what do markets like markets like divided government and markets like divided government for exactly uh those points, which is when we, when we start talking about these campaign led uh kind of visions of taxing things like unrealized capital gains, uh increases in, in the capital gains rate.

It really does all come down to not just who's in the White House, but of course, what is the makeup of Congress?

So we are trying to have our investors just try to be patient, not get too caught up in what are what are essentially just kind of campaign promises and in many, in many cases, campaign trial balloons that are just being floated out there.

There's a long way to go and, and a lot of road to cover before any of these things actually make it into the tax code.

Indeed, Jim, thanks so much.

Appreciate it.

Thank you.

Speaking of which former President Donald Trump unveiling a new batch of economic policy proposals today, including an idea from one of his fellow billionaires, take a look at the suggestion of Elon Musk who has given me his complete and total endorsement.

That's nice smart guy.

He knows what he's doing, he knows what he's doing.

It's very, very much appreciated.

I will create a government efficiency commission task with conducting a complete financial and performance audit of the entire federal government and making recommendations for drastic reforms.

We need to do it can't go on the way we are now joining us now.

Yahoo Finance is Rick Newman.

Uh, Rick, I'm envisioning um Elon Musk, walking into uh us government buildings holding a sink just like he did when he took over Twitter.

And then like, what, what percentage of staff did he end up?

Did he end up cutting from Twitter?

I don't know, half of it or at least half of it got rid of the San Francisco Office.

Made it borderline dysfunctional.

Is that what we're gonna put the technology and yanked it out of the yank it out, yanked the wires out of the wall.

I mean, listen, all of this said, I, I think many Americans agree that government is bloated in various ways.

Is this the, the answer?

II, I think, uh, this is such a great idea to have Elon Musk reform, the government that I think Kamala Harris should actually, even if she went, she should appoint Elon Musk.

Sure.

Come on in and fix it as if nobody ever had this idea before.

I mean, you might want to read the other 4999.

Fix how to fix the government reports that are already sitting there on shelves.

I mean, Bill Clinton had rego reinventing government.

There was a thing on Obama called Simpson Bowles or maybe it was B Simpson, uh, think tank in Washington DC has its own.

And guess what I mean?

Bloat and malfeasance is a, is a feature not a bug of the US government.

Um You know, one of the reasons nobody ever cuts a cabinet department is because every cabinet department represents a jurisdiction for some committee or subcomittee in Congress that represents a budget for the members on that committee and that represents power.

Um So you take away departments, you take away funding, you're actually cutting into the power of members of Congress who appropriate that money, which is why we don't get changes in the government.

So Trump can try.

Nothing's gonna happen.

I'm curious, Rick.

Uh so Trump speaking today at the econ Economic Club of New York and apparently talking about a 15% corporate tax rate for companies that make products solely in America.

Do we have any more color?

What exactly that means?

Any details?

That's it.

All right.

Well, and how many companies are there that still only solely make products in America?

Solely make products in America?

Was solely, was it?

So, I believe that was it, wasn't it?

So, I think they're, I mean, I don't know, I think I'm sure there are some, I mean, they're, they're likely to be small companies, by definition, large companies are MN CS, multinational corporations operate everywhere.

They probably so the Fortune 500 if that were an actual thing that went into effect the Fortune 500 S and P 500 probably wouldn't, wouldn't get that tax rate.

But you can imagine there are a lot of small companies, I mean, companies that are su suppliers, family run companies.

There are a lot of companies like that that have 50 to 500 employees.

Um, so that is kind of a, I guess that you would call that a small business, um, you know, proposal.

And he also what he's gonna, he also said for every new regulation he wants to retire 10 old regulations.

I actually think that is not a bad idea.

I think, I think Biden should be doing.

I think every president, if you're gonna impose new regulations, get rid of the old ones from 1923.

Uh that really don't do anybody any good anymore.

And the other thing Trump hinted at is that um he may want even higher tariffs on import than he has proposed up till now.

So he started at 10% on everything and 60% on China.

Then he went up to 20% on everything and 60% on China.

And he, today he hinted that maybe he's gonna come out with an even higher number.

I mean, it's a terrible idea at 10%.

So why not?

You know, you don't make it twice as bad an idea at 20 or three times as bad at 30% at the risk of that.

I mean, maybe cynical, but I have an honest question for you.

I mean, you only, I mean, we're about two months out now at this point, do the policies even matter.

No, I mean, really because at this point we all know Trump, we all know Harris.

I mean, is anybody's mind actually changing in the next eight weeks?

I, I think it's clear that both of these candidates think they can change some minds and what we are seeing are very targeted policies, um, that are going after voters in Pennsylvania, for example.

I mean, good one in the news this week is the US, you know, standing in way, the uh that, that is solely because of because the steelworkers Union is opposed to that deal as it stands right now.

If they get more, you like better job guarantees or like ironclad guarantees in the future, that deal could go through probably not gonna happen before the election.

So the one thing Biden Harrison Trump agreed on was they, they do now.

Yeah, they basically do.

And, and that's because there are something like 50,000 steel worker jobs in Pennsylvania, a crucial swing state that they are going after.

So I think both of them clearly are honestly saying anything that might get an extra five or 10 votes in the, in the key state.

It's a dead heat.

I mean, really, it looks like it, what the polls look like that is what the polls look like for now.

Thanks.

Thanks guys.

Appreciate it.

Well, coming up, we'll be getting the latest earnings from Broadcom.

We'll give you the numbers, we'll talk to an analyst to recap the report as well.

Stay tuned, more market domination over time.

Coming up.

Broadcom's third quarter numbers hitting the wire and the shares are down 4% that has to do with the forecast.

I'm gonna back into last quarter's numbers and give you the forecast first here.

Fourth quarter revenue Broadcom says will be about $14 billion.

That is short of estimates for about $14.13 billion.

It seems to be that is why the stock is taking a tumble here.

Third quarter adjusted earnings per share coming in at a buck 24.

That's two cents a head of estimates and revenue a little bit above estimates at $13.07 billion.

Now, the estimate there was for $13.03 billion specifically semiconductor solutions revenue also missed estimates at $7.27 billion.

So it may be that too is contributing to the decline in the shares.

It looks like the company has also raised its quarterly dividend by a percent to 53 cents a share.

And finally, another uh thing on the forecast, it sees full year sales from A I of $12 billion that's coming from uh Co Haw Tan here in a statement saying Broadcom's third quarter results flick to strength in our A I conductor solutions.

And VM Ware, he says we expect revenue from A I to be $12 billion for fiscal year 2024 driven, he says by Ethernet networking and custom accelerators for A I data data centers, you know, heading into this print Julie, this stock nice run.

I mean, it was up about 35% this year.

It was about 75% over the past 12 months and, you know, bows and we've had them on the show.

There are a lot of them on this name.

They, they like this C suite, they like the business model in the margins as Hock Tan has pivot this company uh more to software.

And of course, there's been plenty of analysts who think this has been a smart way to play that A I theme.

Broadcom part helps companies uh design custom chips for their A I initiatives.

So that's been a big reason for the enthusiasm here, but at least initially here after hours and some disappointment.

Yeah.

And just to give a little bit of perspective on that $12 billion figure, the projected sales from analyst for the entire year is uh just over $51 billion.

So $12 billion a decent chunk of that, but definitely not even approaching half of uh full revenue for the full year.

So just to take a look at that, so uh we'll keep watching this Broadcom shares and we are also going to be bringing you reaction from an analyst in just a bit.

Meanwhile, Chinese e commerce giant Alibaba is doubling down on the US, its global business.

The business arm is rolling out a slew of products at its second annual co create event in Las Vegas.

Among the announcements, a tie up with mastercard to launch a new credit card for businesses and a new sourcing agent driven by generative A I. Akiko Fujita spoke to the president of alibaba.com, Kuo Zheng about why he thinks generative A I will accelerate global trade on the platform.

We think that it is a perfect scenario.

Since the first, the process is complex and the people are using different languages in different time zones with different cultures.

As a background, we first launched our A I tools for the sellers last October.

And now we have more than 20,000 of uh customers seller site from China and 10,000 customers outside China who's using this A I tools.

And today we are announcing the tools for the for the buyer part.

So we are providing tool which is not a kind of traditional uh passive search engine.

It's a kind of a conversational search engine.

It will get you through.

You can start from a scratch to describe about your ideas or you can through a bunch of a list of questions or even a quotation documentation to the engine and the engine will get you through step by step.

This partnership that you are um you have with mastercard, you're launching a credit card.

I'm looking at the terms of that.

Um Certainly you can see the multiple use cases here, obviously increasing access to capital for the small media price, medium sized enterprises that you serve.

Also though pushing to the alibaba.com platform as well.

I mean, what opportunity do you see particularly in the US market beyond what you already have?

How significant is that growth opportunity we want to launch new uh financing services, for example, give you a more kind of payment terms like 30 days to 90 days.

So you can manage your cash flow better.

The second part is can give you th 3% of the cash back if you pay it online.

And after that, we are providing after sale services.

The let's say if the product you receive have a defect or not as disrupt that you make before, then you can return the product to 4700 different locations for free.

So, so the ease of transaction as you laid it out, but clearly, there's an opportunity that you see here given the launch that's happening today.

Um How big is that market for the US?

Is the US for Alibaba right now, how much more growth do you see potentially?

So currently US is around 30 to 40% in total from the GMV or the transaction perspective.

And that's only cover part of the business in daily basis.

You think about the global trade is a $20 trillion business.

So now the penetration of the digital penetration is a single digit.

So we believe there's a lot, there's a lot potential to grow if we lower the barrier and less more SM BS to come to this network, alibaba.com, of course, um just a AAA part of the larger Alibaba company.

Um you know, looking at your most recent earnings, um certainly a slowdown in the economy back home in China um creating headwinds particularly on the consumer facing side of the business.

The international arm though a bright for the company, I'm looking at international digital commerce that was up more than 30% year on year.

To what extent does the slowdown you're seeing in China increase the importance of the international arm, particularly B to B for Alibaba as a whole.

We have three major uh strategies I think not only for this year but also for the next three years.

The first thing that we already mentioned is about technology like the A I so A I can lower the barrier for more buyers and suppliers to come in to do businesses with each other.

And this is our mission to set up this business to make it easy to do business anywhere.

So we talked about that before.

The second part is about to build the digital supply chain to make sure the buyers and sellers can trust each other can pay easily to pay and deliver the product.

The third part is uh we are helping the uh buyers to coping with uh supply chain disruptions, especially we are introducing more and more global supplies into this network.

So the supplies including from the Europe, Southeast Asia, North America and Mexico, Latin America as well.

So these, we can prove with uh with the effort of this, the buyers are easily to select their partners, not only from China, but from all over the world.

And these three strategy actually is driving our growth.

Yeah, let's talk about what's playing out in the Chinese economy.

Certainly a lot of our viewers very interested and you've got a good pulse on this.

Given that sme these are a real driver in the Chinese economy.

About 60% of GDP, you have conversations with the small and medium sized businesses.

How would you assess the health of those businesses?

We speak with many of the manufacturers, with the suppliers in China?

I think for this year, one thing is that more and more kind of suppliers would like to participate in the global trade, take Eu and Guangdong, Guangzhou as example.

So suppliers, they are actually the new suppliers come to the marketplace actually is 30 to 40% of growth comparing for the last year.

So which means that more and more suppliers would like to join this global trade that push to export more though, I mean, how much of that is a symptom of what's happening in the domestic market and wanting to seek out opportunities in more high growth areas.

I think both so previously is very hard for them to understand what's the real demand and how to kind of ship in time and how to collect the money.

And then now with the help of digital, I think it's more and more easier for them to, to kind of lower the barrier and participate in the global trade.

You talk about global cross border trade, certainly fraught with risks increasingly on the political side of things.

Um you know, global here in the US.

Um you've got the potential for the return of former President Trump who has already talked about um uh the possibility of 60% tariffs on all Chinese imports starting at 60%.

We should say, I mean, you're increasing your supplier base, but you've still got what, roughly 90% in China, I mean, how big of an impact would this be for alibaba.com?

And how are you preparing for the possibility?

So first of all, if we talk about the global trade, actually the fundamental rule is demand and supplies.

So I think from the US buyers perspective, the SMB want to buy some stuff.

So there are a lot of things they need to consider like what product I I produce, what are the market, what are the cost and what the kind of inflation rate and et cetera and the tariff is only one part of that.

And you could argue that it's not just the US anymore.

I mean, Europe has also launched some investigations of their own potential additional tariffs coming on that front as well.

We see different areas actually have different type of demand like in developing countries in developed countries.

Actually, they are buying different stuff.

And what we, what we can do here actually is the first we can lower the barriers so more people can participate.

And the second is that we can make the supplies more diversified from all over the world.

And we have plan to kind of uh invest more than 100,000 kind of uh suppliers all over the world to participate in this uh in this network.

So more and more sme s can get beneficial from this globalization.

So that is uh our view and our effort.

That was the president of alibaba.com, Ko Zhang.

The platform itself has roughly 40 million small and medium sized businesses, 200,000 suppliers on board connecting with each other.

But as we said in the piece, it's still very heavily exposed to China.

Now, Quo Zhang says specifically that the company is looking to diversify their supplier base outside of China, including through M and a last year, Alibaba acquired a German B to B platform visible to pick up some of that footprint in Europe as well.

But even with that guys, the breakdown is 80% China 20% outside right now.

So you can imagine any additional tariffs likely to create some significant risk for that platform.

Great stuff.

Thank you so much Akiko time now for to watch Friday, September 6th and starting off with of course, the labor market, the monthly jobs report for August is coming out in the morning.

Economists forecasting non farm payrolls to increase by 165,000.

Coming after July's weaker than expected.

Numbers signaled a significant cooling in the economy.

Unemployment expected to take down slightly to 4.2% while hourly wages take up to point 3% month over month, Wall Street will be watching this report closely.

The numbers giving us a clear picture of a potential rate cut in September from the fed and whether the cut could be 25 or 50 basis points and more from the fed will be getting some fed commentary in the morning from New York fed President John Williams and fed Governor Christopher Waller.

Investors will listen for any comments of course about the job support from the fed officials and how they're thinking that the latest numbers ahead of the F one MC.

Next interest rate decision.

We've heard a lot of people say Josh that it could be pivotal to see if it's a 50 basis point cut for 2525 were super size.

Maybe get more of him tomorrow.

We'll see.

All right, 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, but don't go anywhere on the other side of the break.

It's asking for a trend.

Stay tuned.