Loading summary
Transcript43 lines
- [00:00]
Aflac Advertiser
Many employees can't afford a hefty medical bill that pops up out of the blue. But it happens. And employees who are financially stressed are understandably more likely to be distracted at work, costing their employers greatly in lost productivity. Luckily, Aflac plans help with out of pocket expenses not covered by health insurance and can be offered at no direct cost to businesses. Learn more@aflac.com frumarkets that's aflac.com frumarkets
- [00:27]
Anne Berry
cracker barrel a CEO shake up just as the turnaround shows signs of working have the latest Jensen Huang the impact of the Nvidia CEO's first expos is rippling across Silicon Valley. We break down the debate over access to AI models and tariffs. Trade tensions. They're back. They're heating up again. Can this market absorb yet another stress? Test for Monday, July 27 is Blue Markets Daily and I'm Ann Berry. More market details to come. But first, tariffs back in the headlines with a new wave of levies fresh from the White House. That's with the expiration on Friday of a 10% baseline tariff that provided a stopgap after the Supreme Court ruled in February that certain Liberation Day tariffs were illegal. Well, the replacement tariffs impact imports from 60 trading partners and hit at a level of up to 12 and a half percent. Small businesses have already sued to halt the new tariffs, including Learning Resources. That's the family owned educational toy company that took the last suit all the way to a Supreme Court victory. But the volume on tariffs even outside this news has been turning way on up in recent weeks. President Trump wrote in a post on Truth Social that a quote, substantial tariff could be placed on the European Union at the earliest possible moment. That's after the EU fined Google 890 million euros roughly a billion dollars on for self preferencing its own services such as travel and local listings over competitors when it came to Google search results as well as for anti steering restrictions on Google Play which prevented app developers from directing users to cheaper purchasing options. Google, by the way, has been given 60 days to adjust its practices or face additional periodic fines. Then there's a new 50% tariff due to take effect on August 19th. And that's on a range of goods in imported from Canada, from hockey sticks to commercial cement. And the reason for this is President Trump's concern over quote, unequal treatment of American cars, dairy products and alcohol. All in all, an escalation of tension with America's second biggest trading partner. Well, so far the markets have not had the volatile reaction that we saw last year when trade policy unfolded fast and furious. I remember we were always rushing to catch up. But this is a moment we are watching. The outcome of the war in Iran remains uncertain. The AI trade is having to prove itself this earnings season. Just take a look at today's chip sell off. And there are whispers, whispers, faint whispers of a rate hike in September. So can the market take multiple stresses at this moment of historically high valuations? It's the key question everyone's asking. We're going to keep on watching. Well, on now to other headlines from the day's trading session. Kicking things off with the Hollywood mega merger that is getting ever more expensive.
- [03:24]
John Cotto
That's right. Paramount has officially delayed, delayed its proposed $110 billion takeover of Warner Brothers Discovery. That's after a coalition of 12 states sued to block the deal on antitrust grounds. The companies have agreed to pause the merger until the lawsuit is resolved or until June of next year, whichever comes first.
- [03:40]
Anne Berry
Well, that delay does come with a price tag. It's pretty hefty. Paramount had agreed to pay Warner Brothers discovery shareholders a 25 cent per share quarterly ticking fee. And what that ticking fee means is if the deal isn't completed by the end of this September, then that extra payment get going on the clock. So if the merger drags out until next June, we're talking about roughly $1.7 billion being added to the acquisition cost with shares of both Paramount and Warner Brothers Discovery down round about 1% today.
- [04:11]
John Cotto
Elsewhere in media, NBCUniversal struck a multi year distribution deal with YouTube that will bring Peacock's full lineup from NFL games to the real housewives to YouTube Premium subscribers. The deal dramatically expands Peacock's reach, putting its content in front of YouTube's 125 million premium members, four far larger than Peacock's 48 million paying subscribers.
- [04:31]
Anne Berry
Well, the timing is notable. It struck us and that's because Comcast is preparing to spin off NBC Universal, which makes partnerships like this one even more important as a way to strengthen Peacock's position as the streaming landscape continues to evolve. Shares of comcast trading around 3% higher today. YouTube parent Alphabet up 2%. On the news.
- [04:51]
John Cotto
Moving over to a turnaround story we've been following closely here at Brue Markets. It's very important. Cracker Barrel.
- [04:56]
Anne Berry
That's right, the restaurant chain is changing. CEOs Julie Messina stepping down next month and will be replaced by former Bloomin brand CEO David Denno.
- [05:05]
John Cotto
Of course, Bloomin Brands, part of the Bloomin Onion from Outback Steakhouse. That's exactly right And Massino spent the last three years trying to revive the struggling chain, overseeing menu changes, store remodels and cost cuts. But her tenure also became mired in controversy. Changes to Cracker Barrel's branding, including the removal of Uncle Herschel from its logo and menu updates, sparked backlash. But the business had been recently showing signs of stability. They started making fresh biscuits again, and the company posted an unexpected quarterly profit and raised its full year outlook in its most recent earnings report.
- [05:37]
Anne Berry
The Biscuit story really landed on this show. John, I remember your mum noticed that they were perhaps frozen, did not enjoy that.
- [05:43]
John Cotto
She said we're not going back.
- [05:44]
Anne Berry
She said we're not going back. Well, maybe we will. Shares of the restaurant chain falling over 3% today and perhaps because investors are weighing why the company would replace its CEO just at the moment that results appear to be improving. That share price today, though around $53, is still down from the 60 bucks level when Massino took over in Novemb November 2023. So even with all the lift that's been happening operationally, still not a big enough change in that overall share price. Meanwhile, shares of meatpacker Tyson Foods and Better News jumped more than 6% today after the United States announced it would resume cattle imports from Mexico.
- [06:21]
John Cotto
The move ends a more than year long suspension that was put in place to prevent the spread of a flesh eating parasite. Before the ban, Mexico shipped roughly 1 million calves to the US each year, which is about 5% of the nation's cattle supply.
- [06:33]
Anne Berry
Well, losing that supply worsened an already tight cat market, squeezing meat packers and helping to drive beef prices to record highs. Well, by reopening the border, the Trump administration is looking to ease the domestic cattle shortage and lower costs for processors like Tyson. And finally a blockbuster IPO halfway around the world. But cannot underestimate this one. Shares of Cxmt, that's China's largest memory chip maker, surging over 460% in their Shanghai debut.
- [07:02]
John Cotto
The listing vaulted the chip maker to an estimated market value of over 480 billion doll it the most valuable company listed on a mainland Chinese exchange. While CXMT still trails global memory leaders such as sk, Hynix and Micron, its business is thriving as China pushes towards chip self sufficiency.
- [07:21]
Anne Berry
Let's take a quick break and when we come back open or closed, we survey the AI debate that's gripping Silicon Valley and its investors.
- [07:30]
Aflac Advertiser
Bitcoin finally clicked for me when I realized it's built to be used with cash app.
- [07:34]
John Cotto
You can actually do that.
- [07:35]
Aflac Advertiser
Send bitcoin instantly pay it local businesses using Square or move it to your own wallet Wallet whenever you want.
- [07:41]
John Cotto
It works more like real money and less like something locked in an account
- [07:44]
Aflac Advertiser
for a limited time. New customers get $10 added to their balance. Just use code Bitcoin10 when you sign up. And don't forget this part. Send at least $5 to a friend in the first two weeks. Terms apply. Cash App is a financial services platform, not a bank.
- [07:56]
John Cotto
Banking services provided by Cash App's bank partners Bitcoin services provided by Block Inc. Brand for additional information, see the Bitcoin disclosures at Cash App Legal Podcast Hear that?
- [08:07]
Anne Berry
That's now crispy and McCrispy strips meeting creamy ca sounds extra crispy Caesar sauce
- [08:16]
John Cotto
at McDonald's for a limited time
- [08:21]
Anne Berry
A chord was struck in Silicon Valley late last week when Jensen Huang, the CEO of Nvidia, posted on X for the first time. And it wasn't just the fact he was taking to Elon Musk's social media platform that got all eyes on it. It was the content of his post that has set X alight. Well, we'll get deep into the details of his post and the ripple effects, but the crux of his message is that it's crucial, in his opinion, that open AI models, not the maker of ChatGPT rather or freely accessible resources, remain open. So when the word open is used in the context of AI models, it generally means that a specific AI model can be downloaded and run by anybody on their infrastructure and free from the maker's original rules. Closed, on the other hand, meaning you can only use the AI model through that maker's own infrastructure on their terms. And this includes the most advanced frontier systems built by Anthropic and the company, perhaps ironically named OpenAI in light of this terminology. Just this morning, Nvidia followed up on that letter by formally launching The Open Secure AI alliance, along with Microsoft, SpaceX, Palantir, and dozens of others, all coalescing around the idea that open AI models are a cybersecurity necessity and must be protected. We're going to dig into why now. Not everyone in Silicon Valley, or in the White House for that matter, backs this view. At least not all of it. And we're going to get into that too. But John, let's kick off with a recent cyber event that really shines a light on the differences between open models and closed models. Give us some background on the Hugging Face hack.
- [09:55]
John Cotto
Right, so Hugging Face is an online platform and community where users share and test AI models and software tools. Earlier this month, OpenAI confirmed that one of its models broke out of a lockdown test, got onto the Internet, found a security weakness and used it to get into Hugging Face's computer systems. Now, to understand and defend against the attack, Hugging Face initially attempted to use anthropic models to analyze its logs. But the anthropic models refused to do the analysis, citing its own guardrails against cyber attacks.
- [10:26]
Anne Berry
So Anthropic did not step up to help an issue created by OpenAI. Just to be super clear, yes, because
- [10:31]
John Cotto
anthropic is closed, so they were Hugging Face was unable to use its resources. So instead, Hugging Face turned to an open weight model from China. And the weights that we're talking about, that you're going to hear about in this coverage is the actual encoded knowledge the model learned during training. And so after analyzing the tack with that open model, Hugging Face was able to boot out the hacking AI agents from OpenAI, reset its passwords, rebuild the compromised parts of its network. So the bottom line, it turned to an open weight Chinese model, which was not bound by the same restrictions as the anthropic models.
- [11:04]
Anne Berry
So this has really thrown open the debate around what is going to go on in this race between China and the United States in the development of models, be that open or closed, who gets to access them? And is there a sense that there is a risk that China and US start running at different paces? In just the last several weeks, Chinese AI firms like Deepseek and Z AI have unveiled models that appear to be narrowing the gap with US frontier AI systems from the likes of OpenAI and anthropology, while also, and here's the really critical point, costing a fraction as much to run. So these open source Chinese models can be 60 to 90% cheaper. And it's meant that some companies, even one like Coinbase, a publicly traded company here in the United States, has announced a move to using some of these cheaper Chinese models. I mean, that's a monumental move in amongst all of this, right?
- [11:54]
John Cotto
And the leader there of Coinbase said that they were saving as much as over 90% using the Chinese version. And so of course, these concerns bring into security, national security debate, corporate security debates, because it comes down to distillation, that Chinese models extract knowledge from a better trained model, essentially stealing from US rivals.
- [12:17]
Anne Berry
That's the accusation.
- [12:18]
John Cotto
Yes, the accusation is of distillation, and that's what distillation is. Last week, Treasury Secretary Scott Bessant threatened sanctions on Chinese companies that commit distillation against U.S. companies, saying, quote, open source is not open Season on American ip. It's been reported that the Trump administration has weighed a ban on these open Chinese AI models.
- [12:38]
Anne Berry
It's kind of the new version of what has been a long standing source of debate and contention and frustration, which is essentially the idea of sort of ripping off ip. Right, right. And this idea is that distillation is being used to sort of extract knowledge from one model and sort of backward engineer what the underlying knowledge would have been used to train it. So this is a sort of continuation of a theme. It's a long standing point of contention. Well, here's what came about on Friday. So Jensen Huang posts and we saw some public support of open mod proliferating across X in reaction to this. Not necessarily support of the Chinese models specifically, but of this concept of open models in general. I think that's where this debate gets a little bit murky. It's open until we don't want it to be open anymore. It's open except open for you or to you or by you. So Jensen Huang, the CEO of Nvidia wrote again, it was his first post on X. Again I think part of the buzz was because you know, there he was coming to social media to make his case and he shared a letter at several pages long. You can go on to his handle, you can see it, it' posted up there in its full. And he shares a letter on quote, why open models matter and effectively. He writes that open models strengthen safety and cybersecurity, accelerate innovation and diffusion and enable sovereignty. And the crux of his point is that you can get the brightest minds looking at these models and that is how you get innovation and as a result how you get to greater safety and security. And he argues that the worlds need both. He says the world needs both frontier closed models and frontier open ones, which feels like a little bit of a. But therefore that's you can have a world where you got Chinese open ones and Chinese closed ones. But the point is he's just saying it's not as clear cut as we should not have them.
- [14:18]
John Cotto
Right, exactly. Because there had been growing concern that maybe the White House would have policy of just shutting it down in reaction to these events in China. So minutes later after that post, Satya Nadella, Microsoft CEO, posted that open source software was, quote, essential to a healthy AI ecosystem. Lots of folks joining in. Elon Musk posted, Jensen is right. This has my full support. And Mark Zuckerber wrote, open source is positive and important for us. And so over the course of the weekend, dozens of other tech companies including IBM, AMD, Palantir, Del, Cisco. Many of them joined in including OpenAI and Google ended up endorsing this letter. Now two holdouts from this letter were Anthropic and Amazon. They did not endorse it and I haven't seen any reporting or comments of why Amazon didn't sign this letter. There's no reporting, but Amazon is Anthropic's largest investor and Anthropic runs on Amazon's Tritanium chips.
- [15:15]
Anne Berry
Got it. So they can't necessarily speak for each other, but there is clearly close collaboration in the ordinary course of their business. Well, at companies like Anthropic claim that just some AI models are too dangerous to be developed in the open and must be tightly controlled. Part of Anthropic's core narrative by the way, is about being sort of a more security focused, higher integrity. I'm parallel, you know, paraphrasing here and making sure that safety is part of it. That's how they've sort of positioned themselves in their branding. And so Anthropic says, look, this is the reason that we need tight control so that businesses like theirs are the ones that actually hold the keys to the kingdom. Well, in response to the letter, Sam Altman said that he wants the U.S. to win AI, quote, both in open source and proprietary models and that he was glad to see the letter. So we are seeing the great and the good of big tech jumping out here around this.
- [16:04]
John Cotto
You know, and this reminds me of when I was growing up and sort of into computers. At the time, long before AI, there has been this open versus closed debate on software in general in Silicon Valley. Netscape, you may remember, was the first open source. They put out their web browser and later created the open source Mozilla and Firefox projects. Of course Linux has had a prominent open source platform for 30 years.
- [16:26]
Anne Berry
Let's talk a little bit about the broader implications of this. And this is the second piece of what was announced and that's this new open secure AI alliance. Nvidia said, quote, the recent hugging face security incident delivered a clear reminder cyber defenders need open frontier agentic systems for self defense. So the companies in the alliance announced that their aim is to create and deploy a suite of open source AI tools that any company can use to defend against cyber attacks. Nvidia, let's just talk about the motivations here. Will still sell chips regardless of sort of who's using them or which models are winning. It's all about the volume of overall usage. You've got the likes of IBM and Oracle. They too, you know, the models will spur demand for their cloud computing services. The piece I'm watching closely here is what the cybersecurity stocks are doing. So I'm going to give a couple of days to settle down, but I really want to see what the likes of CrowdStrike and Palo Alto Networks come out and say in response to all of this.
- [17:18]
John Cotto
Yes, and they've also signed that letter from Friday. And just one more thing to look forward to this week. OpenAI CEO Sam Altman is expected to meet with senior Trump administration officials, lawmakers and economists in D.C. and he's expected to preview the capabilities of the company company's upcoming AI models.
- [17:34]
Anne Berry
I mean we've seen that chatter coming from the White House that they the White House saying that it wants to actually preview more and more of these models as they get released to try to ensure that the government is staying on top of what is cutting edge and could pose systemic opportunity or systemic risk. Well, Nvidia's stock price really part of the broader chip sell off down 5% today. But there is one other thing I want to unearth from all of this and it's just the curious way in which X is now jumping to the forefront when it comes to high profile CEOs and leaders want to share news. So not for today, but I'm sort of teasing it. I want to see if anyone listening has come this far and wants us to double click on this. Ah, no. The leader of lvmh, France's richest person, has joined X to fight negative stories of family succession. There is apparently family succession drama unearthing over at lvmh. It was covered by the French press. Le Monde published a six day series about Bernardo knows luxury empire, his business acumen, his political influence and his art. And apparently the succession battle that is raging among his five children. And he took to X to talk about it. We're not going to cover it right now. I think we absolutely have to cover it this week. So come back and we will dig further into how X is becoming the platform of choice for billionaires. It's 4pm on the east Coast. There it is. The market's wrapping up for the day. There's the closing bell. We don't have a ticker tape. Instead we'll throw it over as always to our human ticker. Our producer John.
- [19:03]
John Cotto
It was a mixed day on Wall. The S&P 500 finished flat, the Dow finished up half a percent and the Nasdaq finished the trading day down 2:10
- [19:12]
Anne Berry
Nasdaq really is volatile at the moment and also it's curious to see what goes on with the market. We did see some news that a cease fire is perhaps going to come about in the region in the Middle east, but still waiting to see what the details are and see how the market may recover in response. Watching obviously those oil prices closely. That's it for today's blue markets.
- [19:30]
John Cotto
Daily Brew Marcus Daily is hosted by Anne Barry and produced by John Cotto, Tarka, Delatief Avenue leroy and Emily Miller. Our technical director is Luis Farri and the president of Morning Brew Inc. Is Devin Emery.
- [19:40]
Anne Berry
Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. See you back here tomorrow, same time, same place.