Another Comcast Spinoff, AI Spending Risks, and Drill Down on Dislocations 6/29/26

Summary

The Exchange (CNBC)

Episode: "Another Comcast Spinoff, AI Spending Risks, and Drill Down on Dislocations"

Date: June 29, 2026
Host: Kelly Evans

Overview

This episode of The Exchange covers a flurry of significant business developments: Comcast’s announcement to spin off NBCUniversal, widespread market reactions and regulatory implications in media and telecom, risks and realities around AI-driven capital spending, ongoing cycle dynamics in tech stocks, the accelerating AI space race between the US and China, and the shifting tides in insurance industry pricing. Bringing together industry analysts, reporters, and investors, the conversation centers around how disruptive change, regulation, and global competition are re-shaping today’s markets.

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Key Segments and Insights

1. Comcast’s NBCUniversal Spinoff and M&A Speculation

(01:39 – 07:28)

Key Points:

• Comcast shares surge, then pare gains after announcing spin-off of NBCUniversal.
• Charter Communications, not directly involved, rallies even more on speculation about possible future mergers.
• Market Response: Early optimism gives way to caution as regulatory hurdles and deal timelines set in.
• Regulatory Concerns: A potential Comcast-Charter merger faces steep federal and state regulatory gauntlets, recalling blocked mergers in the past.

Notable Quotes:

• Tim Horan (Oppenheimer) [02:54]:
  "It's definitely the right move. Strategically, it's only about 20% of the company... they've gotten cut in half since they acquired them, multiples are down, the EBITDA is down quite a bit and there's a lot of channel conflict... This is clearly the right move."
• Alex Sherman (CNBC) [03:46]:
  "It's not usual that you get news that a company is doing a spin and then the share price of the company that rose the highest was not involved in the transaction whatsoever... it's very much up in the air whether a Comcast-Charter merger would be approved by regulators."

Memorable Moment:

• Discussing SpaceX and Starlink as the "elephant in the room" potentially reshaping broadband and mobile competition.

Timestamps:

• [01:39] Comcast spinoff news and initial market response
• [03:46] Regulatory discussion and Charter stock moves
• [05:29] SpaceX/Starlink's looming impact

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2. Streaming Industry Dynamics and Potential Acquisitions

(06:00 – 07:28)

Key Points:

• Netflix’s failed bid for Warner Bros Discovery sparks speculation about future targets like NBCUniversal.
• Major broadcast and regulatory differences between potential targets.
• The challenge of integrating diverse businesses (e.g., NBCU’s theme parks, broadcast stations).

Notable Quote:

• Alex Sherman [06:28]:
  "NBC Universal owns a large theme park business, so perhaps Netflix wants to go there, perhaps not... NBC is a broadcast network, so this deal would have an FCC regulatory component that the Warner deal did not have."

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3. Market Cycles & The “Secular Bull” Thesis

With Steve Offen, Federated Hermes
(08:08 – 18:25)

Key Points:

• Market at record highs; tech sector rebounds from last week's sell-off.
• Secular Bull Market: Offen explains that we're in a long-term, generational bull market started in 2013, characterized by recurring corrections that are often buying opportunities.
• Warns against overreacting to cyclical downturns within the broader secular uptrend.
• Offen describes his “bubble monitor” for signs of overheating: current signals mostly positive, some “turning yellow.”
• Key Risks: Valuation, fraud, and policy (Fed) action.
• Stresses the US banking system’s health as a foundation for continued market strength.

Notable Quotes:

• Steve Offen [10:17]:
  "In secular bulls, you buy the dips, you don't sell the rallies... A lot of people are trying to sell this rally here that we've had in the chip stocks. We still own them."
• Steve Offen [13:21]:
  "One would be valuations... right now valuations are still in our case, green, maybe light yellow... another one is, you know, policy backdrop. The policy backdrop here is really positive right now."
• Steve Offen [16:24]:
  "The reason we think this cyclical secular bull is still really healthy is the financial system... No regulator in the world is going to allow these banks to get into trouble."

Memorable Moments:

• Offen describes retail speculation in leveraged Korean chip ETFs as a “beware the taxi driver moment” [10:47].
• A practical guide to monitoring bubbles and adjusting investment decisions accordingly.

Timestamps:

• [08:45] Secular bull vs. cyclical bull explanation
• [12:43] Current age of this bull market (“middle age”)
• [13:21] Components of Offen’s “bubble monitor”
• [16:24] Why the bull market can last

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4. AI/Data Center Spending Risks & Power Constraints

With George Genericus, Canaccord Genuity
(21:09 – 26:26)

Key Points:

• BIS report: AI/data infrastructure “hyperscalers” to spend $1 trillion+; supply bottlenecks could drive overspending and fuel inflation.
• Power challenges: The pace of data center buildout is running ahead of reliable electricity supply, creating risk of project delays or cancellations.
• Demand-side issues emerge: Shift from unlimited (all-you-can-eat) token models to pay-per-use leads enterprises to rethink spending on AI, slowing token consumption.
• Bullwhip effect: Data center growth has spurred knock-on economic activity; any slowdown may heavily impact broader GDP.

Notable Quotes:

• George Genericus [22:42]:
  "We've gone from a token maxing environment... to a per token billing model, and suddenly, enterprises said, wait a second, our bills are much more inflated than we expected—let's maybe slow down our spending."
• George Genericus [25:01]:
  "These data centers are very likely to get built out. Some of them, not all... be careful of the headlines that we see over the next couple of quarters."

Timestamps:

• [21:09] Overview of BIS report and capital risk
• [22:42] Shift in AI billing models affects demand
• [25:01] Warning of possible data center project halts

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5. Tech Stock Cycle Dislocations & AI Competition

With Gil Luria, DA Davidson
(31:50 – 36:17)

Key Points:

• Not all tech stocks are being treated equally by the market:
  • Memory makers (e.g., Micron) are undervalued compared to CPU or AI chip companies.
  • Microsoft is “punished” for AI capex while Google/Alphabet is rewarded, despite Microsoft having more AI backlog.
• Luria suggests these market dislocations may represent opportunity for reversion.

Notable Quotes:

• Gil Luria [33:20]: "There's no way Intel and Cerebras are worth what they are unless the cycle continues for five more years... Micron is maybe worth four times more than it's trading at now."
• Gil Luria [34:34]: "Microsoft has 50% more AI competition compute backlog than Google... The market is punishing them for being too much, it's punishing them for not being enough AI. The pendulum is swung too far."

Timestamps:

• [31:50] Memory vs. CPU chip valuation gap
• [34:13] Microsoft’s unique position and market misperceptions

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6. US-China AI Race and Ecosystem Risk

With Deirdre Bosa, CNBC Tech
(36:48 – 42:31)

Key Points:

• As the US tries to restrict AI model export, Chinese labs are gaining ground in AI capabilities (notably cybersecurity).
• US policy to restrict Chinese models may backfire, pushing global markets towards Chinese open-source AI and ceding influence over standards.
• US companies have commercial incentives to keep models closed-source, while Chinese companies receive state support for open-source dominance.

Notable Quotes:

• Deirdre Bosa [38:29]:
  "If Chinese open source models become the foundation, the way that Android became the default mobile operating system... China doesn't just get users. It gets influence, the standards, the defaults, the rules of the next AI stack."
• Deirdre Bosa [41:51]:
  "If we ban our chips in China, they're going to find other ways around it... Whether we're talking about Android... or AI, you want the US to lead because we are a democratic society."

Timestamps:

• [36:48] US/China AI dynamics, policy response
• [41:31] Nvidia’s ecosystem dilemma

---

7. Insurance Market Softening

With Elise Greenspan, Wells Fargo
(43:28 – 47:06)

Key Points:

• Years of rapid insurance price hikes fueled by post-pandemic supply chain and catastrophic losses appear to be easing.
• Wells Fargo downgrades Progressive on expectations of policy growth slowdown and margin compression.
• Ongoing advertising remains key for auto insurers, despite slowing growth.

Notable Quotes:

• Elise Greenspan [44:05]:
  "Losses, you know, especially for Progressive and personalized insurers, really spiked coming out of the pandemic... we've started to see a give back on price."
• Elise Greenspan [46:34]:
  "We think the soft period could last this year and... into 2027... for there to be any change, you need to see margins compress and loss trend increase."

Timestamps:

• [43:28] Insurance price trends explained
• [46:34] Prognosis for ongoing softening period

---

Memorable Quotes & Moments

• On The Market’s Mood:
  "Beware the taxi driver moment... They're almost begging for a correction." — Steve Offen [10:47]
• On Regulatory Hurdles:
  "It really is not a slam dunk at all that a Comcast charter merger would be allowed by regulators." — Alex Sherman [04:34]
• On AI Model Policy:
  "The question for Washington is whether it can protect national security without handing the next ecosystem to China." — Deirdre Bosa [38:21]
• On Investing Amid Uncertainty:
  "Dance while the music’s playing, I guess, is part of the message here." — Kelly Evans [16:00]

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Additional Market Movers & Headlines

• [28:33] South Korean AI megaprojects boost US chip equipment stocks
• [28:33] Rocket Lab-Iridium $8B merger highlights commercial space industry consolidation
• [29:43] Venezuela earthquake rescue updates; NBA betting scheme indictment
• [43:28] Insurance stocks diverge: Travelers and Allstate hit all-time highs as Progressive lags

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Conclusion

This episode offered a panoramic view of the disruptions shaping corporate America—from mega M&A and regulatory headaches, to the power and costs of AI innovation, and a nuanced view of market cycle psychology. The unified message: opportunities abound amid turbulence, but vigilance—especially on regulatory, macro, and competitive fronts—remains crucial.

For deeper dives and live coverage, visit CNBC.com or tune in to upcoming special coverage of the ECB's Sintra Forum and breaking market news.

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Transcript

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Sometimes AT&T business Wireless Connecting changes everything. You're listening to the Exchange. Here's today's show. Thank you very much, Frank. The NASDAQ is rallying in spite of weakness in the memory trade. The Dow's newest component is up 4% today. And the Mag 7 are making a stand. I'm Kelly Evans and welcome to the Exchange. The mega cap tech names are outperforming today. Amazon Alphabet up more than 3%. Alphabet, the newest Dow member, is now leading the way. Microsoft, Micron and SanDisk are selling off, though you can see those declines have pared from the session lows. SanDisk still down about 3%, but Micron right around the flat line. We're going to have a lot more on that in just a moment. Elsewhere, Comcast announcing it'll spin off NBC Universal, and that has media and telco names on the move. Also, the Supreme Court ruling 5 to 4 that Lisa Cook can stay on the Federal Reserve while also agreeing the president can fire FTC commissioners at will. But let's begin with the media movers today. You can see on your screens there, Comcast earlier was up as much as 24%. Well, that's pared back to just six and a half percent now after the company announced it'll spin off. NBCUniversal rival Charter shares are up more. They're up about 11%. The theory is that this could pave the way for a merger between these two Internet giants. So what does our first guest think about that? And what does it mean for the rest of the space, including the streaming stocks? Let's bring in Oppenheimer's Tim Horan and CNBC media and sports reporter Alex Sherman. It's great to have you both here. Tim, I'll start with you. Suddenly, this is looking like a pretty muted response in shares of Comcast

[Tim Horan]

Yeah, well, obviously the 20% I think was a knee jerk reaction. The stock is kind of very under owned by investors. I think it's pretty heavily shorted. So the initial knee jerk reaction was to cover those shorts.

[Kelly Evans]

That said, if this. Look, the shares have been struggling for a long time. You covered the stock, I don't have to tell you. Would you expect a bigger move here? They're clearly looking to do something more transformational than what they did with the, with this little offering last year of spinning out version. It sounds like they're dissatisfied. Comcast has continued to underperform, is now spinning out all of NBC Universal. The right move.

[Tim Horan]

It's definitely the right move. Strategically it's only about 20% though of the dollar of the company. So it's not that big of a transaction. But it's been a bit of a disaster on these assets. They've gotten cut in half since they acquire them, you know, over roughly a decade ago. Two different transactions, the multiples are down, the EBITDA is down quite a bit and there's a lot of channel conflict having both a distribution channel and a content creator in the same place. So this is clearly the right move. And I think people now are waking up to the fact though that, you know, maybe Comcast does something else, like you said, maybe they buy Charter, maybe the media business buys other assets. You know, the management team is downplaying that, but they have to do something. They're both basically in secular decline at this point and they both probably need to jumpstart something.

[Kelly Evans]

Alex, let me turn to you because you've said this is creating a lot of ripples already throughout the media and telecom space.

[Alex Sherman]

Well, yeah, you pointed out the first one, which is Charter. I mean, it's not usual that you get news that a company is doing a spin and then the share price of the company that rose the highest was not a company involved in the transaction whatsoever. And yet that's what we saw with Charter, which was up at earlier in the day, about 25%. So the pare down that you've seen in Comcast is mirrored by Charter. In addition to both companies being well shorted, as Tim just said, I think it's also possible that investors have kind of become more sober with the M and A possibilities, at least in the near term. Like this transaction is going to take a year to complete. Even after that, for tax purposes, there's usually another year or so wait for a deal gets done. And even beyond any of those things, it really is not a slam dunk at all that a Comcast charter merger would be allowed by regulators. Think back 11 years. Comcast tried to buy Time Warner Cable. That company was eventually swallowed up by charter. So most of charter today is Time Warner Cable. That deal was blocked or was about to be blocked by the Department of Justice, and then Comcast backed away. So I think it's very much up in the air whether or not a Comcast charter merger this time around would be approved by regulators. And they don't even need to be. Also not. It's not only the federal regulators that need to approve it, but also from a state, by state, local commission, cable commission standpoint, it would need to get state approval. We're seeing the Paramount Warner deal. The last step it needs is to get state approval at the AG level. So there is multiple different regulatory levels that this deal would need to go through. And I think that also may be tamping down Wall Street's immediate reaction today.

[Kelly Evans]

Tim, is Space X with its Starlink provider, the elephant in the room here?

[Tim Horan]

Totally. And, you know, Charter might also be up a little bit. There was some, some news articles out that maybe SpaceX and Charter will try to work together in some form. We don't really know how, but clearly, you know, we think Space X is going to go from having 4 million subs in the United States on broadband to 20 million over the next five years. And we think they're going to get into the mobile business in one form or another. So that's a huge overhang for the whole sector. And you're seeing the telco stocks under a lot of pressure today. You know, not exactly clear what's driving all this because there's a lot of different news items out.

[Kelly Evans]

But to your point, if, if Starlink is going to get in the mobile phone business, if I'm Verizon, if I'm T Mobile, you know, that T Mobile especially, which always had kind of that younger, jazzier demographic. Here comes an even jazzier one. Alex, then what about the rest? What about Netflix? Those shares have actually been struggling as well. What is all of this telling us about the economics of the streaming business just to focus on that piece of it and how much more may be to come in terms of where these assets ultimately end up.

[Alex Sherman]

Yeah, I mean, there's certainly an argument to be made that Netflix shares jumped after it pulled back from buying Warner Brothers Discovery. Now those shares have come all the way back down. So there is an investor argument to be made that maybe they should have just upped their bid on wbd and, and at least they would have walked away with that asset if the shares were going to trade at the same price either way. So I think there's an investor camp that's now looking at NBC Universal as the potential next target for Netflix. However, these are not apples to apples businesses. For one, NBC Universal owns a large theme park business, so perhaps Netflix wants to go there, perhaps not. Certainly it would be a diversion focus wise for Netflix. The other thing is that NBC is a broadcast company at heart. It owns local station. NBC is a broadcast network. So this deal would have an FCC regulatory component that the Warner deal did not have. So to just say, oh, they didn't buy Warner, they'll buy NBC Universal instead, I'm not sure that's a logical jump to be made.

[Kelly Evans]

All right, we'll leave it there for now. With so many more questions still to be raised. Again, a tough time for Comcast shareholders and a lot of innovation happening across the whole space, really. Tim, thanks very much. Tim Horan of Oppenheimer. Alex, thanks as well. That's CNBC's Alex Sherman. Now elsewhere, markets, as we said, are broadly higher across the board. Look at the NASDAQ up 1.6%. All of this rebounding from last week's tech sell off, which was no surprise to our next guest, who has long said that we are in a great secular bull market. And here we are at record highs as he himself is about to step aside. Let's bring in Steve off, the chief investment officer of equities at Federated Hermes for at least a couple more months. Congratulations, Steve, on the retirement.

[Steve Offen]

Thank you, Kelly.

[Kelly Evans]

Great to see you here. And we're excited about who will fill your shoes and all of that. But I mean, I just want to take a moment to, to explain. I remember talking to you a few years ago about some, some skepticism. This was back maybe 22. I can't remember exactly when the economy was still recovering from COVID The outlook was a little bit murky.

[Alex Sherman]

Yes.

[Kelly Evans]

Chat CBT was on the scene. You knew then and you remained steadfast that this is a bull market that can be trusted and it's real and it's, it will continue. And I so first of all, amazing call. Second of all, where do you, how do you feel about it now at this juncture?

[Steve Offen]

Yeah. In this piece we just put out on our website. Yeah. I talked about secular bulls and cyclical bulls because mostly in the media and most of the market strategists on Wall street talk about cyclical bulls and cyclical bears which for most of our investor base are meaningless if you're a secular bull. Only happens once a generation. We're in the third one in the last hundred years. So they're rare. They last around 20 years. They're based off of a massive long term secular bear market that sets the psychology for the next run. They usually have a transformational technology in place and you get this market that keeps making new all time highs and has corrections which are always by points. So for instance, when people talk about we're now in a bear market, we're down 20%. Well that if you're in a secular bull like we have been in and we've I think been right about that for sure, less.

[Kelly Evans]

And by the way, it started when

[Steve Offen]

after the financial, we counted is starting in 2013. 2013, really, that's when we finally broke out the bear market that lasted from 99 to 13. So it was only then that we finally broke to a new high. Over those previous 13 years, the S and P was flat. So once we broke through, we, we went into a secular bull environment. And when you get corrections in a cyclical bull there people say we're in a bear market, the market's down 20%. That's almost always a lights out buying

[Kelly Evans]

opportunity, which was 2022.

[Gil Luria]

Right.

[Steve Offen]

In secular bulls, you buy the dips, you don't sell the rallies. In secular bears, you sell the rallies, take them as an opportunity to get out and lighten your exposure. So a lot of people just throw themselves off. Like a lot of people are trying to sell this rally here that we've had in the chip stocks. We still own them. We're going to buy more of them when they pull back. I think they will. One of the lessons I have in this book I'm working on.

[Kelly Evans]

And by the way, you're working on a book as well. So people who want to read more about this will have their chance.

[Alex Sherman]

So.

[Steve Offen]

But yeah, one of the lessons is, you know, beware the taxi driver. And my fifth grade class and I had a fifth grade class, I was teaching about markets 25 years ago. And they, and the taxi drivers were long these Internet stocks and they made a fortune. But we were, you know, we were approaching a point where those things were just trading on air and on no valuation. And in a way the momentum we have in places like Korea right now with all these leveraged ETFs is a kind of beware the taxi driver moment. They're almost begging for a correction.

[Kelly Evans]

I'm shocked to hear you say that. You're so positive on the chip stocks because I would expect someone with your experience to come in here and say, well, we'll be careful. We're going to see this horrible correction. Instead you're looking for more opportunities.

[Steve Offen]

The reason is what's going on right now. The fundamentals. And I have another lesson called, you know, there is, there's more than just a spot market, there's another market. So I think everyone learned this lesson in the last six months because everyone was looking exactly at the spot market for oil and people like me were talking about the futures market for oil. It's very obvious in commodities markets, the difference between a spot market and a long term market. I think your viewers get that. But actually in the stock market there's also a spot market and a longer term market. So right now the spot market for chip stocks is being set in Korea in these double leveraged ETFs, etc. Those folks really don't, aren't really paying attention to the fundamentals. They're trading charts and it's like a casino out there. So we could for sure. And looking at the, at the price action, these stocks, it's easy to see a 10, 20, even 30% correction. Maybe, I don't know. I'm not selling it because this time around we're in a secular bull. So we're holding, but we'll be if

[Kelly Evans]

we started in 2013. Are we, are we towards the end of this we said we're in the

[Steve Offen]

13th birthday right now. So I call it middle age. And we have something called the bubble monitor because we've been tracking now all the different conditions that can cause the bursting of a bubble and they're not always the same. But if you study the great bubbles of the last 150 years, there's a set of conditions that almost always occur and we call that a bubble miners like seven of them, we're tracking them and most of them right now are still green. A couple are turned yellow. Are there?

[Kelly Evans]

Could you give us. Because this is going to be the little theme of the show today and maybe for many times. What would be in the bubble indicator?

[Steve Offen]

Well, you know, one would be valuations. And so right now valuations are still in our case, green, maybe light yellow. Because if you look at them on earnings, even the chip stocks we've been talking about on valuation basis, they're still single digit multiples. They've been earning their keep, if you will. And that's one reason why we think money will come back into those stocks if There is a correction because the fundamentals are pretty good the next three years. So yeah, one is valuations. It's turning like green to slightly yellow. One is like fraud. We had that as actually turning yellow about six months ago. It's turned back to green now. I mean we had a couple of instances, people were worried about the cockroaches, etc. We haven't seen more cockroaches coming out, you know, and so we've got another one is, you know, policy backdrop. The policy backdrop here is, is really positive right now. The odds of an error are very, very low in our mind. Usually a policy error will crack a bubble and sometimes create a systemic crisis. We don't have that right now. And you know, it's another lesson I've got at the moment which, you know, don't fight the Fed. The bond market is fighting the Fed.

[Kelly Evans]

Yes.

[Steve Offen]

Right. They're insisting the Fed's going to hike. It makes no sense. The old Fed under Powell was a backward looking Fed. One reason we've frankly gotten the Fed more right than wrong is we've had a tendency to try to predict what they're going to do based on what they'll be looking at at their next meeting. So with Powell it was pretty easy. All you had to do is predict what the backward looking indicators were going to look like as next meeting. Don't pay any attention to what he says right now. Predict where the indicators will be and then what he's going to look backward out and do. Bush is different. He's a forward looking Fed governor. The bond market is predicting he's going to hike by the end of the year. It makes no sense. The backward looking indicators will be bad. Inflation numbers are pretty high right now. He knows that looking into next year, the year over year numbers on food and commodity inflation are going to be negative actually. So he's not going to hike. So we think, you know, the curve is going to steepen. The bond market needs to compete with equities. So the 10 year yield probably goes up in that environment. But short rates go down, the curve steepens. That's really good for cyclicals. So one of the things we like here are cyclical stocks. We like regional banks as an example,

[Kelly Evans]

you know, region citizens finance, you give a couple of examples just to kind of serve as emblematic of all that. And so then just to go back to the bigger picture, then it's sort of like you're saying, yes, all of those people who are worried, as we'll hear later in the show about a bubble forming and a crash are right. And on some level I worry because I go, well, that means after the secular bull, are we going to be in another secular bear? And I can't help but think of, though, it's kind of like you got to dance while the music's playing, I guess is part of the message here.

[Steve Offen]

Right. But the thing, the reason we think this cyclical secular bull is still really healthy is the financial system. Usually what you have in a. In it, what the setup for a secular bear is, these negative momentum indicators pull the banking system down because the banks are heavily involved. But one of the key ingredients I said earlier of a secular bear is a secular bull. A secular bull is a secular bear. In other words, you have such a crisis that no regulator in the world is going to lie. And this is still the case today. No regulator in the world is going to allow these banks to get into trouble.

[Kelly Evans]

And then, in other words, like you said, we're this one, the secular bull is like the third one in the last hundred years or so.

[Steve Offen]

Right.

[Kelly Evans]

So. But what you're saying is it doesn't necessarily mean that this ends horribly. Can I hold on to that hope that if, if the banking system's in good shape and everything, that, that this could go on for longer or maybe not end as horribly as the last one?

[Steve Offen]

Well, you can't take Anything statistical from two other secular bulls, but on average, they lasted 18 years. It's sort of human psychology. So I don't know how long this one's going to last. It could last a long, long time. Could last 30 years, we don't know. I think a key to watch for is the banking system, because that's usually what takes things out. What I like about this current setup is the leverage in the system is at the retail level. It's not at the banking system level. So if there is a correction and people are going to get hurt, it's going to be retail speculators in Korea. It's not going to be the US Banking system. That is the core to keeping Main street and the economy greased going forward. The banking system is really good shape.

[Kelly Evans]

So we're going to. How is this. Who can, who can do this like you? It's, there's. Maybe you do it, maybe even in retirement.

[Steve Offen]

My successor, Steve Chevron, has been working with me for 20 years. Kelly, he's all over this stuff. He's going to be fine.

[Kelly Evans]

Look, we are on the same pink wavelength for today as well. Steve, congrats again, really appreciate it. Yeah, thanks for talking us there. It's great to have you here. Steve, off from Federated Hermes. By the way, don't miss CNBC's live coverage from the European Central Bank's Forum on Central banking in Sintra, Portugal, this week. They'll have Fed Chair Kevin Warsh, ECB President Christine Lagarde, and the heads of the bank of England and the bank of Canada. It all begins around 9am Eastern on Wednesday and shares of Owens Corning are rallying on reports of takeover interest. The Wall Street Journal says the building products maker Carlyle and has made more than one unsolicited offer unsolicited offer to acquire its rival, meaning oc. People familiar with the matter say the deal being contemplated would be worth more than $10 billion. The Journal sends says Owings Corning hasn't yet engaged substantially on this, but the shares are still up about 8%. More deal activity lately coming up. Our next guest is worried that the ecosystem is transitioning from pure euphoria to a more turbulent phase. So what should investors and companies do instead? We'll talk about that next. Plus microso Microsoft hovering near its lowest level in over a year and set to close out its worst month since the turn of the century. One tech analyst still likes it over Alphabet and Amazon. He'll tell us why ahead on the Exchange.

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Before we had ATT 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 livestream the whole thing. Not good for business. Now with AT&T business Wireless routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though at&t business Wireless connecting changes everything.

[Kelly Evans]

Welcome back A new report is raising a spending concerns. The bank for international settlements projects CAPEX among the five largest hyperscalers will hit more than $1 trillion between this year and last. They warn supply bottlenecks could exacerbate both the overspending and and inflation writing should inflation rise significantly or led investment run to a bust, the macro consequences could be amplified by existing financial vulnerabilities. They cite rich equity valuations and low rates. Our next guest sees similar issues on the horizon but is following The Chuck Prince 2007 saying about liquidity. As long as the music is playing, you've got to get up and dance. Let's bring in George Genericus, he's an analyst at Canaccord Genuity. George, it's great to see you and usually, I mean it's not unusual for the bank of International Settlements to warn about these things but when you say yeah, I've got some concerns too, will we take notice?

[Chase Sapphire Preferred Customer 1]

Well, thanks for having me Kelly. And our concerns. We've written about this now for two years. We're coming at it from the power angle and these data centers ultimately need power and we've seen these projections around buildouts and we've sort of scratched our heads and saying well where are they going to get all the power? This is really hard to bring online. We've seen rallies in power related stocks, we've seen rallies in nuclear related stocks because data centers to power chips need this stuff. And we've raised the yellow or red flag around the deployments and suddenly our new note talks about maybe the potential for demand side issues too. I mean I'm sure you've talked about it.

[Kelly Evans]

And what does demand side issues mean?

[Chase Sapphire Preferred Customer 1]

We've gone from a token maxing environment meaning enterprises have tried to use as many tokens as possible and a couple of months ago some of the frontier labs moved from a all you can eat model to a per token billing model and suddenly, and there's been a lot written about this that enterprises said wait a second, our bills are much more inflated than we expected, let's maybe slow down our spending on on tokens. And so suddenly we have this situation where we're concerned about the build out and that's supply related but maybe, just maybe there are demand issues too. So this is all what we think is a potentially ugly cocktail for the the eventual deployment of some of the data centers.

[Kelly Evans]

In other words, as we go through your coverage list which has everything from you know, fuel cell to MP materials, generac fluence, oclo, nuscale, I mean, a lot of the names that we talk about a lot as being part of this build out and you're buyrated on pretty much all of them. So you, you see this tension, which is right now it looks okay, but you're concerned that maybe some, some cracks are developing. Shouldn't you move to the sidelines then?

[Chase Sapphire Preferred Customer 1]

It's a great question. So the way we look at is our electricity consumption for over 25 years as a country in the United States grew at around 0.5%. That's really low. And suddenly we're seeing an acceleration not just because of a data center spend, but because of electrification and manufacturing facilities moving back to the United States. Our view is that we still need a lot of power. Our concern is that we might start seeing headlines in the near to medium term that maybe this project is not going up or that project's not going up at the end of the day, that still this underlying fundamental positive tailwind for power is still there. We're just telling people, be careful of what the headlines might look like over the next several quarters and years.

[Kelly Evans]

But for instance, and let's talk about this one, you said, you know, a turbulent new chip. So we've got, we've seen the pure euphoria. Everything goes up, you just buy, buy it and you feel like a genius. Unless you hadn't bought it and then you're furious. But to a turbulent new chapter, which you say is one potentially marked by more data center halts like the Crusoe pause in Wyoming.

[Chase Sapphire Preferred Customer 1]

Well, that's right. So if you look at a lot of the plans that the companies have, we've obviously raised the yellow flag in the past saying, wait a second, how are these data centers going to get powered?

[Alex Sherman]

Be careful.

[Chase Sapphire Preferred Customer 1]

And that's created a rush not only for nuclear related stocks, but for other stocks in our coverage and beyond our coverage. And our point is that these data centers are very likely to get built out. Some of them, not all of them is the point. So be careful of the headlines that we see over the next couple of quarters. And this has broader macro, macroeconomic implications as well. We talk about something called the bullwhip effect, where a slight change in demand here causes a massive change in demand throughout the supply chain. So if there's a pause or a change in the second derivative, that may cause some issues at the end of the supply chain. And I mean, take this for an example. According to some data, over 75% of the growth in GDP in the first quarter the United States came from a data center buildups. That's a, that's, there's a vulnerability there. That's, that's real. And we think that there may be just a change in this growth pattern over the next couple of years.

[Kelly Evans]

When I know you're sort of saying you're picking up, there's going to be a change in the, like, when we get to the point at which you see the data point, George, it tells you it's time to, to really move to the side. I want you to tell me and to come on and wave.

[AT&T Business Wireless Customer 2]

Okay.

[Kelly Evans]

I don't want to find out after the fact because I really, truly, I want our audience to know when you see something that tells you more so than that one data center pause, but that maybe there's something bigger going on here, for instance, on the demand side especially, come back and let us know. Appreciate it.

[Chase Sapphire Preferred Customer 2]

Thank you.

[Kelly Evans]

Thank you, George. All right, George. Generic from Canaccord Coming up, the air race is entering a new and uncomfortable phase. The US Slowing as China is speeding up. We'll have more details ahead. And as we head to break, here's a look at Alphabet leading the Dow on its first day in the index, followed by Cisco and Amazon Travelers and J and J also at all time highs market a two year high. In fact, the Dow is the only major index on track to end the month higher. More of today's biggest movers when we come back.

[Geico Podcast Listener]

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[Kelly Evans]

It feels good when the story ends with savings.

[Podcast Host / Narrator]

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

[Chase Sapphire Preferred Customer 2]

This year's girls trip to Telluride was the best. We one upped ourselves with my Sapphire Preferred card and with 5 times points on Chase Travel plus 3 times points on vacation homes with top brands, we got this incredible cabin it was a mansion and with three times the points on dining. We ordered a wagyu steak dinner and that pistachio gelato was too good. So where should we go next year? I've got ideas. Chase Sapphire Preferred the card that's preferred for a reason. Cards issued by JP Morgan, Chase bank and a member FDIC subject to credit approval terms apply.

[Kelly Evans]

Welcome back. Take a quick glance once again across the markets where the NASDAQ is leading the way, up more than 2% today. The Russell's are actually lower. Applied Materials, KLA and Lam Research are among the leaders in the NASDAQ 100 after South Korea announced several AI infrastructure mega projects worth about half a trillion dollars. It includes Samsung and SK Hynix, each building two new chip plants. And those shares, KLA and Amad, are up 10 11%. Elsewhere, Rocket Lab is buying the satellite communications firm iridium in an $8 billion deal. It's one of the biggest consolidation moves in the commercial space industry, combining Rocket Lab's launch and satellite business with Iridium's network spectrum and subscriber base. If it sounds familiar, that tie up draws comparisons to the relationship between Space X and Starlink. And despite today's big moves, Rocket Lab still on pace for its worst month on record, down about 32%. For more on that deal, go to cnbc.com and Verizon is the second worst name in the S and P today on its first day of trading outside the Dow. Could be that effect could be these rumored reports about Starlink launching a sell business. The shares are having their worst day in over a year. AT&T& T Mobile are at their worst levels in more than a year and a half. Now to Contessa Brewer for the CNBC news update.

[Contessa Brewer]

Contessa Kelly Rescue teams in Venezuela are continuing continuing to search for survivors of last week's 7.2 and 7.5 magnitude earthquakes. The death toll there has risen to almost 1500 people. But look, tens of thousands of people have not been accounted for. A 4.6 magnitude aftershock happened north of Caracas this morning. We're not hearing damage reports. That's according to the president of the National Assembly. The Senate Ethics Committee has reportedly dismissed allegations of misleading conduct against Arizona Senator Ruben Gallego. A letter obtained by NBC News from the committee said it did not find evidence for allegations made by Florida House Republican Anna Paulina Luna. The complaint alleged campaign finance violations and inappropriate sexual conduct. And former NBA players Malik Beasley and Ed Davis are among six people indicted today on federal charges related to an alleged sports betting scheme. Prosecutors said Beasley agreed to take tailored performance on prop bets in certain games while playing for the Milwaukee Bucks. Davis is a former teammate of Beasley and was allegedly known in the scheme as Beasley's gatekeeper. CNBC has reached out to the Milwaukee Bucks and NBA for comment. We will report back, of course.

[Kelly Evans]

Kelly, it's disappointing. Contessa, thanks very much. Coming up, Microsoft's valuation is historically cheap, especially compared with its Mega Cap rivals. Can that help it sail through ongoing slowing turbulence in the trade? We'll talk about that next. Welcome back to the Exchange. June has been particularly ugly for the Mag 7 so far, but the group is trying to end on a high note. You can see they're down about 10% for the month, just as the group that's been carrying the trade, the memory trade, that's dram on your screens there, well, that's down again today. As Goldman's Tony Pascarello said, the AI trade is getting more complicated. Let's talk about it with DA Davidson's head of tech research, Gil Luria. Gil, it's good to see you and we're all ready to get on board the bandwagon. The Mag 7's over. Stick with the memory trade today. A bit of a reversion there. How would you describe broadly the state of play here?

[Gil Luria]

I think the back and forth about where we are in the cycle will continue. And that's the big question we're all trying to answer. Is the cycle peaking now or will it go through 2030? That's a really hard question to answer. So we're focused on more on where the dislocation is. Where are the places where the market is not treating stocks the same way? So one place is most semi stocks, semicap, optical, etc. Are being treated as if the cycle is going to go through 2030. And yet Micron and even in video are trading as if the cycle is peaking now. So that's a big dislocation. And the same thing is happening with the hyperscalers. Google and even to some extent Amazon are trading as if the cycle will continue where for Microsoft, there's a big concern about their spend. They're all spending a lot and yet Google and Amazon are being treated with kid gloves and Microsoft is being punished for that same spend. So it's those dislocations that we find more interesting. Interesting.

[Kelly Evans]

I like the chip one. I just want to kind of separate that out for a second. So you're not that positive on. And I've seen a Few other notes that are getting a little bit not bearish, but just saying, you know, at the level it's trading now implies a lot of future success already. So you think that either Micron should trade much higher in order to cement where intel and Cerebras are trading, or the intel and three brush should be trading much lower to make sense with where Micron's trading.

[Gil Luria]

That's exactly right. There's no way intel and Cerebras are worth what they are unless the cycle continues for five more years. If the cycle turns now, both of those companies are worth a fraction of what they're trading at. Where with Micron. If I say the opposite on Micron, if the cycle continues to 2030, micron is maybe worth four times more than it's trading at now. Wow, that's a really big dislocation. The difference between CPU stocks trading at 40, 50 times and higher and micron trading at 8, 9 times or lower. It doesn't make any sense. The importance of memory in this market is higher than the importance of cpu. The competitiveness of the memory market is less than the competitiveness of cpu. So that's a really big discrepancy and we see that as the the biggest opportunity right now.

[Kelly Evans]

I appreciate that framing. So let's move on to Microsoft now, which earlier was the only Mag7 name not in the green space. You've got Alphabet, Amazon up for. Microsoft's in the red. Why has it had its worst month in a couple of decades? Is it deserved? Because it doesn't have the same AI assets as say Google has with Gemini.

[Gil Luria]

Microsoft has 50% more AI competition compute backlog than Google. Microsoft is selling a tremendous amount of infrastructure software based on AI. It has a tremendous amount of AI exposure and it is getting punished for the same capex as Google. So again same capex as Google, but they have 50% more backlog, meaning they're selling a lot more AI than Google is. The market is just. The pendulum is swung really far. A year ago Google was at 18 times and Microsoft was at 30 times. The market has just swung too far into frowning. Google is the winner and Microsoft's the loser. They're both winners. Microsoft's investment is coming at very good returns, otherwise they wouldn't keep doing it. They are selling this data center capacity at a really big markup to what their costs are and they're locking in this return for several years. But the market is punishing them for that investment. The market's also punishing them for being a software company. In spite of the fact that we all know that we're going to be using Outlook and Teams and Word and PowerPoint in five years, the agents will be using them too. But Microsoft software is very strict. It is very sticky. Enterprises are very committed to it. And yet Microsoft's trading like a software company that going away because of AI. So it's getting punished for being too much, it's getting punished for not being enough AI. The pendulum is swung too far. We think there'll be a reversion to the mean there as well.

[Kelly Evans]

And you're not the only one. Chris Croissante from MBI just told us he's adding it to his value fund for the first time in a decade last week. Gil, thanks very much. Appreciate you joining us.

[Tim Horan]

Thank you.

[Kelly Evans]

Gil Luria with DA Davidson. Coming up, why restricting AI models for safety reasons might end up creating a bigger risk for the United States. We'll talk about that next. Welcome back to the Exchange. Just as the US Is trying to slow access to American AI models, China is making them more available. And that could have big consequences. Deirdre Bosa has more in today's tech check. Deirdre.

[Deirdre Bosa]

Hey Kelly. So this is really the paradox at the home heart of the AI trade right now. America is slowing just as China is speeding up. And now there are signs that Chinese labs are no longer competing on cost. They may actually be reaching the frontier in some of the most sensitive AI capabilities, like cybersecurity. So the policy fight here, it is likely just heating up, limiting access to anthropics and OpenAI's most powerful models that has given Chinese labs an opening. And we have seen a number of companies like Coinbase, Airbnb, Shopify, shift at least some of their workloads to these open source Chinese models. And now people I talk to say that the next focus in Washington, it could be the Chinese models themselves, including a decision whether to restrict or even ban them. But that could backfire. If the US Blocks Chinese models at home, that will not stop developers, companies, governments outside of the US from building on them. In fact, it could push China to move even faster and position itself as the alternative to US Controlled AI. And so the ecosystem is the bigger risk here. If Chinese open source models become the foundation, the way that Android became the default mobile operating system for much of the world, then China doesn't just get users, but it gets influence the same the standards, the defaults, the rules of the next AI stack or system. So guys, the question for Washington, it's whether it can Protect national security without handing the next ecosystem to China. And for American Air Labs, Kelly, the question is, will they go open source to counter these very capable models out of China like GLM5.2. Right now it is just Nvidia pursuing this route with Nemo Tron because it is incentivized to do so. The major AI labs less incentivized to do so.

[Kelly Evans]

It's complicated. We have the journal saying that China has matched Anthropic in cybersecurity. Deirdre, you know this, this company, 360 Security, their new bug finding tool called Too Long Fang. It comparable to Mythos and finding Bugs. You know it ironically, the Chinese stock market is not even doing that well, which kind of frustrated people who thought that might be a great play on this. But in terms of the models themselves, you know, I don't know what a better US approach would be here. What are you hearing?

[Deirdre Bosa]

So, you know, for years, actually a lot of the people I talked to says that the US must pursue open source. We must have an ecosystem that people are willing to build on. That just hasn't happened. There's Nvidia as I mentioned. Reflection AI is another company that is looking at this. And the problem is that open source is hard to monetize. So China treats this as sort of a strategic and national ambition to have the world build on their open source models. Whereas, you know, our Frontier Labs, OpenAI and Anthropic, their business model depends on charging for their APIs, charging for usage of the best AI that there is. However, the Chinese now are getting close, so a lot of companies are making that decision. We are going to use AI that is good enough or really almost as good as the leading models out of the US and that has sort of put us in this place. A lot of the folks I talk to, they still say that America needs to take open source seriously. Typically that has sort of been in the public sphere, right? Universities, but that's not happening right now. There's funding issues, so it's left up to companies, whatever, see how that evolves.

[Kelly Evans]

That's a really good point. And I can understand why the companies would say, especially in a commoditized business, how can you be. Because I'm about to talk about Metta, which is maybe the poster child. It's going to spend 70% of its revenues on CapEx. It originally had an open source model.

[Deirdre Bosa]

Llama.

[Kelly Evans]

How on earth can they monetize that kind of spending with an open source model? Obviously they need to go a different direction, but that was they were going to do that, that sort of approach in the first place. I don't know what the latest on that is.

[Deirdre Bosa]

It's such a great point. And this leads to the incentives, right? You have the Chinese government, that PRC, really helping their AI companies. I mean, you even look at like the CapEx numbers. It's incredible. China is spending just a fraction of what American companies are spending. And that may be because we don't have a complete picture, because Beijing is actually supporting and developing this and it's really treated as sort of like this national strategic ambition, make China proud on the world stage. Whereas in the US we are happily a capitalistic society. So open, anthropic, they have to figure out a way to make money from these. And there's not as much government support. Maybe there will be going forward and maybe that's an argument to see more government support, but just the way that these two industries has developed very differently in China, right, By not having Nvidia chip chips in the first place are the most advanced Nvidia chips. They've had to develop their AI in a different way. They've had to become a lot more efficient. And I think that's an interesting next shoe that could drop is Chinese hardware.

[Kelly Evans]

We also write, doesn't it make sense if we're all saying that the ecosystem with Nvidia at its heart, that manifests in the US models, if that is being disrupted by China, I can see why Nvidia is like, well, then we have to sell, then their business is at risk is what? Well, it goes back to the original deep thing. And I see that their newer models have I think, even faster adoption than the older ones.

[Deirdre Bosa]

And that's sort of been in videos argument the whole way, right? Like if we ban our chips in China, they're going to find other ways around it. They're going to prop up and support their own industry. So we might as well let them in because at least they'll be building on the American ecosystem. And that's really what it goes back to, right? Whether we're talking about Android as a mobile operating system or AI, you want the US to lead because we are a democratic society. So you will be spreading those ideals around the world. If you let China lead and create the ecosystem around the world, you're going to get that filtered through China and there may be censorship, there may be controls along the way.

[Kelly Evans]

That too is a very important part of this. Deirdre, thanks very much. Appreciate it.

[Deirdre Bosa]

Thanks.

[Kelly Evans]

Deirdre Bosa. Coming up, insurance costs have been skyrocketing in recent years. But our next guest says that's changing. She joins us with what kind of relief consumers could be seeing and how much of a pullback to expect in the stocks. Welcome back. Soaring insurance prices have been a huge headache for Americans in recent years and a big contributor to overall inflation. But is the heat breaking Wells Fargo downgrading progressive to underweight today? Citing slowing policy growth and margin compression? And progressive shares are already down 3% this year. Here with me now as Wells Fargo's Elise Greenspan. You made the move we were talking about. Appreciate you coming in and you've covered this space for a long time. So, you know, I mean, it's very, very strong. People loved these insurance stocks in recent years. They had pricing power. I think I read somewhere prices are up 70% on some products since COVID What's happening now, especially with progressive?

[Elise Greenspan]

Yeah, I mean, so the, you know, the reason that insurance companies look to charge higher prices is that is just because of losses.

[Kelly Evans]

Absolutely.

[Elise Greenspan]

Losses. You know, the level of losses, especially for progressive and personalized insurers, really spiked coming out of the pandemic. And we've seen a normalization of loss trends over the last couple of years. And on top of that, we've had companies that have just taken a lot of price. Right. So when you take a lot of price and, you know, loss trend isn't as bad, you know, margins, you know, have been extremely, extremely favorable. And so we've started to see a give back on price.

[Kelly Evans]

For how many years Was it what we'd call a soft market going into Covid? A long time. Right. Was there a sense that it had been, you know, would they would. How would you describe the stock's performance? Has it really been a standout more post Covid or do you think it's actually been they've been slow and steady performers all along?

[Elise Greenspan]

Well, I mean, if we think back over the past decade, right. You know, before COVID you know, kind of the, you know, the later part of last decade, 2016, 2017, now, there had been a period of rate taking by the industry. It was just more frequency driven, a lot of distracted driving. And so companies did start to push for price for a period that waned right before the pandemic. And then, you know, so the market had got softer. And then the pandemic came, which led to extremely profitable results. Lack of driving, lack of losses. And so on the flip side of the pandemic, you had strong margins, but then there was just a lot of supply Chain issues that drove up losses and kind of. Exactly, you know, encouraged this hard market.

[Kelly Evans]

You know, if you were in a pile up, you know and it was even the minor issue could be a really expensive one. And we saw that ripple through. Then there's social inflation things going on. Travelers in Allstate are at all time highs today. Progressive is not what's going on with the gap between their performance.

[Elise Greenspan]

Well, I think you know, first of all, right you can, you know, part of it you could look at, you know, valuation amongst the group. Right. You know, Progressive as has and today still is traded at a premium to the others. So at some point, right. If you're trading at a lower multiple that could help the shares. And, and travel is a little different, right than all state and Progressive there they are personal lines insurers, they do insure cars and homes but they are a large, you know, commercial lines insurer as well. So there that market is softening also. But there are different factors, right that it sometimes can drive a commercial lines insurer versus a personal lines insurer.

[Kelly Evans]

As you mentioned, Progressive is at 13 times, Travelers at 11. Allstate's, you know, below nine. So maybe a little bit of a catch up there. Do they need to bring back flow issue? What's, what's going on with flow?

[Elise Greenspan]

Well, I mean flow is still there. They're relying on some friends as well I think, you know, typically, right. Auto insurers, heavy, heavy use of advertising.

[Contessa Brewer]

Right.

[Elise Greenspan]

So FLO has been around, you know, Allstate, you know, advertising as well. And so you know, even though, you know, prices are slowing, probably less shopping, I still think right. There is, there's going to be a lot of advertising from a group that is often, you know, leaned into spending a lot of money.

[Kelly Evans]

And finally, how long do you, do you think this, this, this softer period for Progressive now could last?

[Elise Greenspan]

Well look, we're with, we think the soft period, you know, could last this year and you know, for now we're expecting the softer period to last in, in 2027 and we'll, you know, we'll see about 28, you know, for there to be any change, right. You need to see margins compress which is going to happen as there's less price and also see you know, loss trend increase and the combination of those two factors. If margins get worse and you know, deteriorate worse than targets then I think you'll, we would, you know, start to see more price for the group.

[AT&T Business Wireless Customer]

All right.

[Kelly Evans]

At least Greenspan, no relation really appreciate you joining us today. Thanks to talk through this from Wells Fargo. That's it for us. Thanks for watching the Exchange and I'll see you for power lunch on the other side of this.

[Contessa Brewer]

Quick break.

[Kelly Evans]

Stay with us. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.

[Chase Sapphire Preferred Customer 2]

This year's girls trip to Telluride was the best. We one upped ourselves with my Sapphire Preferred card. And with 5 times points on Chase Travel, plus 3 times points on vacation homes with top brands, we got this incredible cabin. It was a mansion. And with three times the points on dining, we ordered a wagyu steak dinner. And that pistachio gelato was too good. So where should we go next year? I've got ideas. Chase Sapphire preferred the card that's preferred for a reason. Cards issued by JP Morgan, Chase bank and a member FDIC subject to credit approval terms apply.