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AI's Power Problem, Precious Metals Climb and Home Sales Soar 9/24/25
00:44:09
Bloom Energy has lost nearly a fifth of its value this week as the street casts doubt on its valuation--we talk to the CEO. Why the rally in gold can keep running. Plus, new home sales hit a three-year high in August.
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- [00:00]
A
Morning Zoe. Got donuts.
- [00:02]
B
Jeff Bridges, why are you still living above our garage?
- [00:05]
A
Well, I dig the mattress and I want to be in a T Mobile commercial like you teach me. So Dana oh no, I'm not really prepared.
- [00:15]
B
I couldn't possibly at t mobile get the new iPhone 17 Pro on them. It's designed to be the most powerful iPhone yet and has the ultimate pro camera system.
- [00:24]
A
Wow, impressive. Let me try. T Mobile is the best place to get iPhone 17 Pro because they've got the best network. Nice. Je free. You heard them. T Mobile is the best place to.
- [00:35]
C
Get the new iPhone 17 Pro on us with eligible traded in any condition.
- [00:40]
A
So what are we having for lunch? Dude, my work here is done.
- [00:44]
C
The 24 month bill credits on experience beyond for well qualified customers + tax and 35 device connection charge credit send and balance due if you pay off earlier Cancel Finance agreement. IPhone 17 Pro 256 gigs 1099.99 A new line minimum 100 plus a month plan with auto pay plus taxes and fees required Best mobile network in the US based on analysis by Oklahoma Speed Test Intelligence Data 182025 Visit T mobile.com.
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- [01:31]
B
You're listening to the Exchange. Here's today's show.
- [01:38]
A
That was a quickie. Thank you, Scott. Welcome to the Exchange. I'm Melissa Lee along with Mike Santoli. Stocks right now, little change as the trade under pressure for a second day. Nvidia Oracle, some of the notable decliners. A good earnings report from Micron also not helping lift that stock. One name though is bucking the trend and that is intel. That is actually leading the S and.
- [01:58]
D
P yet Gold taking a breather today as well after hitting a fresh record high yesterday. Copper the big gainer within the commodity space today on pace for its best day since early July. Treasuries just a bit weaker across the curve. Yields are up between 1 and 3 basis points depending on the maturity. The next gauge on inflation from the PC report on deck for this Friday the 10 year yield at 414 is basically back up to its post Fed decision. High markets are kind of digesting a lot of this Fed speak and even a really good housing starts number this morning and wondering if you know, we can really bank on the two cuts remaining for the rest of, you know, of this year and the overall equity index that feels like they're showing some fatigue in potential seasonal weak spot.
- [02:45]
A
We always look at the bank of America flow survey and what it showed last at the end of the most recent week was that there are the most outflows when it comes to the growth stocks, the large cap tech stocks, communication services and the inflows were into small caps.
- [02:58]
D
Yes.
- [02:59]
A
So we are seeing that play out.
- [03:00]
D
Here and there is a bit of a relief for the laggards trade. I mean energy's up a couple of percent this week and you see some of the fertilizer names are leading the way today. So who knows if that's going to be an emerging theme. Well, shares of Alibaba are surging after the CEO unveiled plans to boost AI spending. But is this a wake up call for Washington? For more, let's bring in Christina Parts and Evolos.
- [03:22]
B
Christina, while Mike Alibaba joining the trend of making these multibillion dollar promises, the Chinese tech giant pledging like you said, $53 billion over the next three years to build new models, infrastructure and more of advances in their large language model. Bloomberg also reports Chinese tech giants could spend more than $32 billion on AI next year, more than double 2023 levels. These promises really come at a time when Beijing we know has banned Nvidia H20 chip sales to domestic firms to really speed up homegrown chip efforts. Progress is definitely being made, but Alibaba says it will still use some of Nvidia's development tools in its cloud software systems and really integrate Nvidia tools into Alibaba robots and self driving cars, AKA physical AI. The spending announcement though does carry some significant political weight. Why do I say that? Because a source told me this morning that China's premier toured Alibaba's facilities and was shown its custom It's a PPU chip. What they're calling it's TPU ppu, all different names. But he told me that it was outperforming Nvidia's H20 on every metric. These inspection tours though are highly choreographed. Lots of media and doing this publicly shows top level confidence in China's ability to compete in advanced AI Alibaba shares. You could see they are up about 8% of their highest level in four years. However, if you look on a five year basis, the stock is down about 34%. The market reaction though shows how strong the global appetite for AI is right now and the US side of it may be saturated. There was a research firm note from Vital Knowledge out this morning saying that momentum is maybe moving to Hong Kong where overall a lot of these names have cheaper valuations for U.S. markets, though it likely means more urgency to secure chip supply chains and more scrutiny of Nvidia's continued business with these Chinese tech giants guys.
- [05:13]
A
Well, you also think, Christine, if they're going to spend this much and they can't really buy Nvidia chips that, that perform well and they could possibly make their own or get them domestically from other chip providers that on the US side is the chip companies that's going to, they're completely going to miss out on this next wave of the boom in terms of spending. If the US is in fact saturated and the next wave according to Vital Knowledge is in Asia, then all these chip makers here are just going to.
- [05:38]
B
Miss out, especially with those export controls. Right to your point, they're going to miss out. The investors would miss out if they're heavily invested on the stock front over here and, and then on the American, the CEO front and all of these tech CEOs that are arguing we need to be part of this big capex spend in China or else we're going to be missing out on a huge market. And so obviously there's financial repercussions. But two, if a lot of Chinese firms like Alibaba, they're building these open source models and they're becoming more and more popular with developers. And so if they move forward and developers start using Chinese technology and Chinese models, that pushes out US firms even more.
- [06:17]
A
So.
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B
So that's the argument that Nvidia CEO will make. That's the argument that I guess Intel CEO everybody will make. They want to be part of the China equation. But on the flip side you have the security risks that are involved with that. You're sending more advanced technology. Maybe these B30, B40 chips, these are Blackwell versions geared towards China. You're sending them to China, maybe they can use them for military or nefarious purposes. That's the other side, the other argument.
- [06:42]
A
Yeah, but Christina's point, Mike, I think is a good one in terms of where the wave is. I mean the Alibaba on a valuation basis, much, much less right than the.
- [06:52]
D
Trades here from an investor's perspective. It just feels like it's earlier. If it's, if you want to make the case that it's not super late here and there's still more Runway, it's even much earlier over there. And yes, those valuations are and by the way, how much is how far does $50 billion in capex from Alibaba go over there relative to over here? I mean we throw these numbers out as if it translates to a fixed amount of capacity and we don't really even know.
- [07:18]
A
Right, exactly. We don't know that. Christine, I hear you saying yes, yes.
- [07:22]
B
People can't see me because I'm just. Thank you, Mike. I wish we were more critical that all of these dollar amounts that are being thrown out by countries, by companies with a lack of details, a lack of timeline, where is it going to be spent? Like for example, the OpenAI and video deal. Massive, right? Great for, for chip spending going forward. But is it going to happen on US Soil? Is it going to happen in Europe? Is there going to be any double counting given the, the recent announcements in the UK within video? So there's so many unanswered questions and yet the market still rewards all of these big headlines and then you start to see like an unwind the next day. So I just to your point, perhaps China is an opportunity or maybe, you know, Europe, I don't know but it's just something we just need to be critical about these big statements.
- [08:05]
A
Part of the spend for Alibaba is happening overseas, not even in China. They're announcing big data centers in other countries. Right.
- [08:11]
B
Excellent point. Their cloud expansion.
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A
All right, Christina. Thanks Christina. Parts Navalis.
- [08:15]
D
All right, well it has been a big week for AI already and questions about capacity and power constraints. Bloom Energy, one of the many power companies that's had a massive run this year as part of the data center story that stock up over 200% since the start of 2025, although moving lower this week thanks in part to a downgrade from Jefferies over valuation concerns today. For more on the AI power build out, we're joined by Bloom Energy CEO KR Sridhar. KR it's great to have you on. You know, it's understandable that investors are impatient to try and gain leverage to this massive trend and everybody keeps having higher estimates of the power needs. The street is pushing back and saying look, it can only happen so quickly in terms of the, the build out the pipeline of where you can actually deploy. So how do you characterize where you are in that process?
- [09:07]
E
So two or three things. Right. Thank you for having me. The first point is this trend in AI and the spending and the infrastructure build and the benefits we're going to get is secular. It's going to last for a long time, number one. Number two, the immediate need for building the data center infrastructure between now and 2030 is going to be availability of power. This is on site power in very, very large quantities. 50100 megawatts concentrated in a data center. And just today the US Secretary of Energy, Chris Wright said, Between now and 2030, we need 100 gigawatts of firm, reliable power. That's not just going to come from the grid. A portion of it will come from the grid. The rest of it has to be on site power. That on site power, powering these data centers is necessary because if you just look at the hyperscalers and their investments in the US in the year 2025, it's closer to $2 billion of capex every single day, weekday and weekend. All that infrastructure, all that capex needs power and lots of them. And that's where we come in. We are the best choice for on site power and we have a technology mode bigger than anybody else. And we are the right solution at the right time for this vital project and program that's important for the country and the world.
- [10:44]
D
The demand, so as you say, is there, at least in terms of stated commitments. I guess the question though is how quickly you actually can service the demand. I think that's the nature of some of the, the, you know, maybe a little bit of the skepticism out there, at least in terms of relative to how high the company's valuation has gotten and whether revenues can track accordingly.
- [11:07]
E
So I think just a month and a half ago, during our earnings call, we announced our first installation on one data center for Oracle and we publicly made the statement within 90 days. We will have power from the day of signing. I can reiterate that statement right here. We are halfway into that and we absolutely will have that capacity available to oracle within those 90 days. So that's the speed at which we operate. We operate at a high speed. And whether the rest of the infrastructure, in terms of the buildings, in terms of the data center itself being ready, is going to come at that speed. I can't speak to that. But what Bloom offers, which is unique in this sector, is firm, reliable power that's clean on site at a cost effective manner for the data center. But the most important thing, time to power. Nobody can beat us on that.
- [12:13]
A
The downgrade Today from Jefferies KR specifically cites just lack of visibility into 2027 beyond 2026 year end. 2026 is when you are forecasting that you're going to double your manufacturing capacity from 1 to 2 gigawatts. Can you give us an idea of whether or not you'd be or when you will be at 100% utilization of that additional doubling of the capacity? There's also this notion that you could go up to 5 gigawatts also in the future.
- [12:43]
E
So here is what we do. We are, we have. If you watched how we have built our factory and our factory capacity, we've been extremely deliberate. We don't get ahead of our headlights and we build capacity. When we see the demand, we see a robust pipeline and more importantly we see the fundamentals of the business and we see where that supply demand gap is going to be. It's only going to widen over the next five years. And that widening, the only solution that's going to solve that problem is on site power. When you take those into account, then you look at engines, turbines and fuel cells and compared to, to a turbine, a 50 megawatt class turbine that will be located on site giving about 37% efficiency by the time it is made appropriate for the data center, which is a low voltage DC, it's somewhere in the 30%. We are 75% better because of our technology in providing the same amount of power. So you take 100 megawatt hours of gas, we can provide the data center 75% more power. This is a game where we have inherent advantage because of our technology.
- [14:12]
A
Here's the thing kr I mean underscoring this downgrade today is not that people are skeptical of the technology or the superiority or how it fits into this data center build out, but just the valuation of, of where your company is now. So could you speak to that utilization? You said that you build capacity only when you see the demand. So are you going to be at 100% capacity of that doubling of the capacity in your manufacturing facility? Are you going to be using that all? I mean can you speak to demand beyond 2026 into 2027 to sort of speak to the concerns that Wall street has right now?
- [14:52]
E
So when we offer. So let me address the capacity question head on. When we offer time to power, when we get a big order, we are able to fulfill that very fast. If I have capacity, standing by some amount of slack capacity to be able to meet that demand and command a premium, I am offering my investors significantly greater return. Even if that equipment were sitting idle for a short amount of time because I'm more than making up for it. So from an investor point of view, or from a investment decision point of view, it is the return on investment on your dollars. For us, because of the innovative way in which we have built our factory, our return on investment on a factory is less than a year, which is unthinkable in any other industry. For that reason, we can actually take this bet without risking our capital or our investors and do good for them. So we feel very comfortable about this expansion. I can't wait to expand even further in the in the outgoing years as you alluded to. I think we will be growing and I think when you look at our numbers and how we perform, you will see that that absorption issue that you talked about, factory absorption, is not going to be a problem for us in our financials.
- [16:25]
A
There has been some backlash against data centers and the impact on power, the impact on the retail consumer. KR Governor DeSantis just recently posted something to the effect of, you know, let's say no to these data centers because they require so much power, our citizens are going to pay more in power, etc. There is a movement to bring your own gener to data centers. If you want to build it, then bring your own generation. How do you see that as an opportunity going forward in terms of another lift to demand for Bloom?
- [16:58]
E
Yeah, you know, I'm not just a power provider, but I'm also a power consumer. So let me wear my ratepayer hat and let me speak to that right? What do I mean by that? If I'm a ratepayer and if a big data center comes along and because of that, either the cost of my electricity goes up or the reliability of my electricity goes up, or if I want to expand my own little business as a mom and pop, I'm not being provided that because all the power is going to a data center. That's unfair. I should be complaining about it. That's what people are doing. So bring your own power is the right thing. Now, if I brought my own power, but I bring a noisy, dirty, polluting piece of equipment that makes me living in my neighborhood, bad for me. I should be complaining about that. But guess what? Bloom is clean. We don't dirty the air. And because it's on site and sleeve directly to the data center customer, there's no additional cost to the ratepayer and we are not noisy and we don't look ugly. So we are nice in the neighborhood. If we can offer all that and we can offer the local community economic development. I think they should be welcoming us with their arms wide open as opposed to the fights that you're seeing right now. So that's why we think we are the solid state digital power for the digital world. Unlike the mechanical age horses powering a data center.
- [18:35]
A
KR Great to speak with you. Thanks for your time. KR Shridhar thank you. Bloom Energy CEO and a quick programming note here. Much more on the future of AI when the CEO Qualcomm Joe joins the closing bell over time today, 4:30pm Eastern Time. We don't want to miss that.
- [18:47]
D
All right. Open Air spending spree continues. In just 48 hours, it's announced a build out equivalent to 17 nuclear reactors totaling $850 billion in spending. For today's tech check, Mackenzie Seagalo sat down with OpenAI CEO Sam Altman and asked about those overspending concerns.
- [19:04]
B
Mac Mike OpenAI CEO Sam Altman was clear you cannot afford to underinvest in.
- [19:10]
A
AI infrastructure right now.
- [19:12]
B
He warned that companies will get burned.
- [19:14]
A
If they don't have enough capacity to meet demand. Altman also credited the White House with helping accelerate his buildout. This administration has been great for building. I mean look at what's happening here.
- [19:25]
E
Look at, look at the speed with.
- [19:27]
A
Which we're now able to build infrastructure. And I think the President really understands and values that and has been a great enabler of things like this happening.
- [19:36]
B
And even as Altman acknowledged the froth.
- [19:38]
A
In the markets and said that he understands why people worry about a bubble, he argued this is simply what it takes to deliver AI.
- [19:45]
B
Now I also pressed him on competition, asking who he's most concerned about right now.
- [19:51]
A
So I think there will be great models everywhere.
- [19:54]
D
I think a lot of people are.
- [19:55]
E
Going to win big.
- [19:56]
F
I think this space will continue to evolve.
- [19:58]
A
I don't have like one competitor that.
- [20:00]
F
Oh my God, this is the one.
- [20:03]
A
You know, we have a lot of extremely well funded, extremely talented teams trying to do our thing.
- [20:08]
B
Now Altman may not be singling out.
- [20:10]
A
One rival, but we did just see his biggest backer, Microsoft, moving to add.
- [20:15]
B
Anthropic model into copilot expanding beyond OpenAI.
- [20:19]
A
Guys, Mac, thanks MacKenzie. Seagallos. Coming up, the world's largest stablecoin issuer tether reportedly in the middle of a fundraising round at a half a trillion dollar valuation. We'll ask a partner from crypto hedge fund Pantera about what it signals for the Crypt ecosystem.
- [20:34]
D
Plus Amazon getting an upgrade from Wells Fargo saying its Partnership with AI startup Anthropic will be a major driver for us going forward. The analyst behind that call will join us to make his case. The exchange is back right after this. This is the exchange on cnbc.
- [20:57]
A
Morning, Zoe. Got donuts.
- [20:58]
B
Jeff Bridges, why are you still living above our garage?
- [21:02]
A
Well, I dig the mattress and I want to be in mobile commercial like you teach me. So Dana. Oh no, I'm not really prepared.
- [21:11]
B
I couldn't possibly at T Mobile get the new iPhone 17 Pro on them. It's designed to be the most powerful iPhone yet and has the ultimate pro camera system.
- [21:20]
A
Wow, impressive. Let me try. T Mobile is the best place to get iPhone 17 Pro because they've got the best network. Nice. Jeffrey, you heard them. T Mobile is the best place to.
- [21:31]
C
Get the new iPhone 17 Pro on us with eligible trade in in any condition.
- [21:36]
A
So what are we having for lunch? Dude, my work here is done.
- [21:40]
C
24 monthly bill credits on experience beyond for well qualified customers plus tax and $35 device connection charge credits ended balance due if you pay off earlier. Cancel Finance agreement. IPhone 17 Pro 256GB $1,099.99 and new line minimum $100 plus a month plan with auto PayPal taxes and fees required. Best mobile network in the US based on analysis by Ooklove speed test intelligence data 1H2025 visit t mobile.com I'm no.
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D
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1-800-Flowers.Com we know that connections are at the heart of being human. Whether celebrating life's joys or comforting during tough times, 1-800-FLowers helps you express what words can't. For nearly 50 years, millions have trusted 1-800-FLowers to deliver thoughtful gifts that help create lasting bonds. Because it's more than just a gift. It's your way of showing you care. Visit 1-800-flowers.com pandora and connect today, that's 1-800-flowers. Com. Pandora tether, the world's largest stablecoin issuer, is reportedly looking to raise capital in a funding round that would value it at $500 billion. On par with Open Air. Tether seeks to raise between 15 and 20 billion in equity in exchange for a roughly 3% stake in the company. For more, let's bring in Cosmo Jiang, general partner at Pantera Capital, which invests exclusively in Bitcoin, digital currencies and companies in the blockchain ecosystem. Cosmo, great to have you with us. You're very familiar with the Tether team. I'm wondering in terms of this valuation, which seems eye popping to say the least, how much of it is a bet on Tether itself, the stablecoin, and how much is tied up with the connection to Washington and the perception that they could get favorable treatment because some of their closest advisors include Kanter and Brandon Letnick and also the CEO is Beau Hynes, which used to be the head of digital assets basically at the White House.
- [23:53]
G
We're pretty, pretty fortunate to be close with a Tether team and we have very frequent dialogue with them and their closest advisors, including people like you said, like Cantor, Brett and Ludnick and, and Bill Hines. And so it's not surprising to us that there is a lot of interest in Tether. You know, Tether is the largest stablecoin issuer. It has around $170 billion of stablecoin issuance, 60% market share, so clearly very dominant. It's also one of the most profitable businesses in all of digital assets. You know, on that 170 billion of issuance, they probably are generating close to $7 billion of revenue. And so in that context it's no surprise to us that there are a lot of people who are interested in getting exposure to that, both to Tether specifically, but also to stablecoins as an industry. You know, a $500 billion valuation is not cheap when you think about it. On, on that $7 billion of revenue that's maybe growing extremely fast over the next few years. It actually is really comparable to where the public markets values circle at on a comparable basis. And so it's not too crazy to me that, that they are going to get out there and be successful doing that race.
- [24:54]
A
Is there a premium though associated with the Washington angle?
- [24:58]
G
I definitely think it helps. Right. The fact that Tether is so closely tied to many of the closest, at many of the close people around the White House suggests that they do have a better, better sense of how stablecoin, stablecoin regulation is going to play out over time and importantly, you know, have the right people and relations in place to really act on it quickly when they have the opportunity. And so we saw them bring on Bull Hines recently, which we think was a great hire. Someone who, clearly a standout policy leader. He, he will be pretty effective in how he helps Tether grow their US business, which historically they haven't been doing. And if we think about it, the US is really the largest capital markets and the most profitable market in the world. And so the fact that Tether has the position it does without having tapped into all its relationships and really attacked the US market in a major way, suggests that there is a lot of growth potential ahead.
- [25:47]
D
Cosmo, just to step back in terms of the business itself and whether in fact, you know, it can either maintain or build on this market. It's essentially collecting interest on the collateral that, that underlies the stablecoins. Right. So if the Fed cuts rates, that goes down. And to what degree is that actually worth paying a huge multiple for that type of a business? I mean, what's the innovation here aside from first mover advantage when they've already gotten 60% market share?
- [26:15]
G
There's absolutely a lot of value in being a first mover and having that, having that network effect that allows you to stay in that position. Stablecoins are very much a network like business, like many other networks, the larger you get, the more profitable you can be. And we often will see in these types of industries that the leader in the industry is wildly profitable when the second place is much less so because they just don't have that same ingrained built in, built in, plug in to all the networks. And so we do think that Tether is going to be, continue to really make a strong, really monetize its stablecoin supply very effectively. The, the quality of their earnings we think will change over time, especially as more competition comes in. But undoubtedly their position today feels very unassailable. We do think that that's great for the space generally and the bigger, the bigger opportunity is really around the growth, right? Stablecoins today there's around $300 billion of issuance, which is not small, but we do think that's going to triple, going to surpass $1 trillion over the next year is something that I think is very likely. And so in the context of having that much growth ahead and already having so much lock in effect and a lot of operating leverage in the business suggests that we should be able to suggest that it can be quite profitable on a go forward basis as well.
- [27:29]
A
Cosmo, I want to talk to you about one of Pantera's latest investments in a, in a Crypto treasury company and that's Helios Medical. Helios Medical is actually a neurotech company that makes the neuromodulation stimulator and yet it's buying Solana made its first purchase this week. I'm wondering because there's a case of an exchange crackdown on a company that converted to a crypto treasury company because there was concern that the company may be using funds that was raised as the existing company to then use crypto. How have you changed, if at all, your approach to crypto treasury companies seeing that that the exchanges are taking a much closer look at at how it's being marketed and what funds you are using to actually make those crypto purchases?
- [28:13]
G
HSBT Helios launched last week, which we're very excited about. Hst, we believe will be the preeminent Solana digital asset treasury and we're very excited about Solana as a compelling asset from a fundamental perspective as well as digital asset treasuries and their ability to drive value for shareholders. You know, we do work closely with abiding by the latest regulations and our best counsel, we do think that as long as you are doing right by shareholders, getting the proper shareholder votes, having your filings on time and in a, in a well disclosed fashion, that having a digital asset treasury is a compelling way to drive shareholder value, especially when you're giving access to a new asset, which is Solana, something that the market really hasn't had a chance to really understand yet.
- [28:57]
A
Are they still going to make the neuromodulation simulator which is the first commercial project, or does that completely go away because of Solana?
- [29:05]
G
We do think it's important. You know, as we were going about trying, thinking about which company we want to partner with, we wanted to be with a team that is mission driven. And so we do think what HSD Helios, the medical business is doing is important and will remain a piece of the business. But certainly the core of what we are trying to do going forward is building out this digital asset treasury strategy, which is really trying to advocate for Solana and helping investors understand why HSDT is such a great exposure to Solana.
- [29:32]
A
Cosmo, great to speak with you. Thanks. Cosmo Jiang.
- [29:37]
D
Coming up, new home sales soaring. In August we'll look at what drove buyers into the market and whether that surge is here to stay. We're back after this.
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C
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- [30:21]
A
Morning Zoe. Got donuts.
- [30:23]
B
Jeff Bridges why are you still living above our garage?
- [30:26]
A
Well, I dig the mattress and I want to be in a T Mobile commercial like you. Teach me Saldana. Oh no, I'm not really prepared.
- [30:35]
B
I couldn't possibly AT T Mobile get the new iPhone 17 Pro on them. It's designed to be the most powerful iPhone yet and has the ultimate pro camera system.
- [30:44]
A
Wow, impressive. Let me try. T Mobile is the best place to get iPhone 17 Pro because they've got the best network. Nice. Jeffrey, you heard them. T Mobile is the best place to.
- [30:55]
C
Get the new iPhone 17 Pro on us with eligible traded in any condition.
- [31:01]
A
So what are we having for launch? Dude, my work here is done.
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C
The 24 monthly bill credits on experience beyond for well qualified customers plus tax and $35 device connection charge credits ended balance due if you pay off earlier. Cancel Finance agreement. IPhone 17 Pro 256 gigs $1099.99 and new line minimum $100 plus a month plan with auto pay plus taxes and fees required. Best mobile network in the US based on analysis by Ooklab Speed Test Intelligence data 1H 2025 visit t mobile.com so.
- [31:22]
D
Much talk over the last couple of weeks comparing the current AI investment craze to the Internet boom in the late 90s that culminated in the year 2000. And here's one breakdown of valuation now versus then. It's the percentage of the S&P 500 market value that is attributable to companies that are trading at more than 10 times sales. So very expensive on a price to revenue basis. And right now we're about a third of the index is in companies that qualify for that obviously above where we were at the peak in 2000 was more like 25% of the market. There are those who will say that that's actually okay because we have a lot more companies, bigger ones and tested ones in the index right now that actually are more profitable on that sales bait. This is company by the way, like MasterCard is in here obviously a lot of software companies. So it's not saying that we are at some kind of an absolute peak, but it does show that those earnings have to come through. And people are being very generous about granting these massive valuations to companies even based on revenue, not just earnings. All right. Let's get over to Kate Rogers now for a CNBC news update.
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B
Kate?
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A
Hi, Mike.
- [32:28]
B
A closed door meeting between Secretary of State Marco Rubio and Russian Foreign Minister.
- [32:32]
A
Sergei Lavrov at the UN has just ended. According to the State Department, the meeting comes a day after President Trump said in a social media post that he.
- [32:40]
B
Thought Ukraine could win back territory to its original borders.
- [32:44]
A
The family of one of the victims of the January collision near Ronald Reagan Washington National Airport is suing American Airlines, its subsidiary, and the federal government. Other families of the 67 victims are expected to join the suit. The lawsuit filed today accuses the airline of failing to use procedures that were meant to curb the risk of midair collisions. American Airlines said it continues to support.
- [33:07]
B
The federal investigation into the crash and.
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Will defend itself from legal action.
- [33:12]
B
And a former stylist for Sean Diddy Combs filing a lawsuit today accusing him.
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A
Of sexual assault, abuse and violence while.
- [33:18]
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She worked for him. The stylist also testified against Combs in.
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His federal criminal trial earlier this year.
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B
Combs and his attorneys have yet to comment. Back over to you, Melissa.
- [33:28]
A
All right. Thanks, Kate. Coming up, gold outperforming the market by more than 3 to 1 this year. But is there still room to run in this trade? That's next go lower today but still hovering above the thirty seven hundred dollar level. The precious metal outpacing the S and p by nearly 50% over the past three years. Our next guest is staying bullish despite that runs as the markets are underappreciating the miners operating leverage. CNBC contributor and fast money trader Tim Seymour is here on set.
- [34:00]
C
It's great, it's great to be here on the exchange though. I mean let's, this is, this is fun stuff. This is, you know, talking gold with you guys here. I mean, what's better right on campus.
- [34:10]
A
But you still, I mean, you still like it, you still see upside. What's the catalyst here?
- [34:13]
C
Part of this is leave the gold macro out of this. If you listen to Newmont, which is the largest positions, the largest weighting in the gold index is 1314% of the GDX. Listen to them and listen to what they're doing. They're selling off non core assets, raising cash. They authorized a $6 billion buyback in July and I think that's going to be significantly higher. So the operational leverage in these companies is extraordinary. I don't think the analyst community and by nature it's like a lot of things we talk about, things that are lagging, lagging, they have to catch up to the gold price. And I look at EPS targets for 426 and I am sure they're going to be better. If we go sideways, I think they're going to be significantly better. Even if we saw a 10% pullback in gold, the macro around gold doesn't change. And that outperformance to the S and P over the last three years when all we do is talk about the stock market is pretty shocking from here.
- [35:03]
A
Would you rather gold miners or go miners?
- [35:07]
C
And the reason for that is that remember when gold was rallying in the first part of this rally the miners were really lagging because we had a big inflation push and they were not keeping up with inflation. But I think look at the performance of the stocks themselves relative to the metal and that beta has been two to three times over the last month and really the last two to three months as we've kicked this into high gear, I think you keep that outperformance.
- [35:30]
D
I guess you said the macro around gold hasn't changed and granted that the miners probably still have to realize some of the benefit of where gold has come to by now, but it seems to me the character of that rally changed a little bit. It kind of accelerated. You know it was really dependent on dollar down. It wasn't really operating by a lot of the metrics that we got used to. Right. I mean it's, it sort of felt like it had a life of its own.
- [35:54]
C
Yeah, Mike, I'm not comfortable with this moving gold because this is an ungold like move. And, and I do think that some of the key drivers of this are things that are more thematic than necessarily. I mean we can get readings from China's gold reserves and we can see there at 10 year highs, we know their treasury holdings are falling. Those are things that are part of this equation. Inflation, you know it. But as we joke on the show, and I think Karen Feinerman does this a lot, she's like give me any fundamental macro headline I can tell you or people will tell you that's a reason to buy gold and there's a little that out there. But I'm a buyer.
- [36:28]
A
Are we at a point now? I mean you like gold, you like miners still, but there are other metals that are really showing some signs of life here. I mean copper for one, aluminum is another. Platinum I mean you name it. So should there be an additional allocation there to some of the other metals. How do you, how do you look at it in your basket?
- [36:44]
C
Copper has been extraordinarily volatile and some of that are just due to the technicals of the copper market and how it trades in LME and squeezes and futures contracts. But if you look, if you strip out some of that volatility, that same three year rally in gold is a great trend line in copper. And copper which has fundamentals that are really more about supply, demand dynamics, long lead time on mines, A lot of the, the geopolitics, a lot of the global unrest, some of that, that just leads to copper disruption. The best ways to play that to me are the integrated miners. That's bhp, that's Rio Tinto. I own Freeport and I think that's been disappointing, but picking it up. And I do think that the broader industrial metal space, obviously if we get a growth scare, that's really difficult. China resurgence, especially for Rio Tinto, is a big deal. I'm not saying their economy is going to the moon. I'm saying a little increase goes a long way for those companies.
- [37:34]
A
Tim, nice to see you.
- [37:36]
C
Great to be here.
- [37:36]
A
Tim Seymour and a quick programming note. Fast Money Live is coming back. A special Trading the Holidays live event happening at the NASDAQ on December 11th. Scan the QR code on your screen, head on over to cnbc.com fast money to get your tickets. It's going to be.
- [37:50]
C
Yeah, no, I mean I'm going to wear a great sweater which I just.
- [37:53]
A
Tried on right here.
- [37:54]
C
It's looking sharp.
- [37:55]
A
It's cashmere.
- [37:56]
C
Did you get a sweater?
- [37:57]
A
No, I didn't. I'll wear something else.
- [37:58]
C
You can borrow mine.
- [37:59]
D
It's good you got your wardrobe worked out like two months in advance.
- [38:03]
C
It's going to be fun.
- [38:04]
D
Great time. All right, coming up, Amazon is the second worst performer in the MAG7 this year. But Wells Fargo sees opportunities on the horizon. We'll talk to the analysts who upgraded the stock at his next. In just the past three days, we've gotten major announcements from the likes of Nvidia, OpenAI and Oracle. What about the big tech name seemingly left in the dust? Amazon one of them with shares basically flat so far this year. Our next guest says Amazon's partnership with Anthropic will accelerate AWS growth into next year. He upgraded shares to overweight, raised his price target to $280 today. Joining us now is Ken Gurelski. He is senior Internet analyst at Wells Fargo Securities. Ken, it's good to have you here maybe we set up by saying why Amazon and maybe us have been a little bit sidelined here this year. Concerns about market share, maybe pricing in the cloud business. Why might that turn?
- [39:05]
F
Yeah, thanks. First of all, thanks for having me. And I'd say this is, it's been a bit of a tough stretch. Right. You've had accelerating industry growth at the same time that Amazon has kind of been stuck in neutral.
- [39:19]
A
Right.
- [39:19]
F
And this is why we upgrade these shares today is we think this is about to change.
- [39:24]
G
Right.
- [39:24]
F
Anthropic has been a core, a key partner of Amazon. Note that OpenAI, which has been a very big spender in cloud and the subject of a lot of the headlines you've no doubt reported about over the last three to four weeks is more aligned with, with Amazon, with Microsoft and also does some work with Google but really not with Amazon. So Amazon has not had that exposure. We do think Anthropic has great momentum as a business and also will it be accelerating its compute spend and notably we think there will be a big project, big capacity project that the two are working on together that will benefit next year. We see it as a nice driver to us and a in an accelerant to the business.
- [40:10]
D
Will it get the growth rates back to where, you know, kind of investors had gotten used to? It feels as if there was so much attention to, you know, every quarter to the incremental growth rate in us and then the margin and that was kind of the whole investment story. So where does that trend toward?
- [40:28]
F
Yeah, so if you look AWS will still be a market share loser in total cloud. But our view is this is that the total pie of cloud is much bigger than than we had previously expected. We'll grow probably at a 30% CAGR between 24 and 29. This is a massive industry. Now Amazon is losing share but we expect Amazon share losses to peak this year, to peak this year and to improve thereafter. And importantly Amazon, which has kind of been stuck in the 17 high teens level, we expect acceleration in next year. Hopefully we'll get a little bit of that 3Q and 4Q where we're we see a couple of points of acceleration but more meaningful acceleration to the kind of low 20s and maybe there's an upside case to the mid 20s next year but again that is slower than the overall industry growth of 30% plus and a couple of the other larger players, Google and Azure. But we, we see the antidote to competitive share concerns and or AI positioning. The antidote to that is always acceleration. If you look back in the middle of 23, you saw the same thing. Acceleration, the concerns move to the side. That's to us is the opportunity.
- [41:47]
A
Ken, just curious though, you know, when you're rolling out rattling off these big numbers for the cloud industry and you know, huge CAGR numbers etc. How do you think about the growth when we have a series of announcements and money has yet to be deployed? Do you count those as do you say that is going to be the spend that is going to happen and that's what I'm going to base my estimates on. I mean for instance the Nvidia open air announcement earlier this week. Week they didn't even actually finalize the details of this agreement. They announced it. We are still lacking all the details but there is a huge headline number. How do you think about those large numbers that are being announced every day?
- [42:25]
F
There's no shortage of press leaks and press releases. Right. And maybe a little shortage of a couple fewer dollars out there that are actually being deployed. We are confident that the demand is there, right? We are seeing incredible amount of demand for computer. We, we believe that this will only really will expand over time and we just need more, more resources and compute. So relative to what we had, we had expected six months ago, dramatically more compute. But I want to be level headed and clear eyed here.
- [43:00]
A
Right.
- [43:01]
F
Which is there, there is a method to the madness and there isn't competitive advantage to staking out these big compute deals and taking up a bunch of capacity. So I would not discount the competitive aspect of making these big announcements and wrapping up large swaths of of compute kind of capacity as a competitive tool as Open OpenAI moves forward.
- [43:29]
D
Yeah, no doubt about OpenAI seems like it's willing to just keep making the numbers bigger to press their advantage there it's and get everybody to raise the stakes. Ken, appreciate the time today. Thank you. Ken Grinski from Wells Fargo. All right, coming up. Well, home builders are higher after new home sales soared to a three year high in August. Lennar, the best performer in the home construction etf itb. The numbers and the latest read on mortgage rates are next. A massive jump in sales of newly built homes in August. But the experts are skeptical of those numbers. Diana Olek joins us with the latest to explain why. Hi Diana.
- [44:10]
B
Hey Mike. And new home sales spiked a much larger than expected 20.5% in August compared with July to the highest level since January of 2022. And that's according to the U.S. census. It's also the largest one month gain since August of 2022 and sales were 50 15.4% higher than August last year. Now, this count is based on signed contracts. So people out shopping in August when the average rate on the 30 year fixed mortgage was higher than it is today. And that rate started August at 6.63% according to mortgage News Daily. It didn't really move much during the month. Today we are well below 6.4%. Now, Homebuilder analyst Ivy Zellman, who we all know around here, told me that the direction is right, that is higher sales. But quote, the magnitude is way too high. Even the NHP's chairman said in a release, while this month's figure may be subject to downward revision, we do expect a general improvement in sales over the coming months, supported by the recent decline in mortgage rates. And he's talking about that decline in September. Now, in addition, the report has the median price of a new home sold in August up nearly 2% year over year. This after the homebuilder sentiment survey for September showed the highest share of builders cutting prices of the post Covid. Period. Period. Now, that big sales number pushed inventory to just over a seven month supply, down from a nine month supply in July. And guys, I'll tell you, I get an awful lot of housing data reports a lot. And this is my least favorite because it is always subject to major revisions and has the highest margin of error of any of the reports I get.
- [45:45]
D
So, so basically it's somewhat a noisy survey is what you're suggesting there. Maybe that noisy and maybe that's why the homebuilders are only up a little on this, on this news.
- [45:55]
B
Yeah, I mean one homebuilder actually said to me, don't hang your hat on this number. Yes, the trajectory is higher and we could see even higher in September because that's when we saw that big drop down about 20 basis points in mortgage rates. But again, you know, 20.5% in one month, that's a little much.
- [46:11]
A
And where are we now in mortgage rates, Diana?
- [46:13]
B
I believe we're at 6.37 today, unchanged from yesterday.
- [46:17]
A
Okay, so not much relief for homebuilders.
- [46:18]
D
Six and three eighths, we used to say back. I still think it is.
- [46:22]
A
Yeah, Diana. Thank you, Diana Olek. Coming up America, the buyer Micron slips and PayPal turns to the alts. All that and more in today's Rapid fire. That's next. Let's get you caught up on a few more stock stories on our radar. Time for Rapid Fire. First up, shares of Lithium Americas nearly Doubling after the Trump administration proposed taking an equity stake in the mining company after it said it would be unable to meet the requirements to receive funds from its $2 billion Energy Department loan granted under President Biden. Can't hurt to invest along with the administration.
- [47:04]
D
No, it can't. I mean, in this case, because there is an outstanding loan, there is an outstanding government commitment here, you will convert it to equity. It's a little different than kind of, kind of just asking for a stake, you know, in exchange for other promised funds, but got the group excited. Albemarle was up today on, on this, just this general idea. All of a sudden these are strategic assets. Not all of a sudden, but at least now more formally.
- [47:26]
A
So, so yeah, if you took a look back though, in terms of what the government has taken a stake in it, I mean, this is obvious, but it's worth underscoring. All of the assets have gone up. I mean when they share intel, for instance, NP Materials, the government has a nice trading up now so far, yes. Next up, Micron unable to hold on to yesterday's after hours gain. Shares initially popped following better than expected results and strong first quarter guidance. But we did give up the gains. We were watching the reaction. Yesterday's session was sort of lackluster in the aftermarket. Seagate Western Digital under pressure as well today. This group of stocks had really gotten juiced, I think over the trade.
- [48:04]
D
You got the recoil and there's a general sense of, you know, are we overdoing it in this area? I mean, Nvidia is trading below where it was before its earnings last and all this great news flow around the supply chain and everything. So it does show we're in a little bit of a, you know, a kind of a rethink of the whole thing.
- [48:20]
A
Exactly. And there is some concern that if they build out, you know, this is sort of a very cyclical business, that it could really hurt margins. Follows the boom topic. 3 alt Investing firm Blue Owl Capital will buy $7 billion worth of PayPal's buy now, pay later loans as part of a two year agreement. PayPal shares slightly higher today, but down about 20% so far this year. I mean, it's good to get this stuff off the balance sheet from a PayPal standpoint. But I don't know what this says in terms of a broader sentiment standpoint about the Buy now, pay later space.
- [48:50]
D
What it says to me is an enormous amount of private credit capital just seeking any possible asset. So just don't, don't like make them triple a rated and sell them to the retail investors. All right, that's it for us. Thanks for watching the Exchange. Power Lunch Start now. It starts right now.
- [49:05]
A
You've been listening to the Exchange.
- [49:07]
B
Make sure you're subscribed to get each episode every day, same time, same place.
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C
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