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A More Opaque Fed, AI’s Strange Bedfellows, and “Less Screaming. More Streaming!” 7/1/26
00:44:01
Fed Chairman Kevin Warsh saying he’d rather have a “good family fight” with his FOMC colleagues at the next rate decision meeting than give forward guidance. Journalist and author Sebastian Mallaby weighs in on what’s holding OpenAI back, how Google is pulling ahead and why it’s in the best interests of both nations if the US and China coordinate on AI. Plus, Wolfe Research upgrades Fox, saying its merger with Roku will scale Fox’s general entertainment streaming and could double its long-term sales growth rate.
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- [00:00]
Keith Lansford
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 subscribe@schwab.com Market Update podcast or find Schwab Market Update wherever you get your podcasts.
- [00:29]
Peter Cipino
Before we had AT and T Business Wireless coverage, our delivery GPS wasn't the most reliable. Once our driver had to do a 14 point turn to get back on route. A 14 point turn. An influencer even livestreamed the whole thing. Not good for business. Now with AT and T Business Wireless, routes are updating on the fly and deliveries are on time. And the influencer did get us 53
- [00:52]
Keith Lansford
new followers though AT and T Business Wireless connecting changes everything.
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Kelly Evans
You're listening to the Exchange. Here's today's show. Thank you very much, Scott. Stocks are mostly up today, but those parts of the trade are getting hit really hard. Corning, core, weave, the chip stocks all under pressure. The momentum trade is having its worst relative day since 2020, according to BTIG. Welcome to the Exchange. I'm Kelly Evans. Our market guest today isn't waiting any longer. He's getting defensive. He'll explain why in a mom moment. Plus, we'll hear from Sebastian Malabi this hour. He sees troubling signs for OpenAI, whose IPO may be delayed into 2027. But let's start with the first public comments from new Fed Chair Kevin Warsh following his first Fed meeting a few weeks ago. The Chair firmly reiterated the need for all central banks to get inflation down, and that's about as forthcoming as he was in his messaging on the broad conduct of policy.
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Kevin Warsh
At my press conference, I said I'm not going to give forward guidance because we're meeting in six weeks. But I have an update for you. We're meeting in four weeks.
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Megan Casella
Helpful.
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Kelly Evans
So is July on the table for a rate hike?
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Kevin Warsh
So Sarah is trying to get me
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Brandon Gomez
to break this rule.
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Kevin Warsh
She's going to fail,
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Kelly Evans
but we have to try. Joining me in our opening exchange, New Century Advisors Chief Economist Claudia Sahm and and Brookings Institution Senior Fellow David Wessel. It's great to see you both again. We were just in D.C. together a couple of weeks ago for that first meeting, Claudia, which a lot of people interpreted as quote, unquote, hawkish. And look, Wash did reiterate again in other parts of that discussion. He said getting inflation down is our Number one job. So we're hearing that messaging once again as well.
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Claudia Sahm
Yeah, absolutely. The message is coming across loud and clear. But no plan. We haven't, you know, real inflation. Hawk, at this point, with inflation of 4%, would be talking about rate hikes. Kevin Wash is not talking about rate hikes. He also isn't talking about, well, is this inflation? Is it temporary? He was asked that. He really didn't answer the question.
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Kelly Evans
Do you think we don't know. Should he answer the question? What do you think his, his goal and approach is going? And by the way, there's, I think it was bank of America, Claudia today who pointed out the last two weeks have been pretty quiet on the Fed speak front, quieter than usual for similar other periods to say maybe it's the holiday or maybe this really is going to be a different Fed.
- [03:22]
Claudia Sahm
So Kevin Morse is absolutely doubling down on his pulling back of communication. And I do think you've seen the Fed has been quieter in general, not silent. Right. We have gotten more commentary from other Fed officials, but not the kind of crescendo that we often have coming out of Fed meetings. You know, he, he has a principle, he has a plan. He wants to pull back on information. I'm skeptical that this is going to end well. And I think for accountability's sake, they should at least be explaining why they've held interest rates, how they're thinking about the data, not necessarily forward guidance, not necessarily future policy. But he's really cut back on the amount of information that he's willing to share.
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Megan Casella
Right.
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Kelly Evans
David, what are your thoughts? And he was up there with other central bankers. I would say for the most part, he did kind of play the part. He didn't go out of his way to different. He was actually very collegial in his approach and kind of teasing with them and being very playful. And he also said, look, we all need to work in concert to really get inflation down.
- [04:19]
Kevin Warsh
Right. Well, I think that I agree with Claudia that he's very disciplined and he's determined not to give very many signals. On one hand he said inflation risk has come down, but of course, a lot of that is oil prices. On the other hand, he reiterated that we're going to deliver price stability and anybody who thinks otherwise will be disappointed. So a little bit for everybody there. I think what we learned about his style is he's willing to poke at the reporters. He's very comfortable doing that. And he kept invoking how he's now one of this small band of central bankers. And we were all together during the global financial crisis. So I think he's trying to assure people that he knows what he's doing. But I thought Christine Lagarde, the ECB president, has made clear maybe we don't have forward guidance where we predict interest rates, but it's important to describe what she called your first framework or others call the reaction function.
- [05:14]
Kelly Evans
Yeah.
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Kevin Warsh
And he doesn't seem to want to do that. He doesn't want to say I'm watching the money supply or he says he doesn't like the Phillips curve. And I agree with Claudia, that's going to get them. It's going to cause problems if he, if he doesn't do that. He did say that. Oh, since I told people we're not going to give more forward guidance, there's less volatility and all that. So he seems to be taking a preliminary victory lap on that. But I don't think it's going to hold.
- [05:37]
Kelly Evans
This is, this is an area, Claudia, where actually some argue, and I'm kind of sympathetic to this point point that in pulling back and making the market a little bit more nervous about where he's going, they're building and I don't know what the technical term is kind of a risk premium in the 10 year. In other words, could he actually steepen the yield curve, maybe even be able to lower interest rates? But not necessarily. But, but still kind of tighten policy. Do you know what I mean with, does that make sense that he might be using his obscurity in a way to kind of achieve some kind of market tightening?
- [06:09]
Claudia Sahm
It's possible. I do take him at his word that what he's trying to do is not inject the Fed's thinking into markets. Let markets kind of sift through the data markets think about where interest rates should be and the Fed can read it back out. I don't think that that's the right way to approach the job at the Fed, but I think that is part of. He's trying to get the Fed a smaller footprint like this shows up in a lot of his thinking with the balance sheet, with communication. Just wants to make the Fed smaller. And I don't know that he can't roll back the clock like we're in a world. Fed has, has a footprint, it has a role. And, and this is denying information to decision makers is going to create volatility because there's going to be a lot.
- [06:51]
Kelly Evans
Is that, is that, is that the goal?
- [06:54]
Claudia Sahm
I hope that's not the goal because that's not a smart goal. Like the Fed trying to create volatility, surprise markets. Like we have a long history of the Fed surprising markets and it goes very badly. Right. So I don't think he's trying to inject volatility and he's trying to get the private markets to just work on down and not kind of, really, you know, rely on the Fed as a crutch for how to interpret the economy. So, but I just, it's hard for me to see even if in this short period volatility has come down some, which I think is mainly tied to what's happened in the Middle East. I just don't see how a Fed that goes dark and is still making policy is going to reduce volatility. I think it's gonna be a problem.
- [07:33]
Kelly Evans
David, how do you expect the private sector to fill this void?
- [07:35]
Kevin Warsh
Yeah, well, I think that what Warshire signaling is he's willing to accept more volatility and that's clearly the cost of his approach. I think it's going to frustrate Fed watchers who want to predict two days before the FOMC with 100% certainty what the Fed is going to do. But I think people are going to begin to wonder like what is it that they are looking at to, to decide whether to raise or lower interest rates. And I think there, it's, it's not, it's not holding themselves accountable. If we're going to have a family fight at every meeting and you won't have any clue what we're doing and afterwards we'll tell you what we did and we're going to issue a very short statement. I think markets and the public going to find that distressing.
- [08:16]
Kelly Evans
Interesting point. I guess maybe he would push them to the, you know, Humphrey Hawkins or something like that. Right. To say that would be. And that's where their ultimate kind of accountability lies really, is to Congress. And those are opportunities for a couple of hours, couple of days. I know that's not as timely as people would like, though.
- [08:33]
Kevin Warsh
Yeah, we'll see. I mean, I'm tempted to say, well, there'll be a task force for that because that's what his answer is to every question. And we will see. I do think he's signaling, though, we're not going to make abrupt changes. He was very strong on that at the ECB conference. We're not going to make abrupt changes in the balance sheet. Whatever we do, we're going to explain it. I just don't want to predetermine every FOMC meeting. The question is how do you balance not giving forward guidance with giving the markets and the public some sense of what it is you're thinking about when you look at the economy and how will you make those decisions?
- [09:07]
Kelly Evans
Claudia, finally you've talked a little bit about this. And one other risk that could come out of this is that the Fed's private speak becomes way more valuable. And there's a little bit of a, I don't know if we use the word scandal, a little bit of a issue with this in recent weeks. And that is getting access to Fed officials now will probably be even more prized than ever in venues that are non public.
- [09:29]
Claudia Sahm
Absolutely right. You take away the public information, the private information goes way up in value. And even if Fed officials are trying not to let information go out in private, there's going to be so much incentive for private actors to try to get one comment, one facial expression, anything, right. To try to, you know, be able to better get ahead of what the Fed's going to do. So it's a, the Fed has a long history of having problems with these private events and this public, private sharing of information. And so the transparency and public is the best way to fight that. And I am very concerned that we could go the route. And the last thing the Fed needs is to be accused of corruption and handing out information to various parties. That would be a very bad outcome.
- [10:12]
Kelly Evans
All right, well, for today, not a lot of people are talking about Warsh, which I think is exactly how he wanted it after his appearance in Sintra. Claudia Sahm and David Wessel, thank you, really appreciate it.
- [10:22]
Kevin Warsh
You're welcome.
- [10:23]
Kelly Evans
The worst performers in the NASDAQ today are those high flyers from the first half of the year, Sandisk, coreweave, the semi equipment names like KLA and Teradyne. Perhaps it's just profit taking, but our next guest thinks the AI trade will give way to companies that are using AI to increase their earnings and productivity. David Hardin is Summit Global Investments CEO and CEO. Good to see you, David, and talk us through this.
- [10:46]
David Hardin
Thank you, Kelly. I'm glad to be back on your program. The key here is when you're looking at cash flows, you do want cash flows now and you want them to be able to impact your trade. You don't want to be having that long term exposure to cash flows that come in the future. The other thing that we found is that how do we increase cash flows? I can help with that. But it's companies that want to keep their employees. It's companies who want to utilize AI to increase their earnings now. So cash flow is key here.
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Kelly Evans
I think of two names that Chris Davis of Davis advised that he told us about on this show. The first one that came to mind for him was Capital One. And yesterday we were also talking to an advisor firm who said they're using AI to make their 11,000 agents more productive. So again, financial services is a category where perhaps we'll see some roi.
- [11:36]
David Hardin
Absolutely. I mean, we feel it every day and that we need to be more productive. How do you be more productive? Clearly, I can help you be more productive. And more productivity does actually lend to higher profit margins. So looking for companies that have higher profit margins, increasing profit margins and, and increasing growth, there's a number of them out there. So I think that this is a real possibility, not just people creating a new model.
- [12:00]
Megan Casella
Right.
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Kelly Evans
And before kind of circling back more specifically to that, what do you make of the trade and kind of the breakdown in the. Let's put this with both the Mag 7 on the one hand, the infrastructure names on the other. What would you say to investors there?
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David Hardin
Well, I think clearly we've seen for the last six months, Magnus 7 has not been the leaders. Right. We know that, we've seen that. We understand that there has been a shift away from that. And now you're seeing that shift in the last month and a half away from the AI infrastructure. And that's okay. It doesn't mean that they won't continue to go up. But there may be more value and less volatility in the portfolio if you make that shift. So we have been moving away from that and putting it into higher quality cash flows now and companies that, you know, make that difference.
- [12:46]
Kelly Evans
Phil Blancato said he was telling clients to take, you know, take half of their money out of the Mag 7 and put it into the small caps who just had their best quarter in 35 years.
- [12:55]
David Hardin
Amazing small caps. I mean, our small cap fund has, you know, off the charts, up 30% for the first half of the year. That's incredible. Small cap is an unrecognized story that needs to be talked about more. And there's a ton of small cap companies out there that are just absolutely performing well, very, very well.
- [13:15]
Kelly Evans
I think the flip side of that argument is others who are. I think it was, oh sung yesterday at Wells Fargo and some of the top level strategists who would say you can't get defensive at a time like this. You know, when, when the NASDAQ's up 21%. I know that sounds like you should get, but he said you can't get defensive at a time like this. The market is just behaving, you know, the rally is too strong and the risk is you move to the sidelines too quickly. What would you say about that?
- [13:39]
David Hardin
Yeah. So there is different levels of defensiveness. One is to go to cash. Right. One is to go into bonds. Right. But I think that there's a number of opportunities within the market and I'm cautiously optimistic here that would actually somewhat help you overall in your portfolio. But you're still in the market. I mean look, today the NASDAQ's down, you know, one something percent and the Dow's up 0.3%. So there is definitely opportunities to become more defensive in your portfolio, look at higher quality earnings and yet still stay in the market. And that's key. Look at the small cap, you know, diversified small cap done tremendously well as we talked about. So Kelly.
- [14:17]
Julia Boorstin
Yeah.
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David Hardin
That doesn't necessarily go to bonds or go to cash, but it does mean take a look at your high flyers and what's been working might not work in the next two quarters or in the next quarter.
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Megan Casella
Right.
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Kelly Evans
Although hopefully small caps will continue in that direction.
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Julia Boorstin
David, thanks.
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Kelly Evans
We'll bring you back soon. Appreciate it.
- [14:35]
David Hardin
Thank you.
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Kelly Evans
David Hardin with Summit Investments. We've got some breaking news out of Washington. Megan Casella has the story. Meghan Kelly, we just heard from US
- [14:43]
Megan Casella
Trade Representative Jameson Greer that the United States is not renewing the US Mexico, Canada agreement for another 16 year period. Now today was the deadline for all three countries to say they wanted to renew and extend the deal for another 16 years. Canada and Mexico had formally said they wanted to do that. We expected the US to do this. And crucially, Kelly, this does not mean that the agreement falls apart immediately, but this will k off what we expect will be a pretty intense renegotiation between the three countries. Some talks have already kicked off between the United States and Mexico in a formal way. They're also in touch with their Canadian counterparts as well. And there's likely to bring some big policy changes, likely around the automotive sector, some rules of origin, maybe some labor disputes, particularly with Mexico. What this does now, Kelly, is this sends the USMCA into something like a 10 year countdown clock. After 10 years, if the three parties haven't by then agreed to renew the deal, that's when it would fall apart. But for now it kicks off. This renegot negotiation will get annual reviews and we expect a lot more engagement among the three parties between now and while they continue to work these issues out.
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Kelly Evans
Kelly it is official. Meghan thanks very much. Megan Casella Coming up, a reversal by the Trump administration lifting export controls on Anthropic's new AI models. Sebastian Malaby weighs in on that next. Speaking of AI, are employers starting to regret their layoffs and is the technology failing to live up to its promise? That's coming up on the Exchange.
- [16:09]
Keith Lansford
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- [16:42]
Keith Lansford
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 subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts. Thursday, July 16, CNBC Sport and Boardroom Join Fanatics Fest for Game Plan groundbreaking ideas shaping the future of sports and entertainment. Request your invite@cnbcevents.com gameplan welcome back.
- [17:27]
Kelly Evans
The Trump administration has lifted export controls on Anthropic's latest Claude model, Fable 5. The controls were hastily imposed on June 12 shortly after the product launch, causing Anthropic to pull it off the market entirely. The government said more had to be done to address to address security concerns, but critics called the move erratic and suggested it was even retaliation for Anthropic's criticism of the administration. While Chinese competitors have been releasing their own models that reportedly now match Anthropic's capabilities. For more here, let's bring in Sebastian Malaby, Council on Foreign Relations Senior Fellow and author of the new book the Infinity machine, Demis Hassabis, DeepMind and the quest for Superintelligence. Sebastian, it's great to see you. What do you make of this back and forth between Anthropic and the government, and what should the right approach be to these new models and their releases?
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Sebastian Malaby
You know, I think what we're seeing is the kind of, you know, two steps forward, one step back evolution of the US Government towards a sensible Policy. And the sensible policy is you've got to control frontier models, which are dangerous if you don't control them. And so, you know, they released a supposedly voluntary framework in an executive order recently. It's clearly not voluntary. Right? I mean, Anthropic was ordered to take stuff off the market, and now it's been permitted. So this is very much a compulsory regime. And the same thing is going on with OpenAI, which has been told who it can and who it can't distribute its newest model to. So, you know, the government's taking control. Even a laissez faire government is taking control. I view this as a good thing because I do think that frontier models do need to be controlled.
- [19:03]
Kelly Evans
Why do you think they're so dangerous?
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Sebastian Malaby
Well, I mean, cybersecurity is the immediate thing. That's what Mythos. The anthropic model had been tested and it had been shown to be the most powerful cyber hacking model out there. So if criminals got hold of this thing, they could just, you know, take down the banking system. They could do terrible stuff. But behind that, we have to remember that there's other threats coming. There's biological warfare threats, the ability of a criminal group maybe to design a pathogen like imagine COVID 19, but worse. So this is only going to get more intense in the next year or two as the models get even more powerful. And I'm glad that we're beginning to see the emergence of a government regime which sort of tries to put some guardrails around who gets the model and what timing.
- [19:48]
Kelly Evans
So do you think that each model should be up for government review? And I'm not asking this in a farcical way. I mean, I've heard serious proposals. I think Bob Greifeld has talked about this actually and said, you know, back in the day at the Nasdaq, they would have to run their kind of changes by the SEC every time to market structure, for instance, or things that were going on with IPOs. Should there be an agency, a government body, where an AI release has to kind of quickly go and, you know, if there's no major issue, then it goes right to market. And if there is, there's a hold up. I mean, do we need something like that put into place?
- [20:20]
Sebastian Malaby
I think we do. I mean, that's what we have already for pharmaceuticals or the fda. You know, every drug that wants to go to market, you have to make sure it's safe for consumers to use it. That's what we have with the Federal Aviation Authority. We don't want Planes falling out of the sky. So the government plays a role in ensuring the safety of aircraft. And I don't think it should be controversial that AI models which are equally dangerous should be vetted before they're allowed to be released. What we need to move to is something which is less ad hoc, less ad hominem. I mean, there was a moment when it seemed like Anthropic was being targeted because they didn't like the CEO Daria Amadei. You know, they said, yes, you can release it. Then they reversed themselves a few days later. That's not good. You don't want that kind of arbitrariness. But I hope that the government understands that and it's evolving towards a system where there will be more. More of a formal, you know, fair system where everybody understands what the rules are. But I think some kind of system is, yes, it's needed.
- [21:19]
Kelly Evans
Let's talk about OpenAI. Against this backdrop, they're not the. In some ways, maybe they wish they were the poster child, right? You want to be the one that's on the leading edge and causing all these conversations. And in some ways they are. Their IPO might be delayed now until 2027. What does that tell you?
- [21:34]
Sebastian Malaby
Well, I think it tells you that they were already in a. In a bit of a squeeze because they've been overtaken on the one hand by Anthropic, which is doing much better at enterprise models. You know, the coding assistant, agentic systems, cybersecurity, these kinds of things. Anthropic is just doing better. Then on the other hand, in terms of retail consumer rollout, I would say that Alphabet, Google is doing better because the Gemini model is good, it's fast, it's cheaper to run. The Gemini app has now picked up so many users that it's pretty much equal with ChatGPT. And by the way, every smartphone, whether that's an iPhone or an Android phone, is serving its customers the Gemini model, not the OpenAI model. So I think OpenAI is caught between a very tough retail competitor and then a very tough enterprise competitor. And that's before you even mention these open weight Chinese models that are pretty good and are coming to market. The fact that consumers, particularly business consumers, are having second thoughts about how much they want to spend on AI tokens. So there's more rationality among the consumers. You've got a worse interest rate environment for any company trying to go public because the Fed is now expected to hike, not to cut. That's thanks to the inflation that feeds through from the Iran war. So there's a bunch of factors out there which just make the climate for an IPO tougher for everybody, but specifically tougher for OpenAI.
- [23:03]
Kelly Evans
And I know, as you've said before, that their fundraise from the public is one thing that would actually kind of get them through this window of time where we've talked, we've talked before about would they literally need a strategic partner or something like that. Speaking of China, they're reportedly, their models are now as good as anthropics. So kind of going back to your earlier point about how dangerous these models are, if they already exist and are pretty good and the Chinese or other Asian economies are producing them, what does that mean for the whole US Supply chain?
- [23:33]
Sebastian Malaby
Yeah, well, first of all, I would say that we should take with a grain of salt the claim that they're as good. I don't think they're as good. I think they're a few months behind, but that's not very much. And so your question is very important. What do we do in a world where China is able to produce models that, you know, at least are close and maybe they're like six months behind, a year behind at the maximum. But we're going to have to face the reality that Mythos, this anthropic model that can do all this cyber hacking that will be, you know, produced by a Chinese company, even if we don't, you know, even if we don't concede that that's been done already, it will be done not too far in the future. And at that point, these models from China, they're open, meaning anyone can use them, anyone can modify them, nobody can kill them off with an off switch. There's no off switch to be had. And that means that criminals are going to get these models. And that is a very worrying prospect. And my view is that the only way we're going to handle this is by having the US Government talking to the Chinese government, saying we have a shared interest.
- [24:33]
Kelly Evans
Oh, boy.
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Sebastian Malaby
In. In not letting criminals get hold of these models. I know it sounds crazy to talk to China. It sounds a little crazy these days.
- [24:40]
Kelly Evans
Yeah, it does. Well, the idea of coordinating with the Chinese on. On AI model.
- [24:46]
Sebastian Malaby
Okay, okay. But just think back. When was the Nuclear Non Proliferation Treaty agreed? The answer is 1968. And the precursor was 1956. The IAEA agreement. What happened in between? The Cuban Missile Crisis. So in other words, Khrushchev, the Soviet Union, these guys were fierce competitors and rivals and enemies of the US it did not stop the Negotiation of a non proliferation regime for, for, for nuclear. So I believe we ought to be trying the same thing now with AI.
- [25:17]
Kelly Evans
Let me ask you this quick final quote because that is actually a brilliant historical analogy. Later in the program we're going to talk about how companies are in some cases rolling back the layoffs they made to implement AI because the AI is not. So I'm trying to understand on the one hand the comparisons to the nuclear age with these tools and on the other hand companies going, you know what, we're not really, it's not really as good as we thought it would be.
- [25:40]
Sebastian Malaby
Well, you know, the classic statement about AI is true, which is that it has a jagged edge. It's really, really good at some things and then quite bad at other things. And so it's, it's, you know, one thing we know is that it's very good at helping people to code. That is a proven use case. And nobody's rolling back that in business and in kind of, you know, adjacent to the coding ability is this cyber hacking ability. And we also know separately that it's very good at structural biology. This was the Nobel prize winning back in 2020 that DeepMind produced unraveled all the shapes of proteins in nature. Adjacent to that could be the discovery of bioweapons. Right, I see. So just because American businesses are having trouble finding a good use case in the enterprise, it doesn't mean that there aren't scary frontier abilities that we should be trying to regulate.
- [26:29]
Kelly Evans
That's a great answer and I'm glad that we had you on today. Sebastian, thanks so much for the time.
- [26:33]
Sebastian Malaby
Yeah, I enjoyed it. Thank you.
- [26:34]
Kelly Evans
Appreciate it. Sebastian Malaby. Coming up, while Comcast is looking to shrink its media footprint, Fox is doing the opposite. And that's why one of our guests just upgraded the stock. He joins us ahead. Plus, remember, aol, it's not only still around, its new owner, bending spoons is IPOing today known for reviving old tech companies. They just opened on the NASDAQ at $31 after pricing above the range of $29. They're trading at 39 right now. It's a Milan based digital media conglomerate that also owns Vimeo, Eventbrite, Wetransfer and others. I remember Evernote I love. But we're back in a moment. Hey, Fidelity. What's it cost to invest with the Fidelity app?
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NYSE SIPC Thursday, July 16 CNBC Sport
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Keith Lansford
and Boardroom Join Fanatics Fest for game plan groundbreaking ideas shaping the future of sports and entertainment. Request your invite@cnbc events.com gameplan welcome back.
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Kelly Evans
The major averages are trying to stay positive while the Nasdaq has now turned lower as the AI supply chains supply chain name names suffer, she said. General Mills is having a nice day though. It's among the leaders in the S and P after topping earnings estimates and outlining a multi year cost cutting plan. It's up 8%. Best day since 2020 in fact. But they are coming off a record stretch of seven straight quarterly declines and the shares have lost half of their value in that time. Turning to tech, Guggenheim is upgrading Salesforce and ServiceNow to buy. The firm says neither company has demonstrated meaningful monetization, but the market has become overly pessimistic about SAS apocalypse scenarios despite today's pop. And ServiceNow is up 7%. Shares are still more than 40% off their recent highs. Meantime, bitcoin is another bright spot today, reclaiming the 60,000 mark. While crypto firms like Strategy finally see a bounce, new filings now show the president himself has made millions of dollars through issuing his own crypto tokens. Megan Casella has more.
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Megan Casella
Megan Kelly that's absolutely right. More than $1 billion overall in crypto related income for the president in the first year of his second term. So 6 and 35 million of that was royalties from so called Celebration coins, the meme coins that bear the President's name. There was also more than half a billion dollars from the sale of tokens released by World Liberty Financial. That's what President Trump co founded with his sons. There's another 65 million there from sales of equity and World Liberty. The President's properties and legal dispute settlements from media companies together brought in a few hundred million dollars and there was more than 370,000 listed in gifts shifts, including 10 tickets to the FIFA World Cup. Now Kelly, the president was asked this morning about the appearance that he's profited off his presidency. He's of course pushed policies that are friendly to crypto. He's also held official meetings at some of his properties. Here's what the president said on that,
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Keith Lansford
you know why I'm profiting? Because the stock market's going up. Everybody's profiting. If you have a, you have a 401k, how's your 401k done? It's about up 85%. Thank you, President Trump. So we're all profiting. I'm profiting because I have a lot of money and a lot of cash and I give it to institutions. I don't know if they know what they're doing or not, but they buy a vast array of things.
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Megan Casella
President Trump also holds hundreds of individual company stocks, according to the filings. That includes Apple, Microsoft and Nvidia. And he's invested, Kelly, between half a million and $1 million in gold bars. Back over to you.
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Kelly Evans
There are now accounts trying to follow his trades the way they used to do with Pelosi. Megan, thanks very much. Megan Casella, by the way, President Trump is sitting down exclusively with Joe Kernan tomorrow, ahead of the country's 250th anniversary. That interview will air on Fast Money at 5:00pm Eastern. Now to Brandon Gomez for the CNBC news update. Brandon.
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Kevin Warsh
Hey there, Kelly.
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Brandon Gomez
The US military reportedly deployed more than 900 personnel in Venezuela to support relief operations following earthquakes that killed at least 1700 people. The top US general for Latin America told Reuters that forces have participated in search and rescue operations and mobilized air and naval assets to allow humanitarian aid to arrive. Artificial the film about Sam Altman and OpenAI, was acquired by indie distributor Neon after it was dropped by Amazon MGM Studios earlier this month. Amazon at the time said the movie starring Andrew Garfield as Altman, would be better served at a different studio. That came a few months after the tech giant announced a $50 billion investment investment in OpenAI. Neon said today the film will be released this year, making it eligible for the Oscars. And two people climbed to the top of the Empire State Building's more than 1,450 foot antenna today and appeared to get engaged. The pair spent about 40 minutes at the top of the iconic building before descending the spire. They are in police custody now. The NYPD tells CNBC the investigation is ongoing and they believe it to be a stunt with no connection to terror. Still, braver souls than I. Kelly, you
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Kelly Evans
know, I want to have one of these. You can't do that reaction. But when you see people go up 1400ft, Brandon to get engaged, it's a little hard to root against.
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Brandon Gomez
Remarkable feat. Regardless, I know what else should do it.
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Kelly Evans
To be clear, don't ever do this Terrible idea, but I kind of wish him well.
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Kevin Warsh
Yeah.
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Peter Cipino
Yeah.
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Kelly Evans
Thank you, Brandon.
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Brandon Gomez
Thanks.
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Kelly Evans
Coming up. Remember when I was supposed to destroy the job market? That didn't quite happen. In fact, the opposite might be true, and it's leading to some C suite regret. Plus, Meta's push into AI Compute has its shares soaring today, while other infrastructure providers are selling off. We'll have those details next. Tomorrow we get the monthly jobs report, a crucial data point for the economy and for the Fed. Job growth lately has been surprisingly strong, averaging 188,000 over the past three months. So what's driving that? Well, it might in part actually be AI. Employers like Ford are reportedly rehiring some engineers they had intended to replace with the technology. While new data from Ramp and Reveal Revelio Labs shows a surprising result as well. Companies who spent the most on AI also grew their headcount by roughly 10% in the two years after adoption. Joining me on set is Evan Sohn, managing director at Revelio Revelio. I think Revealio sounds like you're revealing.
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Evan Sohn
Yeah, Revelio is. Is correct. That's great.
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Kelly Evans
It's good to see you.
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Evan Sohn
Good to see you, too.
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Kelly Evans
Is this a real thing where employers are realizing workforce reduction may not be part of the AI plan?
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Evan Sohn
I think it's really fascinating and as you just said, we did this report with Ramp and it showed that the companies that were really intense, really, the higher the intensity of AI, we're actually seeing headcount growth by 10%, also about 1 1/2% in the entry level side. So it's not just the more seasoned people who are benefiting from the AI and that's sort of the company on the growth side. But also these companies were now hiring entry level people as opposed to the companies that were sort of playing around with it, where they weren't seeing either as much growth or even negative growth on the entry level side.
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Kelly Evans
What is your expectation for the, for the report tomorrow?
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Evan Sohn
Do you think it's going to. We're seeing really high. We're with. We see really high numbers. Over 250,000.
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Claudia Sahm
What?
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Evan Sohn
Yeah, yeah. Pretty, pretty.
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Kelly Evans
What would you say is driving?
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Evan Sohn
Let's actually peel it back for a second. We've been talking about low hire, low fire, low quit for months now. Well, in a world where there's low hire, low fire, low quit. And we saw the same thing from the jolt numbers. Low quitting, low firing job, and the job open numbers are pretty much, pretty much stable. Any hiring is going to stick, right? Any hiring is now going to be incremental. And we're really seeing is that if the hiring went up by 0.4% and attrition went down by 0.8% that's really going to have, have a very dramatic effect on the overall numbers. And that's really what we're seeing across all sectors with the exception of transportation. We really saw a stronger good job job number for June.
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Kelly Evans
So tell me again, so we've been in low hire, low fire, which everyone describes as. We're kind of in that little bit of a stalemate, kind of a stuck feeling jobs market. And why do you think that's giving way now?
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Evan Sohn
So it's giving way because of purposeful hiring. And we talked about that probably a couple of months ago that companies still need to hire. And if you have to hire but people aren't going to quit, that's going to create a new job. So there's not enough of an opportunity to leave. Wages went up in the job postings by about 3%. I'm not looking to leave. The company's not looking to fire me. By the way, the Warren layoff Note layoff numbers 50% of where they were the month before.
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Kelly Evans
So they're low, they're very low.
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Evan Sohn
About 17,000. That's about it. As opposed to 35,000 the month before. So in this market where no one's moving, any hiring is going to now be an incremental hire. So they're going to land those people inside, you know, inside those companies.
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Kelly Evans
It's fascinating and you always have good kind of insight into where some of the jobs are and where the trends are and what are you seeing lately.
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Evan Sohn
So again we just saw this like IT consulting and, and advisory services, AI helping people implement AI, but also don't help, don't first if I, if I need the help, let me go outside and get a consulting firm. And that's how we stood. The consulting firms, the advisory firms really staff their numbers up. They're up by between 30 and 40% in terms of just job posting data.
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Kelly Evans
Why is it, if all this is the case, isn't that the classic job channel for MBA grads? And yet I keep reading these stories about how MBA graduates can't get hired.
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Evan Sohn
I don't know what explains that. I think it's taking time for companies to understand that an AI empowered employee is actually to be really productive. You know, the first thing we start to see is, is productivity and people didn't equal each other. I could be more productive by throwing out AI into the into my operation and we're going to get more, we're going to get more efficient and more productive. Now, what they're really realizing in many instances is an employee with AI and empowered with AI is going to be even more productive, supercharged superpower and even more productive. What do you want? I'd rather have an employee with superpowers than no employee.
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Kelly Evans
I think that's exactly right. I think it's true here. I think it's true in a lot of places. I also saw a recent story, CNBC story, that said people are actually happier with their jobs lately than they have been in some time. So going back to your point about this low quit situation, it seems like there's actually a degree of job satisfaction that is emerging throughout amidst all of this innovation and chaos.
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Evan Sohn
I hope so. Look, if each individual is becoming more productive as they're adopting AI, they're feeling better about themselves. They're feeling, hey, maybe the, the scut, some of the scut work that they used to do is now being done by AI. They're learning new things. Everybody always likes to learn new things, feel really good about themselves. And maybe that's really driving some sentiment.
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Kelly Evans
Well, we will see. 250 is a big number, big number because I've heard like zero is the flat line these days with changes in the population. So we'll see if that comes in. Evan, thanks so much.
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Evan Sohn
Thanks, Kelly.
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Kelly Evans
Appreciate it. Evan Sohn of Revelio Labs. Coming up, Metta announcing a new strategy as it struggles to find its footing in the air race. Is Zuckerberg now following the Elon Musk playbook? And can that that turn Metta into the next space X those details next. Welcome back. Metta announcing it will now sell excess computing power to outside customers. But competition in that space is already fierce. Shares are up nicely today, though. Julia Boorstin has more in today's tech check. Julia.
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Julia Boorstin
Well, Kelly, sources close the situation confirmed to CNBC that Met is working on building a cloud infrastructure business to sell AI compute. Now, this should not be a surprise to anyone because Mark Zuckerberg first talked about this last October and then again at the company's annual shareholder meeting this May, saying, quote, it's definitely on the table. Almost every week there are different companies that come to us from outside asking us to both stand up an API service or asking if we have compute that they could buy from us at some premium to what we've bought it at. Now, back in January when Zuckerberg appointed Dina Powell McCormick as the company's President and to co head its new Meta Compute division. Back then the company was laying the groundwork for this type of new business as it works to monetize is up to $145 billion in capital expenditures this year. Nomadic could offer paid access to models hosted on its data centers and competition with Amazon's aws, Microsoft Azure and Google's cloud. Or it could sell raw compute like Core Weave. Now Core Weave along with another AI cloud company, Nebias Group. They are both down double digits today, down 12 and 14%. This as analysts are bullish on Meta's move. UBS writing today quote, this move shows at least some financial constraint from Zuck. So now the story can shift to free cash flow stabilization, a potential new revenue stream and all of it at what many would argue are near trough valuation multiples.
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Kelly Evans
Kelly, you know when I saw this I thought to my we had had Sam lessen on not long ago asking him about Meta Struggles. Obviously he's close to the company and the Zuckerbergs and he said look, they're hoarding Compute for a reason. They're going to do something with it. They see an opportunity and here we are. So that was prescient. But this is a, as you just exactly outlined, Juliet area. There's a lot of competition. I'm not really sure what matters. Edge is, you know, if, if a customer can go to an existing cloud with another model or to a NEO cloud and just bring its own. I'll be curious to learn more about where they think their, you know, their best competitive point is, well, look, there's
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Julia Boorstin
a lot of competition, but there's also a huge amount of demand here. And the fact that back in May Mark Zuckerberg was saying they are being approached, they're getting incoming from companies that say, hey, we know that you've invested all of this money to lock down this compute capacity. Can we have access to some of that? So I think there is this, this scarcity or a sense of scarcity down the line in this space and Metta has made those investments to make sure they do have access to compute capabilities. And it's worth noting that, you know, over the past several quarters Mark Zuckerberg has said don't worry about us over investing, hosting an AI infrastructure because even if we don't use it, there will be other people who will be willing to pay for it. Right.
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Kelly Evans
And look at Starlink, I'm sorry, Space X and Anthropic. I mean it could be something like that. As we said, taking a page out of that playbook. Julia, thanks very much. Julia Boorstin. Coming up, shares of this media name are down 19% over the past month. But Wolf Research upgrading it today and sees 30% upside. We'll reveal it and speak to the analyst next. Welcome back. Shares of Fox are down 18% since they announced they'll acquire Roku in a $22 billion cash and stock deal. But Wolf Research says combining the two will make both Fox and Roku stronger for longer and should double Fox's long term sales growth rate. The firm upgrading shares of Fox to outperform with the $71 price target. They're up about 3.4percent today. Let's bring in Peter Cipino. He's the analyst at Wolf Research. Peter, it's great to see you. Welcome.
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Peter Cipino
Thanks.
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Kelly Evans
Why do you think the market reacted so negatively when this deal was first announced?
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Peter Cipino
It's pretty simple math. Fox to pay a price for Roku that was much higher as a multiple of profits than Fox was trading for. There are lots of good reasons for that. We think this is a smart strategic move for Fox Fox. But the Fox shareholder base signed up for a really different risk profile than Roku. Fox for many years has been a company about which the investment debate was the resilience of the Fox News and the Fox Sports audiences, the idea that even as pay TV shrinks, that in the same way that CNBC keeps its audience, Fox News and Fox Sports would keep their audiences. And that's been true. And Fox has been a good stock stock. But the shareholders that signed up for that steady Eddy buyback stock pay dividends profile were just caught off guard by this big price paid for Roku.
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Kelly Evans
It's been a good stock until this year. I mean, it was down even before this deal, which to some smacked of, I don't want to say desperation, but a little bit of a change in direction, maybe some urgency. Look, has that now taken hold of the entire media landscape? Look at Comcast versus Versant. It's barely six months out. Now they're spinning off nbcu. So that's an entirely different strategy, it sounds like, than what Fox is pursuing. How would you compare and contrast those two?
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Peter Cipino
I'm glad you brought up the weakness of the last several months in the Fox stock. It's mostly about the NFL. Fox's fundamentals have been really strong and it's generally not been frequently named. In all the tumult happening in the media industry, Fox has been a steady Eddie, but the Fox broadcast channel has a very obviously important relationship with the NFL. And the NFL has been rumored to be looking to reprice its broadcast TV rights deal in the United States because the NBA did such a well priced deal a couple of years ago. And whenever Fox and the rest of the broadcasters that have the NFL TV rights renegotiate their rights, they are going to pay more. That risk is out there. It's not in the published numbers for Fox, but everybody who trades and owns the stock is expecting there to be some dilution from that in the future. And it's just a question of how much and when.
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Kelly Evans
So why are they buying Roku?
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Peter Cipino
So Fox, in addition to having Fox News and Fox TV has to be and to be is the second biggest player in free ad supported viewing. It's the alternative to expensive subscriptions. And the price of SVAD or streaming subscriptions keeps going up every year. The average household now now is paying almost as much for subscriptions as the linear TV households.
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Kelly Evans
Exactly.
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Peter Cipino
Satellite tv. The other reason is that the Fox ad sales force is really powerful and Roku produces more ad inventory and collects more data about its customers than it knows what to do with. And Fox is in a really strong position to monetize all that ad inventory and all that data.
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Kelly Evans
So finally then, where does that leave in NBC Universal? You wrote yesterday or earlier this week when Comcast made this announcement that you actually don't think the spinoff is going to happen because someone's going to come in and buy. Is it Comcast you think, or, or how do you expect this to play out here?
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Peter Cipino
There are several ways this could play out. And yes, I did write that it's possible this breakup of Comcast won't reach finality because some deal will come in preemptively, although it doesn't have to play out that way. Is it also possible that Comcast will spin out out NBC Universal and that'll be the transaction that facilitates an offer for Comcast cable by Charter? That's probably the base case and it's going to take a while to play out. Alternatively, there may be interest in buying NBC Universal proactively. And this move by Comcast is smart. It's like in basketball, it plays the role of a shot clock. Anybody who wants to do a deal for NBC Universal today can no longer wait out Comcast. They have a shot clock. They've got to act before this breakup takes place. Otherwise there's a one to two year waiting period for tax reasons.
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Kelly Evans
Final comment then. How much is Starlink? An overhang, you know, on the Comcast charter, the Internet space Is it a big one?
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Peter Cipino
For the companies in our coverage who provide home broadband and mobile services, Starlink is a big overhang that won't go away. It's interesting. The mobile providers, the big three telcos, have traded even worse than the cable companies who provide home Internet over the last couple of months. Maybe because they were treated like safe harbors before.
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Kelly Evans
Indeed.
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Peter Cipino
But actually Starlink is coming for home Internet first and faster. The Starlink's ability to attack the mobile space is less clear and will take more time.
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Kelly Evans
Peter, a pleasure. Thanks so much for joining us today. Appreciate it. Peter Cipino of Wolf Research and that's it for us. Thanks for watching the Exchange. Dom Chu is in for Brian. I'll join him for Power Lunch right after this break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
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Keith Lansford
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 subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update. Wherever you get your podcasts.