A Chip Sell-Off, Netflix’s Report, & President Xi’s AI Pitch 7/17/26

Summary

Squawk Pod – July 17, 2026

Episode: “A Chip Sell-Off, Netflix’s Report, & President Xi’s AI Pitch”

Main Theme

This episode of Squawk Pod is a guided curation of the top business, markets, and tech stories from CNBC’s Squawk Box, with a strong focus on the sell-off in semiconductor stocks, turmoil and shifting competition in the streaming landscape (notably Netflix’s earnings miss), the latest in AI geopolitics with President Xi Jinping’s major pitch for "open" AI standards, and a deep dive into America’s worsening housing affordability crisis.

Hosts Joe Kernen and Becky Quick lead discussions with market strategists, reporters, and analysts, covering financial market corrections, streaming content dynamics, global tech rivalry, political concerns, and changes (or lack thereof) in residential real estate.

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Key Discussion Points & Insights

1. Semiconductor Sell-Off & Market Correction

(02:41, 15:50, 17:50)

• Recent Volatility:
  Chip stocks, particularly in global markets like Korea, have experienced sharp drawdowns after a significant rally (SK Hynix and the KOSPI index highlighted).

  • “That's the great thing about the market, man, this always keeps you guessing. It's never easy.” – Becky Quick [03:37]

• Expert Analysis – Hugh Gimber (JP Morgan Asset Management):

  • The earnings power of semiconductor companies remains strong, but the big question is whether growth can sustain as far out as 2027–2029.
  • Future performance of "hyperscalers" (cloud titans like Amazon, Google, Microsoft) is crucial since their CapEx largely drives semiconductor demand.
  • CapEx projections for top U.S. hyperscalers have already grown from ~$500B to ~$700B for 2026, underpinning big earnings expectations.
  • The market needs more than confirmation; it needs further CapEx upgrades to restore confidence in chips.
  • “We've already seen significant upgrades year to date... I think you’re going to need to see earnings upgrades move further.” – Hugh Gimber [19:43]
  • There’s particular vulnerability in the mid-tier semi names, especially with rising competition from China.
  • A healthy correction, but recovery depends on clear signals of sustained or accelerated hyperscaler investment.
  • “This to me is a healthy correction, but it only finds a floor once we get that confirmation that CapEx plans are not just on track but can continue to push higher.” – Hugh Gimber [22:23]

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2. Netflix’s Earnings Miss & The Streaming Wars

(04:16, 04:58)

• Financials & Reaction:

  • Netflix beat EPS estimates but missed on revenue, causing a stock drop of nearly 10%.
  • The 11.7% forecasted revenue growth is Netflix’s slowest since 2023.

• Commentary on Streaming Landscape:

  • Becky and Joe express dissatisfaction with Netflix’s current slate of original content, noting that the best programming seems to be found on Apple TV, HBO, Prime, and elsewhere.
  • Becky: “That's what you're just not [getting on] Netflix, right?... I think they got complacent... just, I don't know—the writers and the content... there's a lot of good content in a lot of places, but just not Netflix.” [05:24]
  • Joe lists hit shows from other networks and questions Netflix’s creative direction.

---

3. U.S. Politics: Trump’s Address and Data Allegations

(06:14, 07:02)

• Trump’s Claims:

  • President Trump addressed the nation, advocating for stricter voting legislation and alleging (without direct evidence) that China acquired 220 million U.S. voter files.
  • Reporter notes that this information is largely public, China denies interference, and the political reality is Trump's legislation lacks sufficient Congressional support.
  • Joe: “The president has repeatedly claimed, without evidence, that widespread fraud affected the 2020 election. He also claimed that China obtained millions of US voter records but did not provide evidence.” [07:02]

• Gimmick and Public Pressure:

  • Trump is “taking it to the people” to build pressure for legislative change.
  • Becky and Joe discuss the unlikelihood of the proposed bills passing.

---

4. China’s AI Ambitions & Geopolitics

(07:54, 08:39, 11:43)

• Xi Jinping’s Shanghai Speech:

  • President Xi promotes "open source" AI, calls for global cooperation and opposes “overstretching” national security concerns in AI.
  • Xi implicitly contrasts China’s purported openness with the U.S.'s more proprietary approach:
    • “He pitched for Beijing to lead the AI world order... He took a veiled swipe at the US’s proprietary models by saying that AI development, quote, should not be a solo performance.” – Eunice Yoon [08:39]
  • Xi’s China-backed “PAC Silicon Initiative” sees a surge in membership (29 countries), but the U.S. stays out.

• Doubt around China’s Openness:

  • Despite the talk of openness, foreign AI models (OpenAI, Anthropic) are not permitted in China; Beijing may restrict foreign access to its best models citing security and competitiveness.
  • New Chinese LLMs (Moonshot’s “Kimik 3”) claim to rival the best American technology.
  • “Openness in China is not really clear in terms of what they mean ... a lot of the talks in today in AI circles has been that Beijing could be moving to restrict foreign access to China’s best AI models in the name of national security.” – Eunice Yoon [09:26]
  • Chinese tech circles acknowledge the U.S. is ahead but see rapid progress and competitive hope.

---

5. Sports: LeBron James’ Free Agency Decision

(12:29, 12:45)

• NBA Schedule on Hold:

  • NBA Commissioner Adam Silver says the league’s scheduling is “waiting” on LeBron’s decision and expects considerable impact based on his new team.
  • “Everybody wants to lock in the schedule, but it will influence how we set opening week, Christmas Day, etc. So I need him to make a decision...” – Adam Silver [12:45]

• Speculation:

  • LeBron’s likely destinations range across several teams (Cavaliers, Heat, 76ers, Warriors, Timberwolves).
  • Becky jokes about the breadth of possible “most likely” teams, reinforcing the uncertainty.

---

6. Insider Trading in Prediction Markets

(13:56, 15:06)

• Teleprompter Scandal:
  • Trump’s teleprompter operator is investigated for betting on prediction markets about presidential statements, reportedly profiting ~$90,000 before bets were frozen by Kalshi.
  • Becky and Joe discuss the difficulty of enforcing insider trading rules in prediction markets, given the wide array of unforeseeable public events.

---

7. America’s Housing Affordability Crisis

(22:47, 24:28)

• Latest Housing Data:

  • June saw a 19% surge in residential construction starts, driven almost entirely by multifamily buildings (up 76%). Single-family home starts and permits fell.
  • “Just a huge discrepancy between single family and multifamily housing starts... the story of today's housing market.” – Diana Olick [25:02]

• Causes & Challenges:

  • Multifamily jump comes as rents stabilize and vacancies decline.
  • Single-family home market remains stagnant due to high mortgage rates (around 6.6%), expensive land, labor, and materials. Builders’ sentiment remains solidly negative.

• Affordability and Demographics:

  • The median age for first-time homebuyers is now 40, up from 30 a few years ago.
  • Steve Liesman: “If you want to invest in housing, you should buy shares in futon because that's what people are using.” [30:13]
  • 18–34 year-olds overwhelmingly cite housing cost as their top issue but remain renters due to affordability constraints.

• Policy Solutions:

  • Diana Olick emphasizes that increasing housing supply is key—but efforts are hampered by local zoning and complexities (federal efforts have limited impact).
  • Lower rates alone won’t help in a supply-constrained market; more inventory is required.
  • “It's supply and demand. It's as simple as that... all about building more supply, getting more inventory in there.” – Diana Olick [28:22]
  • Ongoing debate about how current housing pain may be fueling interest in socialism among young adults.

---

Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote & Context | |-----------|--------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------| | 03:37 | Becky Quick | “That's the great thing about the market, man, this always keeps you guessing. It's never easy.” (On chip correction volatility) | | 05:24 | Becky Quick | “That's what you're just not [getting on] Netflix, right?... I think they got complacent... the writers and the content...” | | 07:02 | Joe Kernen | “The president has repeatedly claimed, without evidence, that widespread fraud affected the 2020 election... did not provide evidence.” | | 08:39 | Eunice Yoon | “He pitched for Beijing to lead the the AI World order... AI development, quote, should not be a solo performance.” | | 09:26 | Eunice Yoon | “Openness in China is not really clear in terms of what they mean ... Beijing could be moving to restrict foreign access to China’s best AI...” | | 12:45 | Adam Silver | “Everybody wants to lock in the schedule, but it will influence how we set opening week, Christmas Day, etc. So I need [LeBron] to make a decision...” | | 15:06 | Becky Quick | “It's everything in the world. How can we possibly figure out insider trading on this?” (on prediction markets) | | 19:43 | Hugh Gimber | “We've already seen significant upgrades year to date... I think you’re going to need to see earnings upgrades move further.” | | 22:23 | Hugh Gimber | “This to me is a healthy correction, but it only finds a floor once we get that confirmation that CapEx plans... can continue to push higher.” | | 25:02 | Diana Olick | “Just a huge discrepancy between single family and multifamily housing starts... the story of today's housing market.” | | 28:22 | Diana Olick | “It's supply and demand. It's as simple as that... all about building more supply, getting more inventory in there.” | | 30:13 | Steve Liesman | “If you want to invest in housing, you should buy shares in futon because that's what people are using.” (on young people and home-buying) |

---

Important Segment Timestamps

• [02:41] – Start of market/correction chat
• [04:16] – Netflix earnings and streaming landscape
• [06:14] – President Trump claims, China allegations
• [07:54] – President Xi’s AI speech (lead story)
• [08:39, 11:43] – Eunice Yoon’s analysis from Shanghai
• [12:29] – LeBron James’ free agency and NBA schedules
• [13:56] – Prediction markets and teleprompter operator scandal
• [15:50, 17:50] – Detailed chip sector analysis with Hugh Gimber
• [22:47, 24:28] – Housing segment with Diana Olick & Steve Liesman

---

Flow/Tone & Style

• The hosts blend serious financial insight with conversational banter (“That's the great thing about the market...”).
• Frequent rapid exchanges and some self-deprecating humor (e.g., discussion of Becky’s birthday, drones in Shanghai, futon investing).
• Tone shifts between analytical (e.g., Gimber’s market breakdowns), skeptical (on Netflix and political claims), and playful (sports and survey quips).

---

Summary Takeaways

• Semiconductor stocks’ volatility is a classic “healthy correction”; sustainability of hyperscaler spending is the linchpin for the sector’s recovery in 2026 and beyond.
• Netflix faces stiffer competition for must-see TV; its slowing growth is both a business and a cultural challenge.
• Global AI rivalry is heating up: Xi Jinping is pitching “openness” even while restricting market access, trying to rally a China-led AI bloc.
• Housing affordability remains dire for young Americans due to high prices, scarce supply, and little hope for policy-driven short-term fixes.
• The episode seamlessly transitions between serious economic news, political drama, tech geopolitics, and lifestyle/sports, offering sharp insights for business listeners.

---

For listeners: This episode connects global tech trends, domestic political shakeups, and lived economic reality, driven by informed, candid analysis—an essential round-up for market-watchers and news junkies alike.

Transcript

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[Casual Commentator]

having a gender reveal for their dog.

[Becky Quick]

No, no, no, no. This is a breed reveal. Oh, so yeah, they're finding out the

[Casual Commentator]

breed of the puppy they're rescuing.

[Hugh Gimber]

So they could just be spending all

[Becky Quick]

their money on like pet insurance. Instead we got Lemonade for Roscoe and it covered vaccines, microchipping. We saved 90% on vet bills. Oh, here we go. What do you think beige confetti means?

[Casual Commentator]

I don't know that we'll never get this Saturday back. Get a quote for any breed at Lemonade.

[Becky Quick]

Do bring in show music please.

[Squawk Pod Host]

This is Squawk Pod and I'm CNBC producer Cameron Costa. On today's episode, chip stocks are under pressure. JP Morgan Asset Management global market strategist Hugh Gimber considers it a healthy correction, but he says relief won't come until we know more about big tech spending.

[Hugh Gimber]

For me, I think what's key here is not so much what the semis names are telling you themselves, but but rather what we're going to get from the hyperscalers over the next couple of weeks.

[Squawk Pod Host]

And America's housing affordability problem. CNBC's Diana Olich.

[Diana Olick]

How do you fix housing supply?

[Squawk Pod Host]

Joining her is our own Steve Liesman.

[Steve Liesman]

If you want to invest in housing, you should buy shares in Futon because that's what people are using.

[Squawk Pod Host]

President Xi Jinping is pitching China as a leading AI partner. Eunice Yun reports for from Shanghai.

[Eunice Yoon]

He's been preaching a whole lot of openness in contrast, or at least to attempt to contrast The Chinese perspective versus the U.S. closed model.

[Squawk Pod Host]

Plus President Trump's speech stateside. LeBron's next move. And Netflix revenue has disappointed investors. And then there's its content.

[Joe Kernen]

There's a lot of good content in

[Becky Quick]

a lot of places, but just not Netflix.

[Squawk Pod Host]

It's Friday, July 17, and Squawk Pod begins right now.

[Joe Kernen]

Stand Becky by in three, two, one.

[Becky Quick]

Fuel, please.

[Joe Kernen]

Good morning, everybody. Welcome to Squawk Box right here on CNBC we are live from the NASDAQ market site in Times Square. I'm Becky Quick along with Joe Kernan. Andrew is off today.

[Becky Quick]

The other day when, when IBM highlighted the potential problems with software, the chip stocks were actually up.

[Joe Kernen]

But now it's the chip stocks.

[Becky Quick]

So around the globe on such a what goes up must come down or what do you do to shake out the weak hands? You do things like assuming it's going to re accelerate down the road. But things can't just go up, up, up, up without getting, without making people doubt whether they should hold them.

[Joe Kernen]

And that's the case in Korea this morning too. South Korea, the cost be off by about 6% overnight. That's an index that has risen so incredibly rapidly. SK Hynix driving the way. But I think the itself has doubled over the course this year and then even some. So if you take a look. Yeah, for the one year it's up by 113% to 6%. Pullback is shocking in the averages until you consider just how high things have gotten to your point.

[Becky Quick]

And if you were in there, you'd be like, wow, probably the hardest thing would be maybe to buy the dip because you just don't know if the whole thing is ready to unravel at this point. How big an air pocket. But that's the great thing about the market, man. This always keeps you guessing. It's never easy. Happy birthday.

[Joe Kernen]

Thank you. It's not today.

[Becky Quick]

It's not. No tomorrow.

[Joe Kernen]

Yeah.

[Becky Quick]

We had to do it today though.

[Joe Kernen]

Yeah. Because you won't be here to torture me tomorrow.

[Becky Quick]

No, but all these songs that we were done.

[Joe Kernen]

Never mind.

[Becky Quick]

Netflix shares are plunging. Earnings of $0.80 a share beat estimates by a penny. That's not the problem though. Revenue was slightly below the third quarter guidance. Disappointed Wall Street Netflix forecast revenue growth of 11.7%. That's the smallest year over year increase of any quarter since 2023. The stock right now is down almost 10%. And I think the high we're at 66 a high. It's above 130. It wasn't in the last 52 weeks, but it did. There it is. You can see that's what it was. And over to the left, that's where it was 800 before the split. 800 down to 200. And it really was quite a buy

[Joe Kernen]

if you look at even an even longer period because remember during COVID how it shot up and you were talking about like mortgaging your house.

[Becky Quick]

If you could buy it under 200, I would. I would have bought, but now I wouldn't.

[Joe Kernen]

No

[Becky Quick]

too many other players and I think they got complacent and just, I don't know the writers and the content that they've been putting up.

[Joe Kernen]

There's a lot of good content in a lot of places.

[Becky Quick]

That's what you're just not Netflix, right? No. Yesterday I finally said, eh, Widow's Bay, I kind of like. And that's not even Netflix, you know, I think that's Apple. Apple comes true occasionally with some, with some good shows.

[Joe Kernen]

I watched some stuff on prime last night.

[Becky Quick]

Prime, hbo.

[Joe Kernen]

There's a lot of competition.

[Becky Quick]

HBO seems like, you know, they take it seriously if they have to try and do a something that's gonna last and is a real something that you talk about, oh my God, Homeland or Game of Thrones, Breaking Bad, Sopranos. But this crap on Netflix right now. We were talking.

[Joe Kernen]

Look, there are times that I watch

[Becky Quick]

stuff on that not blasting too.

[Diana Olick]

It's just.

[Joe Kernen]

But it's, there's a lot of competition

[Becky Quick]

and I'm not going to say it's woke because people get mad and call me, you know, a boomer.

[Joe Kernen]

President Trump addressed the nation from the White House last night, announcing plans to release declassified information related to the 2020 election and renewing his call for stricter

[Narrator/Reporter]

voting requirements over a period of years Starting during the 2020 election cycle, the People's Republic of China carried out what is believed to be the largest compromise of election data in history, resulting in China's illicit acquisition of 220 million US voter files. That information includes names, addresses, phone numbers, political party preferences, and other sensitive data that would be needed to register to vote and engage in other nefarious activities.

[Joe Kernen]

President Trump urged Congress to pass the Save America act, which would require voters to show photo ID and proof of citizenship to register to vote. The president has repeatedly claimed, without evidence, that widespread fraud affected the 2020 election. He also claimed that China obtained millions of US voter records but did not provide evidence. Much of that voter information is publicly available through states. Before the address, a Chinese spokesperson at the embassy in Washington said, China has never and will never interfere in the presidential elections of the United States. But he doesn't have the vote. The president doesn't have the vote in Congress right now. He was basically at the end of that, urging people to contact their representatives.

[Becky Quick]

I don't know. Through budget reconciliation, they can't do the filibuster. They don't have the votes for that, that's for sure. They don't have the votes to get through the 60. So I don't know how they're going to do it.

[Joe Kernen]

I think that's why he took it to the people.

[Becky Quick]

He's looking for them to add pressure right overnight. In Shanghai, Chinese President Xi Jinping endorsed the building of open source AI models. That's an approach that has helped China close the gap with the US in AI technology. Without naming the us, she said, he said, she said we should oppose overstretching the concept of national security in the field of AI, or placing one's country, one country security, over that of others. He also called for a global effort to develop AI standards, not one led by a single country.

[Joe Kernen]

Our Eunice Yoon is live in Shanghai. She's got more on that front. Eunice, it's good to see you.

[Eunice Yoon]

Hey, Becky. Well, President Xi spoke at China's World AI Conference here in Shanghai, and he pitched for Beijing to lead the the AI World order. He took a veiled swipe at the US's proprietary models by saying that AI development, quote, should not be a solo performance. He also called for efforts to avoid what he described as historical injustice in AI. And he also praised what's being seen here as China's answer to the US's PAC silica initiative. So this is a group that was established last year but didn't really get much membership until this week. 29 countries are going to be or have already joined, not the United States. And this is meant to share technology and expertise in AI and ultimately to help set new standards when it comes to AI as well as rules. Now, President Xi had also cautioned against what he described as overstretching the concept of national security when it comes to AI. And today he's been preaching a whole lot of openness in contrast, or at least to attempt to contrast the Chinese perspective versus the US closed model. Now, of course, openness in China is not really clear in terms of what they actually mean, because even though this is the world AI conference, OpenAI anthropic, the big LLMs are not here and generally the Chinese don't allow them to operate in China. And in fact, a lot of the talks in today in AI circles has been that Beijing could be moving to restrict foreign access to China's best AI models in the name of national security, as well as to protect the technology and maybe possibly to show that, that China actually is very, very competitive. Moonshot, which is an AI company here, a small one, just rolled out the world's largest open weight AI model that independent benchmarks say is just as Good as fable. Guys.

[Joe Kernen]

Eunice, thank you. We've been watching what's happening. Are those birds flying in front of you, too?

[Eunice Yoon]

Oh, no. I think there might be some birds, but also dragonflies.

[Becky Quick]

Dragonflies.

[Eunice Yoon]

Sorry if it's distracting you, but I think it's because there's a light and it's sundown.

[Joe Kernen]

Yeah. Attracting them.

[Eunice Yoon]

Yeah. They were big. I was trying to avoid them and pretend that they're not flying.

[Becky Quick]

Yeah.

[Joe Kernen]

We had images of the birds Hitchcock style here.

[Becky Quick]

Yeah. It could be drones in China. Eunice, don't say anything.

[Joe Kernen]

Right.

[Becky Quick]

Miniature, scary drones.

[Eunice Yoon]

No, there are too many regulations right now. No drones.

[Joe Kernen]

No drones. You know, Eunice, what would you say?

[Eunice Yoon]

Well, President Xi is here. The security has been very tight.

[Becky Quick]

Very scary drones. That's all we need.

[Joe Kernen]

Eunice, just overall, the idea of this battle in the United States, we certainly look at it as a battle of China versus the United States. We think we're in the lead at this point and trying pretty rapidly to maintain that. How does China view all of this from that grand perspective?

[Eunice Yoon]

Well, I think a lot of the Chinese companies believe that the US Is ahead. I mean, there's a big question as to how much they are ahead. And because we had this moonshot announcement, which came a little bit before the WAIC started, there were a lot of people who were saying, you know, look how good we are. Because these independent benchmarks, Arena AI have said that moonshots, this is. It's called Kimik 3, is really one of the best, if not the best right now in terms of being able to help with the web interface production or developing. So that's. So because of that, you know, there are a lot of people here who are very hopeful, but they do see the US As a head, at least at this stage.

[Joe Kernen]

Eunice, thank you very much. It's good to see you.

[Becky Quick]

In sports news, basketball fans are waiting for LeBron James to make his free agency decision, and his call is impacting many people and businesses. Here's NBA Commissioner Adam Silver at CNBC's Game Plan Summit yesterday.

[Adam Silver]

I guess all politics are local. The way I think about it is we have to finish up the schedule, right? And where LeBron plays will affect the schedule. So I would like him to make his announcement already so we can finish the schedule, because as you might imagine, the teams are calling us, the networks are calling us, and everybody wants to lock in the schedule, but it will influence how we set the schedule, how we set opening week, Christmas Day, etc. So I need him to make a decision but the direct answer is, I have no inside information.

[Becky Quick]

Reports say LeBron's most likely choices are the Cavaliers, the Heat, the 76ers, the warriors, or the Timberwolves. I'm not sure if that qualifies as most likely when you give six different teams, but.

[Joe Kernen]

Well, look, a lot of people have thought that Cleveland would be the way to.

[Becky Quick]

Some of the possible choices.

[Joe Kernen]

Some of the possible choices. But the idea of doing those. But yeah, it's anybody's guess where he's going at this point. He's the only one who really knows. The guess is that he, he will be the one who makes the announcement and everybody else will kind of scramble afterwards.

[Becky Quick]

And if you get him, what does it guarantee? Certainly doesn't guarantee ticket sales, Right? Doesn't guarantee you that you're going to.

[Joe Kernen]

No, but my guess is he would be looking at the best way that he could possibly win, too. Right. You go to a team where you feel like you can bring something home if this is going to be your last time around. President Trump's longtime teleprompter operator is under investigation by federal regulators in connection with bets allegedly made on prediction market Kalsheet related to state statements made by the president. White House press secretary Caroline Levitt did not name the operator, but said that he is on unpaid leave and that he didn't handle the device for the president's address last night. A person familiar with the investigation identified the operator as Gabriel Perez, who has handled teleprompter for Trump speeches all the way back to 2016. During the presidential campaign, he allegedly made more than $90,000 in profits on those trades. But most of that money was frozen by Cauchy after the bets were were flagged as suspicious. CNBC and cashier have a commercial relationship that includes customer acquisition and a minority investment. But this is one of those stories where, look, you can bet on all kinds of how do. You were never there before. And there's always somebody who knows something.

[Becky Quick]

I mean, to be simple, insider trading to be this memory on Oliver Stone. First Walter, there was Stockwatch, right? And we're seeing some weird things happen now.

[Diana Olick]

It's everything.

[Becky Quick]

It's everything in the world. How can we possibly figure out insider trading on this?

[Joe Kernen]

Well, right, and if you're looking at any of these markets and there's a big bet, like, let's say, where LeBron's

[Becky Quick]

going to go, right, Someone new, or

[Joe Kernen]

if there's even on CNBC's states, you know, all the things that you can bet on that were never there before. It's just really interesting to try and get our heads around how you do insider trading when it's the entire higher public at large. Kalsi to their credit though, are the ones who caught this in flat.

[Hugh Gimber]

Keys will be next.

[Squawk Pod Host]

Coming up on Squawk Pod, we are unpacking the pressure on chip and memory stocks with J.P. morgan Asset Management's Hugh Gimber.

[Hugh Gimber]

The question here is not about their earnings potential now, it's really about the sustainability of that earnings growth and therefore investors growing increasingly concerned about whether that earnings can be even better.

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[Narrator/Reporter]

This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and [e-mail] MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.

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[Squawk Pod Host]

You're listening to Squawk Pod from CNBC Today with Joe Kernan and Becky Quick.

[Joe Kernen]

The benchmark Philly Semiconductor Sector Index is down sharply from its June high. You're looking at a decline of about 17% this morning. The drop is 4.3%. For more on the chip sector and the trade, we want to bring in Hugh Gimber, who is global global Market Strategist at JP Morgan Asset Management Hugh, we watch these kind of swoons with semiconductor prices and with chips. What do you think is happening under the surface?

[Hugh Gimber]

So a few points to pick up on here. I think first of all we should highlight that the earnings power of the semiconductor names remains absolutely rock solid. We've had a number of reports out over the past week or two from some of the biggest players in the space and they're delivering good earnings. But the question here is not about their earnings potential now, it's really about the sustainability of that earnings growth and therefore investors growing increasingly concerned about whether the earnings can be even better in 2027 or 8 or 9. For me, I think what's key here is not so much what the semis names are telling you themselves, but rather what we're going to get from the hyperscalers over the next couple of weeks because all of that earnings growth is because of hyperscaler Capex. And so to see a floor go into semiconductors, to see the valuations on offer today start to present good value, I think you need to hear more from the hyperscaler names over the next couple of weeks, really reaffirming to investors that yes, Capex estimates have already risen by a huge amount over the past six to 12 months, but that there's more room for them to increase again. And that's where you start to build conviction again in this longer term earnings story for the semis.

[Joe Kernen]

Well, that's key. Do the hyperscalers have to say we're going to continue to spend these amounts or do you think they need to rapidly or greatly advance, ratchet up how much they're spending in order for the semiconductors to get another bid?

[Hugh Gimber]

I think they need to go higher. We've already seen significant upgrades year to date. If I just look at the biggest US hyperscalers, analysts came into 2026 looking for roughly $500 billion of AI capex from those biggest five names today, that stands at closer to 700 billion. And that for me explains why analysts are already anticipating close to 100% earnings growth in semis. So I'm looking for more than just confirmation that that Capex is going to be delivered. I think you're going to need to see earnings upgrades move further. And really there's a bigger picture point here, which is that across the tech space it's unsustainable for only one group of a subsector to be pushing too far away from the rest of the pack because ultimately they all need each other. You need the semis to be getting the Revenues from the hyperscalers. You need the hyperscalers to be getting the revenues from the large language model providers. And ultimately for tech overall, you need sectors outside of tech demonstrating that demand for this technology is sufficient to allow all parts of the tech sector to keep a decent margin.

[Joe Kernen]

So you're looking at earnings not just from the hyperscalers, but what every single sector is going to be saying about what they're spending on AI effectively.

[Hugh Gimber]

I think you have to look at each sector's neighbor, you know, to form a view on one, you have to look at where that revenue is coming from. And similarly, the bigger picture that we've been grappling with on AI over the course of really the past two or three years is about the money that's going to come into tech from outside of the tech sector to justify the level of return on investment which investors want to see now. At the same time, I think there's an additional nuance perhaps to pick up on, which is that the position of some of these semis names who aren't the biggest and the best or indeed aren't the cheapest is where I see a bit more vulnerability. We've had headlines over the past 24 hours around the progress that Chinese models are making. We know that China is already highly effective at producing some of the cheapest and therefore for the semiconductors from the hardware names, I think you have to demonstrate that if you can't compete on price, you can really compete with a top tier product. And so if you're looking across semis for opportunity today, where clearly these moves are quite extended for me, you still have to be focused on an upping quality approach because it's the mid tier that looks most vulnerable to disruption coming out of China.

[Joe Kernen]

Hugh, we've got to run, but is it fair? I mean you sound fairly skeptical of, of the idea that these chip names and others can continue to grow. Is that a fair assessment of your take?

[Hugh Gimber]

Look, I think the earnings strength that we've seen today has been justified, but we need more evidence to come in the coming weeks and when you put that into context of momentum, seeing a sharp reversal, this to me is a healthy correction, but it only finds a flaw once we get that confirmation that CapEx plans are not just on track but can continue to push higher.

[Joe Kernen]

Okay, you, thank you.

[Squawk Pod Host]

Next on Squawk Pod, a snapshot of America's housing. New data out from the Commerce Department and analysis from our own team of experts including Steve Liesman.

[Steve Liesman]

Bring the rate down. That will improve affordability, not in a state situation where we have a supply deficit. Right.

[Squawk Pod Host]

We'll be right back.

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[Squawk Pod Host]

welcome back to Squawkpod. This Friday we got some data on housing from the Commerce Department. New residential construction increased 19% in June, but that was driven largely by multi family housing starts. The majority of home building in this country, single family housing and those starts and permits for future construction were both down. This gets to a larger conversation about affordability and politics as you'll hear.

[Joe Kernen]

Here's Becky, Steve Liesman and Diana Olek are both here to join us with more on that. Diana, why don't we start with you?

[Diana Olick]

Well Becky, just a huge discrepancy between single family and multifamily housing starts. And that is really the story of today's housing market. You have this headline number on starts of a 19% month to month increase in June, but that is 76% increase in multifamily and actually a slight drop in single family. Now we had this oversupply in the multifamily apartment market for the last three years. A record number of units coming onto the market and the builders pulled back. Well, now suddenly you have them seeing rents are starting to stabilize again. We just got a report from Colliers this morning saying they were bullish on the multifamily REITs because they feel that the multifamily market has bottomed. That is rents are coming up, vacancies are coming down. And that's why you see this enormous jump in 76% percent in the multifamily single family. Again, we talk about this all the time. It's just remaining at these very low levels because of high mortgage rates. We've seen the average rate on the 30 year six at about 6.6%, just not moving at all in June. And that's probably why you see permits for single family are down as well. Single family builders have a lot of issues when it comes to the cost, land, labor, materials. And we saw that in builder sentiment, which fell again yesterday. We've seen builder sentiment in the 30 range. 50 is the line between positive and negative. Anything below 50 is negative. And we've been in the 30 range all year. So the builders are not bullish on their single family market. So again, these numbers are really indicative of this split between we're seeing multifamily come back and single family just not moving back to you guys.

[Joe Kernen]

Okay, Steve, what are you thinking?

[Steve Liesman]

Well, a couple of things. On the import price story, one of the things that's out there is this notion of are the end users or the exporters paying the tariffs? If import prices don't fall, it suggests that we're paying the tariffs. Does that math make sense to you?

[Joe Kernen]

Explain that.

[Steve Liesman]

Well, if, if the price of imported goods was going down, it would be, it would show the discount for the tariff that's being paid. But it's not interesting. This is a surprise. The BLS saying higher prices for non fuel industrial supplies and materials, capital goods and consumer goods, excluding autos, where it were more than offset the lower prices for automotive vehicle parts. There could be a AI import part of this thing. Right. Which is those prices are going up, as you know. So that's a big part of it. On the housing side, I'm just amazed by this debate we have, which is, it's just an interesting debate. And if you remember when I asked Kevin Warsh, the Fed chairman, about whether or not he saw rates were neutral or not, and he said, yeah, everything but housing. And we can't have a separate, we can't have a separate interest rate for housing. But that's one of the areas that's really lagging And I want to show you just remind you from our CNBC All America economic survey what the 18 to 34 year old group says about housing. It's their number one issue by far.

[Joe Kernen]

Well, it's right now. Isn't the average age for people buying a new house age 40 or something? Didn't it just go maybe for first time, 40? Yeah.

[Steve Liesman]

And maybe Diana Ohlich has a solution because she's our housing expert. So we asked Diana how to fix that. And are 18 to 34 year olds right, Diana, to be so concerned about this?

[Diana Olick]

Absolutely, they're right. All you hear about is affordability because remember, you know, you date the rate, you buy the house, you date the rate. So if your rate for your monthly payment on the mortgage is unaffordable, you're just not going to get into it. And also they're having trouble because of inflation of saving for that down payment. Now as Becky said, you're right. 40 has become the new first time buyer age and that is extremely high. We were seeing 30 before, but again, you know, it's how do you fix housing supply, Steve? You know, it's supply and demand. It's as simple as that. I am not an economist. You are. It's all about building more supply, getting more inventory in there. And you know, we have this talk about the single family rental investors and we have the new law that just went into effect that bans them from buying more unless it's billed to rent. We build to rent would be great for those investors to get involved in. But again, those investors are barely 4% of the rental market and just a tiny piece of the overall number of homes for sale.

[Steve Liesman]

I'm going to be an economic geek here. Just keep, I keep coming back to this and I keep hitting my head over this. Bring the rate down, that will improve affordability. Not in a situation where we have a supply deficit. Right. You bring.

[Diana Olick]

Because prices keep going up that price. Look at what happens when we drop rates to 3%.

[Steve Liesman]

It won't help you because you're still going to pay more. It's just going to be that the sellers.

[Joe Kernen]

Can I, can I just point out the demographics on the chart 18 to 34 year olds from your survey? They're the ones who say that they have problems with housing prices.

[Steve Liesman]

It's their number one issue.

[Joe Kernen]

Yeah, that means the rent's too damn high because they're not home buyers. Right. You got to be 40 and it's

[Diana Olick]

going up now again.

[Joe Kernen]

18 it is.

[Steve Liesman]

18 it is. But not if you're 30 years old just forming a house, you can get up forming a family house.

[Becky Quick]

30 year olds live at home, they do 50% some number.

[Steve Liesman]

That's why we, that's why the house,

[Becky Quick]

that's why it's 40 now because that's when you're moving out of your parents house.

[Steve Liesman]

But the housing investment, if you want to invest in housing, you should buy shares in futon because that's what people are using. I mean look, and I think by the way, if I don't show it there, but you go into the next cohort of what is it, 35 to 49.

[Joe Kernen]

Yeah.

[Steve Liesman]

Housing's number two.

[Joe Kernen]

Okay.

[Steve Liesman]

So that's, that's right, right in there. And I guess the question is, do we have a quick second for Diana if the housing bill addresses this issue for younger Americans? Diana?

[Diana Olick]

Not really. Only if you're into manufactured housing and maybe on the rental side a little bit with the single family rentals. But again, it's all about more supply. They're trying to help with zoning on that. But zoning is a local issue. It's not at the federal level.

[Steve Liesman]

I'll be back Monday.

[Becky Quick]

Joe would have been a strange survey

[Steve Liesman]

results on what Americans think about socialism and capital.

[Becky Quick]

That was what it was. That was, I was going to say, I was going to say to Rick, if you want to lower from 18 to 34, if you want to lower the rent, just freeze.

[Steve Liesman]

I think this is a reason why your 1834 year olds are hot on socialism right now.

[Becky Quick]

Freeze the rent.

[Steve Liesman]

Housing.

[Becky Quick]

That'll work. You'll get a lot more supply when you're freezing.

[Steve Liesman]

Yeah. Wait till we come back Monday with these.

[Becky Quick]

We had lafrac in yesterday.

[Steve Liesman]

If Joe's hair is real, it will stick to his head when his head when, when the top flies off, when it's easy results.

[Squawk Pod Host]

That is a deep tease for you. Make sure you join us on Monday for more on the ongoing squawk conversation about socialism, capitalism and the economy. For now, that's where we leave you on Squawk Pod today. Thank you for listening. Squawk Box is hosted by Joe Kernan, Becky Quick and Andrew Ross Sorkin, weekday mornings on cnbc starting at 6am Eastern to get the best parts of that three hour TV show right into your ears. Follow Squawkpod wherever you get your podcasts. We'll meet you right back here on Monday. Happy birthday to Becky and to all the other July birthdays out there.

[Becky Quick]

We are clear. Thanks, guys.

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[Becky Quick]

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[Steve Liesman]

That's right.

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