The Exchange (CNBC) - Episode Summary

Date: October 20, 2025
Episode Title: Apple Climbs, AWS Outage and Rare Earths Refocus
Host: Morgan Brennan (in for Kelly Evans)

Main Theme

Today’s episode of The Exchange centers on the tech sector’s dominance in the markets, led by Apple’s surge toward a $4 trillion market cap, the ramifications of a major AWS outage, and the resurgent strategic importance of rare earth elements in global supply chains. Additional coverage includes shifts in healthcare stocks and ongoing economic and geopolitical storylines with China.

Episode Breakdown

1. Market Overview & Tech’s Outperformance

[00:07 – 02:25]

• Stock Market Performance:
  • Equities are up broadly, with Apple driving the rally (+4%) after bullish analyst actions and nearing $4T in market cap.
  • Regional banks rebounding; Bitcoin recovering to around $110,000 (seen as broader market liquidity barometer).
• Guest: Stephen Whiting (CIO Group’s Chief Investment Strategist)
  • Bullish on Tech:
    • Tech sector earnings have risen double digits in recent years, with continued (if moderating) growth forecast.
    • Draws an analogy to the late 1990s: “There were all sorts of warnings. This is over, the collapse is in. And we hear a lot of that. Again, I do think that we need to look at all these asset classes as a mature bull market.” (Stephen Whiting, [01:44])
  • Macro Notes:
    • Infrastructure is growing rapidly (42% growth rate, fastest since the PC’s invention).
    • Other sectors, especially manufacturing and industrials, are lagging.
    • Consumer spending remains relatively strong (+3.5%).

2. Credit Conditions & Federal Reserve Policy

[03:25 – 05:52]

• Credit Markets:
  • Whiting warns against overreacting to cracks in credit (e.g., regional bank issues, auto sector).
  • Fraud headlines overstate the broader economic picture; sentiment is more nervous than fundamentals suggest.
• Fed Watch:
  • With a rate cut expected, Whiting cautions: “When the Fed has cut more than 100 basis points, it’s usually not good for the economy… Now, there have been exceptions.” (Stephen Whiting, [04:40])
  • He downplays the dependency on rate cuts, highlighting profit growth expectations instead.
  • Fed’s balance sheet runoff is mentioned as more disciplined compared to 2019.

“I don’t think it really depends on Federal Reserve cutting. If they had strong reason to...it would be a negative regardless of the cuts.” (Stephen Whiting, [05:15])

3. Sector Spotlight: Healthcare

[05:52 – 06:46]

• Whiting favors health care for its secular growth and deeply lagging performance, suggesting mean reversion potential:

  “If you wanted to find a sector you could slowly add to and expect mean reversion…the next 12 months, we would be adding more to health care.” (Stephen Whiting, [06:40])

4. Apple’s Record-Breaking iPhone Cycle

[07:01 – 09:05]

• Reporter: Steve Kovac
  • Apple shares soar on upbeat iPhone 17 sales.
  • Multiple analysts, including Evercore and Loop Capital, cite exceptional demand—especially in China due to government subsidies.
  • iPhone Air sells out globally; longer wait times are interpreted as robust demand.
  • Anticipation builds for December quarter earnings, with a guidance beat expected.

“New hardware designs and new hardware features are way better sellers than AI and software. Those are the big sales drivers…” (Steve Kovac, [08:18])

• AI Factor:
  • Apple’s lack of new AI features in the latest cycle hasn’t hampered hardware-driven growth:

    “Apple can take the year off of developing AI and putting out new AI features and still have a great iPhone year. We’re not going to see their vision for AI until next spring at the earliest…” (Steve Kovac, [08:44])

5. Microsoft & AI Market Dynamics

[09:05 – 10:19]

• Kovac notes Microsoft’s persistent supply constraints for AI compute—“They literally don’t have enough compute supply to meet all the demand they’re seeing”—and forecasts no sign of AI investment cooling.
• Microsoft expected to spend over $100B on CapEx this fiscal year.

6. Major AWS Outage: Impact and Implications

[11:04 – 19:40]

• Reporter: Mackenzie Sigalos
  • AWS’s main Virginia region experiences a 10+ hour outage, impacting over 8 million users and major brands globally (Amazon, Disney, Lyft, McDonald’s, United Airlines).
  • Not a cyber attack, but exposes the “fragility” of cloud infrastructure.

“A single regional failure can still knock critical services offline worldwide.” (Mackenzie Sigalos, [11:45])

• Expert Panel:
  • David Kennedy (TrustedSec):
    • Stresses the need for redundant/switch-over systems. The shift from on-premise to cloud heightens the systemic impact of outages.
    • “Small changes can cause these types of massive interruptions… goes to show you how fragile this infrastructure really can be.” ([13:57])
  • Rohit Kulkarni (Roth MKM):
    • Outages raise “a mild yellow flag”—enterprises may diversify across clouds.
    • Google seen as well-positioned to gain share in AI cloud infrastructure.
    • “The big, big question…is Amazon positioned to succeed or are they losing share in the cloud? And such an event gives a pause…” ([15:23])

7. China’s 5-Year Plan: Tech, Security, and Consumption

[22:55 – 31:43]

• Reporter: Eunice Yoon (Beijing)

  • China’s Fourth Plenum sets economic policy for 2026-2030, focusing heavily on advanced manufacturing, semiconductors, and AI.
  • There’s been little prioritization of broader reforms to spur consumer consumption, despite weak economic data.

• Guest: Derek Scissors (AEI)

  • Rare earths remain a strategic flashpoint—not just reserves, but refinement capabilities matter.
  • U.S.-China trade frictions could lead to deals but not to long-term resolution, as China continues to build control over key supply chains.

“The problem is refining. And the Australians own the largest refiner outside of China. That’s where we need to work with them on.” (Derek Scissors, [26:59])

• China’s long-term tech buildup serves strategic (Taiwan) and economic leverage goals, not consumer prosperity.
• “There is a long-term Chinese strategy to build up their production capability. It harms their economy in a lot of ways… but it is working.” ([31:13])

8. US Rare Earths Industry: Investment Perspective

[32:58 – 36:14]

• Guest: Neil Dingman (William Blair)
  • Even pre-revenue companies like USA Rare Earth are deemed compelling due to the urgent need for domestic, government-backed supply chains (“wartime effort” analogy).
  • Magnet production is a key bottleneck; initial focus is on refining over mining to avoid cost overruns.

“I just don’t think the type of method, valuation methods we’re accustomed to today is applicable.” (Neil Dingman, [33:36])

9. Healthcare Costs & Public Opinion

[36:55 – 40:28]

• Mark Cuban:

  • “There’s nobody in the history of everybody in this country who likes the way the cost of health care is and the cost of medication.” ([36:55])

• Survey Takeaways: Steve Liesman

  • While most are satisfied with personal healthcare access, costs force 1/3 of Americans to forgo treatment, with especially high rates among women aged 18-49.
  • 57% believe the government should provide insurance, but there’s deep partisan division and the upcoming insurance enrollment and shutdown debate loom.

10. Boeing Receives FAA Approval to Boost Output

[41:03 – 43:40]

• Reporter: Phil LeBeau
  • FAA allows Boeing to ramp 737 Max production to 42 jets/month.
  • Backlogs remain substantial; key certifications (Max 7, Max 10, 777X) pending.
  • Air traffic control staffing also flagged as a near-term travel bottleneck.

Notable Quotes

• “There were all sorts of warnings. This is over, the collapse is in. And we hear a lot of that. Again, I do think that we need to look at all these asset classes as a mature bull market.”
  – Stephen Whiting ([01:44])

• “A single regional failure can still knock critical services offline worldwide.”
  – Mackenzie Sigalos ([11:45])

• “Apple can take the year off of developing AI and putting out new AI features and still have a great iPhone year.”
  – Steve Kovac ([08:44])

• “The problem is refining…That’s where we need to work with [Australia] on.”
  – Derek Scissors ([26:59])

• "If you wanted to find a sector that you could slowly add to and expect mean reversion... we would be adding more to health care."
  – Stephen Whiting ([06:40])

• "There’s nobody in the history of everybody in this country who likes the way the cost of health care is and the cost of medication."
  – Mark Cuban ([36:55])

Key Timestamps

• Tech/Markets with Stephen Whiting: [00:07 – 06:46]
• Apple iPhone 17 Surge (Steve Kovac): [07:01 – 09:05]
• AWS Outage: [11:04 – 19:40]
• China’s 5-Year Plan/Rare Earths (Eunice Yoon & Derek Scissors): [22:55 – 31:43]
• USA Rare Earth Investment (Neil Dingman): [32:58 – 36:14]
• Healthcare Cost Survey (Steve Liesman): [36:55 – 40:28]
• Boeing Production Update (Phil LeBeau): [41:03 – 43:40]

Conclusion

Today’s Exchange episode provided a rich, on-the-minute look at market leadership from tech (notably Apple), the systemic risks and resiliency issues in cloud computing, the high-stakes race for rare earth supply chain independence, and ongoing pressures in healthcare and aerospace. The guest interviews were insight-driven and candid about the opportunities and risks for investors and the broader economy in 2025.