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Apple's AI Problem, "Save the Shire," and Caterpillar Crushes 4/30/26
00:43:33
The iPhone is booming, but can Apple fix its AI problem? Oppenheimer's "one AI to rule them all." Plus, how AI could touch off a new cycle for an old industrial.
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You're listening to the Exchange. Here's today's show. Thank you Scott, and welcome to the Exchange. I'm Kelly Evans. And one of these is not like the other four of the Mag seven reporting last night. All of them beat expectations and all of them raised their CapEx plans to a combined $700 billion this year. That's equivalent to the GDP of Norway, by the way. But as you can see, three of them are getting punished for it and trading lower. Only Google is not it's up 8% percent for its best day since last November, while for Metta it's the opposite. With its worst day since last fall, Those shares are down 9% today. Microsoft, it's falling as well, down 6% and that's keeping NASDAQ gains in check today. While the Dow meantime is up nicely with caterpillar adding more than 400 of its 600 point gain. That's also an AI story. But not just that. We're going to have more on Caterpillar ahead. But let's begin with these diverging fortunes for the mega cap tech names today. Michael Sansettara is chief Investment Officer at Sylvan Capital Management. He's here for our opening exchange. Michael, welcome. And it's getting, we can lump them all together by size, but performance wise this is a pretty big divergence.
- [02:12]
C
Yeah. Today you're seeing a little bit of market jitters I think with some of the spending of capex, the concern about long term bookings, particularly with Metta, and maybe just the difference between having a real moat like, like Alphabet does versus talking about it. Right. I think if you go back a year and we were all concerned that Alphabet wouldn't be able to compete in AI because they would ultimately lose share from search and that would be a problem. It's turning out to be just the opposite. Search is helping them spread their AI Gemini models and they're having good success doing it. Capex still rising, but I would say still in check from a normalized current, normalized position. And you've got, you've got a company that's executing real well.
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B
But Metta just posted 33% revenue growth. I'm almost, it's hard to even fathom now unless their revenue growth was for some reason a one off zero a year ago. I mean if that was, if a year ago this company was, it's mature, it's been around the block, they're posting whatever and their revenue growth was up 33% over the past 12 months and the stock's down 9% today.
- [03:18]
C
It seems a bit aggressive to me as well. I think when you, when you look at a meta, they're really trying to become a similar hyperscaler cloud computing company than an Alphabet, Amazon and Microsoft and they're not, they're a social media company so they're using these tools, AI tools to do better ad revenue and that's working great for them. And you're right, it's a great growth rate. It's actually very respectable. I think the consternation around the shares today and maybe longer term is they still have to prove themselves. They are spending a lot of Capex like the rest. They are getting good ROI in their core business like the rest. The question is do they have that same level of backlog, that same level of predictable revenue that's coming? Like some of the others, they don't have that. So that, that is a reason to say okay, well then what are you going to do? You're going to keep spending. And the answer is yes, they're actually raising capex more than the other three on a dollar and percentage basis. So now you're left with if they're raising Capex, they seem to be getting good roi. Can it continue? I think today that that lack of backlog is making some investors say maybe we should put the assets in a place where we know there's backlog north $450 billion kind of backlog numbers for, for both Alphabet and for Amazon. Maybe that's a better play longer term with a higher degree of predictability.
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B
Does the Mag7 moniker break down here? We were just showing the year to date performance and it's all over the place from up 19% to down 17 to flat. So again this, this might well refer to just simply the largest companies out there and maybe still some of the fastest growing companies out there. But the stock performance shows a very different picture.
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C
Yeah, I think if you go back to 2023, all these stocks were killing it and all these stocks were outperforming. And as you've seen the years pass, you've seen differentiation both in how well they're beating the numbers and, and how well their share share price is doing. You've got stocks like Apple and Tesla that have lagged. You've got other stocks like Google that are really stepping forward again based on new developments in Gemini. So yes, you should see differentiation. That's good, that's healthy, that helps broaden the market. It's not just There is no MAG7. Right. There are seven companies that are doing seven things, some of them similar, some of them different. There will be winners and losers. To us, that's healthy.
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B
If we were simply to take the largest companies by market cap, it would include all of these names. But you'd also have Eli Lilly on that list. You'd have Berkshire. Sure, we're going to hear from them this weekend. Obviously a different story. But the growth that we're seeing is mostly in tech. The size we're seeing is mostly in tech. But even Wal Mart has cracked the trillion dollar list lately.
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C
Yeah, absolutely. You know, we love Lilly. We've owned that stock since 2021 based on Phase 3 Manjaro data. This has been a sort of a sleeper a few years ago and now it's really coming to its own again. You know, we recognize the GLP1 trend early, the weight loss proportion in particular, which is now expanding. And as they go toward oral. I think one of the things that surprised investors today with Eli Lilly is their oral drug really isn't showing up cleanly in those weekly scripts that we all get on Fridays. So I think folks were surprised by that. We knew the number would be better, we didn't know how much better. I think folks really saying this could be a very, very good long term growth story, not only in GLP1s, but taking that cash flow that they're generating, making smart acquisitions to diversify the portfolio longer term. We think Lilly continues to look quite strong.
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B
Two more quick questions. Just going back to your top holdings. Tesla is not in there. Is that because it's a smaller position or is there no position in it?
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C
No, we have no position in Tesla. We've owned it in the past here and there. We track key metrics on these types of companies and we still view them as a very sophisticated automobile manufacturer, but an automobile manufacturer nonetheless. So as we've seen some of the issues with production, with pricing and models, we love a lot of the tech that they're working on, but not much of it is tangible yet. If it gets tangible, we'll reassess, but right now, no Tesla.
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B
And finally, one of the reasons that we've Talked about the Mag 7 a lot lately is because they have kind of traded together since the March 30 lows. Why?
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C
Yeah, I think the market pulled back or at least went sideways for these guys for the last, call it, nine months. Right. A lot of these, a lot of these companies were growing into their multiple. Nvidia is sort of the classic One that was 38 times forward earnings just six or seven months ago and then promptly grew every quarter since then north of 50% and is now at a slightly over a market multiple. So I think, I think what happens is for a little while there, they all just sort of marked some time, went sideways, grew into their multiple, notwithstanding Microsoft's issues that they had last quarter. And then now you're starting to see again new data, fresh data from the quarter, they're starting to diverge. That makes sense again, I think it's healthy and it's good for the breadth of markets.
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B
Is there anything in these earnings last night that calls into question the investment thesis around owning that, let's call it hyperscalers or the semis or things that go into kind of the trade broadly? I mean, did they just to ask the question kind of on that banner, did they meet the moment and pass the test?
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C
I think they did. You know, I think, I think it's even more impressive given their size, how fast these companies are still growing. That tells me that CapEx spend in this cycle, which looks a lot like CapEx spend in the 2006 cloud computing cycle, that's when it all started, is a battle to get to the highest ROI as fast as possible. And let's not forget it took Amazon, Microsoft and Amazon, Microsoft and Google A good 10 years to make money in those businesses. They're spending again. They're going to continue to spend. We are seeing growth from that spend. We are seeing roi. I think they met the moment cleanly. I think the story's intact. I think these companies continue to outperform over time.
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B
And you, and you're sitting pretty, you also have Visa as one of your top holdings today. And to see that name moving the way that it is is also worth a call out for sure. Michael, thanks for making the time. Really appreciate it today.
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C
Great to see you, Kelly. Thank you, Michael.
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B
San Satera with Sylvan Capital. We have some breaking news on the prediction markets with our Washington reporter Emily Wilkins. What's happening?
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D
Hey, Kelly. Well, as you know, lots of movement on Capitol Hill with prediction markets, but the Senate actually just went ahead unanimously passed a provision that would change the Senate rules and ban senators from placing any predictions on prediction markets. Now, of course, this only applies to the 100 senators in the US Senate, but it does speak to the rising tides on Capitol Hill when it comes to concerns about prediction markets, about insider trading, speaks to other bipartisan legislation that's out there. So definitely, I think, a first step. And notable, of course, that this passed completely with unanimous consent of all the senators, no one trying to block it. But that just occurred right now.
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B
Would it apply, Emily, to their staff? Do we know if for this moment
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D
it does not apply to staff, but there's certainly legislation out there that's been introduced that would have it applied to a wide swath of federal employees because of the concerns about insider trading.
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B
All right, for now, Emily, thanks very much. Emily Wilkins, Meantime, my next guest says if you wanted to get into the trade, look past the Mag 7, all those mega names we were just talking about. Instead, he recommends this name that he thinks will rule them all. And it's not a memory play. It's not Caterpillar or an energy name. The stock he favors is Palantir, and it's had a rough start to the year, down more than 20%, yet it still trades at a forward P e of about 104. Let's bring in Oppenheimer's Param Singh, who says this multiple is justified. He initiated the stock with an outperform and a 200 price target. It's at 138 today. Param, it's great to have you here. Welcome.
- [10:50]
E
Yeah, thanks, Kelly. Thanks so much for having me. Look, so, you know, we do feel that this is one of the names that should be a core holding for a lot of people. And before I get into the thesis, I kind of want to explain why this company is different in how people think about technology and what its value proposition is. There's obviously a lot of buzzer on Palantir, but people forget what they really, really do. So just want to take a step back.
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B
I don't know if I've ever even known what they really, really Do I know they help, like, energy companies get more efficient and that kind of thing?
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E
Yeah, yeah. And I think it's important to kind of describe how they kind of get to that process, both for the government and on the commercial side. Right. So let's spend a quick minute on that. So they developed something which they call ontology. Right. It's their secret sauce. And what they really, really do is have something called forward development engineers go into a customer or the government, bring together all the physical assets in one data set, all the data inputs from all these different sources that are segregated, map it out in a very unique proprietary workflow. And to be clear, you could have a different workflow for different companies within the same vertical, whether it's financials, energy, health care, whatever. Right. So when you have a proprietary workflow on how an organization is set up, runs, you feed data into that ontology, that unique workflow, and then you build an application on top of it. I think that's what people forget. And Palantir is the only one who can do it effectively, and they've been successful at it. Other companies have tried it, other IT services companies have tried it with forward development engineers, and it really hasn't worked for them. The other thing to keep in mind is if a customer ever decides to move off of Palantir, they get to keep the application, they don't get to keep the ontology. So you have to recreate the entire application from scratch.
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Understood.
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Nearly impossible to do. So that's why you have a very sticky customer base and you're delivering value that nobody else can. So you can charge whatever you want. That's why their operating margins are over 50% going to 60%. Right. So that's the real value proposition behind them.
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B
And the secret sauce, you say one AI to rule them all. And I think while everyone could understand what they do well and they've earned the reputation, that kind of this trusted reputation, they work with it. So if you're a company with sensitive data, you think, well, they work with the US Government, they've done this, they have the track record. We could trust them here. But there's a lot of companies coming for this moat right now. There are. So, yeah, a few years ago, they were first mover, a little bit different now every time you turn around, there's someone looking to use AI to optimize workflows at a. At a lower cost, maybe a more highly specialized, you know, suite of offerings. And from that point of view, I wonder if that's why the stock has Traded down.
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E
Absolutely it has. And look, all the applications offered names have traded down as a basket since the beginning of the year. Right. But, but there's two things I want to say. Yes, there's a lot of noise around it where a lot of companies claim that they're going to compete in this market. Right. You are hearing this from a lot of the large language model providers from anthropic, from OpenAI. You're hearing it from companies like databricks and they do want to compete in this. But there's two separate things. Number one, nobody owns the entire stack to build an end to end application just because you provide a data lake or a large language model. So certain parts of this four to five layer cake of the stack you can do everything end to end. Number two, Palantir already works with all these guys. So if you are using a databricks or a snowflake or an anthropic for a large language model, you can feed the data into a Palantir system and then run it. That's why I said one AI to rule them all. It's one operating system that then takes all these other functionality from a layer cake. Right. So layer four might be an alarm, layer three might be a database and all feeds into this one system that's going to basically control everything else and the other pieces on the fds. I don't want to be clear. All these companies that are trying to spend on forward deployed engineers, they're not being as successful. They don't have the quality of staff that Palantir has built over the years. The other thing to keep in mind is there's not enough dollars to go around. Yeah, Every incremental dollar that's going to a large language model provider. Right. Whether it's anthropic or to OpenAI or even two guys like Databricks, it's going towards hardware capacity to train their AI models.
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B
Param, don't mean to jump in here. Appreciate you joining us. We just have to get back to Washington with some more breaking news. Param Singh there with Oppenheimer, Emily Wilkins. Emily, is there more to the story?
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D
Kelly, now on a totally different topic. As you remember, the Department of Homeland Security is now in day six 76 of their shutdown. But the House has just again, via voice vote with no objections, gone ahead and passed funding to fund the Department of Homeland Security with the exceptions of ICE as well as Customs and Border Patrol. Those two agencies of course being funded in a separate Republican only bill. But this means that things like tsa, like the Coast Guard, like Secret Service will now be getting funded as soon as Trump signs this bill for the rest of the fiscal year. And of course we are expecting that additional funding for ICE and CBP to come soon. Kelly.
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B
All right, so a significant move there that is pushing stocks towards session highs. NASDAQ is now positive by about 40 basis points. Emily, thanks very much for that. Emily Wilkins, Coming up, the top stock in the Dow today, Caterpillar looking more like a butterfly hitting another all time high and within striking distance of its best day since 2009. What's changed after nearly two decades of dragging demand? That's next. Plus the busiest week of earnings season continues with the pair of memory stocks and of course Apple reporting after the bell today, the action, the story and the trade on all three ahead in earnings exchange.
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This is the exchange on cnbc. America's best network just got bigger. Switch to T Mobile today and get built in benefits the other guys leave out. Plus our five year price guarantee. And now T Mobile is available in US Cellular stores. Best mobile network based on analysis by Oogalift speed test intelligence data 2H2025 bigger network. The combination of T Mobile's and US cellular network footprints will enhance the T Mobile network's coverage price guarantee on talk text and data exclusions like taxes and fees apply. See t mobile.com for details. Introducing Fidelity Trader plus, the next generation of advanced trading from Fidelity.
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think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday. Wherever you get your podcasts. Shares of Caterpillar hitting an all time high today. They're up 10%, adding 400 plus points to the Dow. All of this after reporting better than expected earnings and raising their revenue forecast for the year. Our next guest has been waiting for this upcycle to come. Rob Wertheimer is director of research at meal, even if your daughter didn't appreciate it. Rob I certainly did. I loved your note. So much of what you're talking about ties together a couple of themes, which is the AI buildout and more broadly, Jeff Curry has talked about this as well, this kind of underinvestment cycle the past decade that is now leading to the revenge of the old economy, this scramble to kind of build out across a number of different areas. So over to you on what you think this means for the stock right now going forward.
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I
Yes. As you touched on, I mean, there's been a long period of underinvestment, whether it's in oil and gas, in mining or just more broadly and more geopolitically in China's rise having soaked up a lot of the world's factory production and everything else. And I think we've seen a reversal of that partially through the actions of President Trump, President Biden, but just in general with AI and everything else. And so you have this demand surge from power gen generation, electricity generation for air, I combined with the need for copper and everything else. And that really fits right into what CAT is best at.
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B
What is it you think that they detailed that really showed investors this could be a different cycle. And for how long? For how long could this run?
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I
So they're seeing demand for their power gen products into the next two and three years and probably likely far beyond. And so one thing they did was commit capital to it. They are expanding their electricity power gen production capacity again, having done it just a year or two ago already. And so the hyperscalers and others keep calling for more electricity and they are one of several trying to provide that.
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B
We usually also go ahead. I'm just going to say, you know, one of the headlines, 15 gigawatts is their large engine capacity. So I'm used to hearing about gigawatts, you know, from the hyperscalers and the data. Why am I hearing about gigawatts from Caterpillar?
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I
That's the addition they're doing. So it's a lot of power. And so yeah, there is a shortage of power. And some have called it part of the kind of geopolitical arms race on who will get to AI first, who can have enough electricity to do it. And so you've seen companies like ge, Vernova adding capacity to large gas turbines. CAT has for a long time done turbines and also just big engines that can deliver this sort of thing. We haven't done them at gigawatt scale before, but they've started to, I think they said they had six projects that are 1 gigawatt plus for Prime Power for not just a backup engine but providing real power with big engines.
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B
Caterpillar is hardly the only one, Rob, that you cover. I mean talk a little bit about this. Where else are we seeing it show up across the companies in this space?
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I
Yeah, for sure. For Cummins backup power we see that Nova which we follow has a tremendous backlog and tremendous capabilities in power gen. And then just more broadly it's interesting to see as you touched on the old economy coming back, these are very defensible, very critically necessary businesses that have I think limited risk of disruption if jobs like mine go away from AI.
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B
They won't, I promise. I'm just speak talking my own book here. Caterpillar importantly and this is a little bit inside baseball but you think it's also become more disciplined from what we might have experienced back during kind of mining boom heydays in the mid 2000.
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This goes back a long way but Cat has earned a much better reputation over the past six, seven years. Just steady execution and what wasn't the greatest end market for them. And so they're adding capacity but they're doing it at a time where again the world's under invested for a long time and I think the world needs them.
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B
And what's your price target now?
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I
We try to keep up with price targets as they, as they, as they keep going up and up and believe we're at 840 and we'll see where we go.
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B
All right at 891 as the shares are to your point kind of roaring ahead of even those expectations. Rob, thanks for making the time.
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I
Thank you very much.
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Rob Wertheimer with Melius Research. Speaking of Caterpillar, it's one of this company's customers whose shares have skyrocketed over the past year. We'll reveal it and speak exclusively with the CEO fresh off the earnings call ahead.
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Learn more@schwab.com trading@strayer university we help students like you go from Is it possible? To Anything is possible by offering access to up to 10 no cost gen ed courses so you can reach your goals affordably and fast. Visit strayer.edu to learn more. No cost gen eds provided by strayer university affiliate sofia. Eligibility rules apply. Connect with us for details. Strayer University is certified to operate in Virginia by Chev and has many campuses including at 2121 15th Street north in Arlington, Virginia. For the S and P here, as we're watching about 7180 there with about 2/3 of a percent gain, Dow roaring higher with Caterpillar. As mentioned, even the NASDAQ's positive Dom Chu is over at the media center
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J
with a closer look. I see what you did there. I'm going to call it the library or the Media Center. Anyway, let's let's start things off with a check of a stock that's jockeying for position is the best S&P 500 performer. That's chipmaker Qualcomm, which is surging by just about 14%, better than expected quarterly results. Now the stock did initially fall in extended trading after what was viewed as disappointing current quarter guidance, but then rebounded sharply due in part to comments on the earnings call where the company said it would start shipping data center chips to an unnamed hyperscaler client by the end of the year. It also said, by the way, it sees a bottoming process in place for Chinese smartphone demand in this current quarter. So Qualcomm shares up 14%. Then you got shares of Eli Lilly. The biggest pharma company out there by market value is also posting solid gains, up 10% after it easily topped expectations for quarterly profits and revenues, and then hiked its full year revenue and profit outlook as well. That was due in large part to continued strength in demand for what else? Lilly's flagship weight loss products, Zepp Bound. Also diabetes treatments like Mountjaro. That stronger demand helped counter lower prices for those medications in the US Market. And we're going to count things off with a check on the high seas, where shares of Royal Caribbean are up by about 6% after the cruise line operator reported somewhat mixed results. Profits were better than consensus. Revenues came in just shy. But it also cut the top end of its full year profit guidance given, amongst other things, higher fuel costs. But it did say that bookings trends remain solid and shares have been under pressure for the better part of the last couple of months here. So maybe a little bit of positivity on some of that downward momentum. Royal Caribbean shares up 6%. Kelly, I'll send things back over to you.
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B
Thank you, Dom. You got let's get to Pippa now for the CNBC news update. Hi, Pippa.
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D
Hey, Kelly. The House passed a major bill reauthorizing agricultural and food programs for the next five years. Fourteen Democrats joined all but nine House Republicans in advancing the measure that seeks to expand investments in rural communities and increase crop insurance access. It passed after lawmakers stripped a set of controversial provisions aimed at protecting pesticide manufacturers following a revolt from Make America Healthy Again activists, authorities said. A former Atlanta Hawks finance executive was sentenced to three and a half years in prison for embezzling almost $4 million from the team. Federal prosecutors said Lester T. Jones Jr. Misused corporate credit cards and filed fraudulent Exchange Spence reimbursement requests to pay for travel, luxury apparel and tickets to concerts and sporting events. And Hershey says weight loss drugs are driving higher gum and mint sales for the company. Executives didn't specify the cause, though some people who take GLP1s like Ozembic and Wegovy have reportedly experienced bad breath. Sales of the company's icebreaker mints climbed 8% in its most recent quarter.
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Kelly.
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B
See, this is why I watch cnbc. But where else are you going to get that's that is unbelievable.
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D
The unintended consequences of all of these GLP ones.
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B
Start my own Mint company. Thanks, Pippa. Coming up, Amazon and Alphabet are at all time highs. But Apple is lagging the market and the divide is even more dramatic when you compare it with the memory names this month and this year. Earnings Exchange delves into all of this next. A massive day for tech earnings. It started yesterday. It continues tonight. If you give it the 24 hour period, Apple and two key players in the memory space, SanDisk and Western Digital. We'll hear from them after the bell. Here with his trades ahead of results is Tim Seymour, the founder and CIO at Seymour Asset Management. He's also a CNBC contributor. Don't feel like you have to trade any of these before the results. These might be hold them and put them away.
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Well, they're tougher ones to trade when you talk to Memoryland and it's, it's a case of did I see that the standards was $4 and 4,85 in earnings and 24 and now will be $130 a share in 27.
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Believable. This is what we remember. Nvidia. All right, let's back up for a second before we get into that. Let's actually start with Apple, which has been a little bit on the sidelines here. Maybe in a good way, maybe not, who knows? It's Tim Cook's last call as CEO. Investors are looking for more color on iPhone7 teen demand while dealing with these memory constraints. First read on the MacBook Neo, which everybody loves. Future Neo products. The shares are up 7% this month, but they're still about flat on the year. What do you do here?
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I like Apple. I'm Long Apple. I understand this is a discussion about the multiple and you're somewhere between where you have 27, but you're somewhere between 32 and 34 times. Services should come in 14. 14 and a half is kind of the whisper. If they got above that, I think the street would love it. IPhone shipments we know are solid. We know, you know, Apple probably benefits a bit in a world where memory, you know, what concerns me is that we think Apple is more insulated because of their ability to push people around and because they've managed some inventory and that actually the memory costs are something they can not only absorb, but they might take some market share. I think that's consensus now and that's part of the concern. I think it's 2.8 times memory increase for them. It's a big deal. The integrated, vertically integrated nature of their business. We heard from Qualcomm yesterday that they clearly are getting to the end of the road and that that means Apple truly internally is getting these cellular modems in place. That's good for other places to offset costs. Long story short, Apple has proven to be a defensive stalwart. And I, you know, for people that say Apple's really underperformed, outperformed on a five year basis, it still outperformed the S and P by 18% on a two year, by 12% on a year over year, it's kind of holding serve and flat. Yeah, but I think given how defensive it is and given the world we live in that they have not overspent on Capex. I love the story.
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B
And the Apple is eating itself. I mean if they didn't have so all the share buybacks, this would be easily a 5 trillion company, if not more. So it's, it's given returns to shareholders, but even in a way that's kind of penalized it from the rankings we always go through, you know, who's the largest. So anyway, yeah, it's had other ways to show performance. The flip side of that coin though are the memory names you mentioned what we saw with Seagate the other night, sandisk. We're going to hear from the streets watching for updates on those price hikes you mentioned. Demand trends. They're going through this massive supercycle. It's the best stock in the Nasdaq 100 since January. It's up 300% this year and that still pales in comparison to its performance over the past 12 months where it's up 3,000%.
- [30:12]
F
I mean, you know, and I've been doing this a long time, I don't feel like I've ever been this sidelined on a name that has been such a dominant play. We talk about this on Fast Money all the time. And as everybody knows, demand is not the story. It's really about a supply response in anything that's commoditized. Except for the fact that these long term agreements are getting renegotiated. We finally have a lot more visibility, at least out through 28 when you'll start to see some degradation. So the question is again, I think I look at a Western Digital to a SanDisk and say that one's relatively more expensive and to itself and to really the multiple you want to pay for it, where SanDisk is trading 10 to 15 times more than its five year average. And I think is kind of the stock despite that that meteoric move is kind of the EPS has kept pace and it's probably of the two, the one that makes more sense to me.
- [31:01]
B
And by the way, Mehdi Hosseini, who we love from Susquehanna was talking about this Yesterday, he thinks SanDisk with Flash is going to be the one to own now that we're moving into the tokenization cycle and not just the build out of AI anyhow, Western Digital you briefly mentioned, we're looking again, inventory, data center demand, long term hyperscaler contracts. These shares have doubled. They've more than doubled this year. They're up 60% in April for its best month in a quarter century over the past 12 months. I mean, you know, 900% gain here.
- [31:27]
F
Yeah, I think it's a case where this one to me especially off of a smaller base has gotten a little more excitement and is a little too, too. I think just worked up on the multiple. I just, I think the bar is incredibly high and we're discounting the ability of the Chinese memory manufacturers to actually introduce more to the market. We're hearing where, you know, Micron in India is getting now 10% of their production. India is coming online. I think the supply response, which is what we always expect in commoditized world, even though this time is different, is something I would be more worried about with Western Ditch.
- [32:02]
B
All right. And we will have that. CEO Tim, thank you very much. Tim Seymour joining us there. We'll have an exclusive interview with Western Digital CEO right here on the Exchange tomorrow at 1:00pm Eastern. Really looking forward to checking in with Irving Tan. Coming up, a last look at our mystery chart today. Shares of this transportation name have more than doubled over the past year for a transportation name and its revenues increase when fuel prices move higher. We'll reveal it and talk to the the CEO next. All time highs for the S and P today up now 3/4 of 1%. And the Dow's up more than 700 points with Caterpillar contributing more than 400 of that. The Nasdaq, which was almost in the red or briefly in the red earlier on, some of those results from the Mag 7 last night is now positive. We've got some more news out of Washington to Megan Casella this time. Megan, what's happening?
- [32:54]
G
Kelly, Treasury Secretary Scott Bessant and the US Trade Representative, Jameson Greer held a phone call this morning with their counterparts in China, mostly to discuss the president's upcoming trip to Beijing just a couple of weeks away. But we're just learning a little bit about what that phone call focused on. And Bessant on X posted saying that the meeting was both candid and comprehensive, saying he stressed that China's recent provocative extraterritorial regulations have a chilling effect on global supply chains. He says he looks forward to a productive summit between President Trump and President Xi in Beijing. And Kelly, this comes after earlier today we got a little bit of a readout from the Chinese side as well. Reuters wrote this up, citing the Chinese state broadcaster cctv, that the Chinese vice premier Le Fang called it a candid in depth and constructive exchange, but that the Chinese side also expressed serious concern over the recent U.S. restrictive trade measures against China. So the two sides here, both of them emphasizing that they are looking for cooperation and to manage their differences, but also suggesting that they have some issues with some of these frictions that have emerged. Remember, on the US Side, there have been a number of new sanctions targeting China, most recently targeting banks that work with Chinese refineries that process Iranian oil. On the Chinese side, they've announced these new rules that lay the legal groundwork to punish foreign companies that seek to shift their sourcing away from China, something that's been a priority for the Trump administration. So now we see all of this ahead of the summit in a couple of weeks. Thanks, Kelly.
- [34:15]
B
China's expanding its anti long arm jurisdiction toolkit. So they, you know, everyone wants to set the global rules, really, and they're all getting mad when others try. Anyway, I'm sure we have a lot more coming up ahead of that meeting for now, Megan, thanks. Megan. Costella, let's turn our attention back to the markets where the Mag 7 has been getting lots of attention today. But check out shares of logistics giant XPO, which was our mystery chart. They're up more than 60% so far this year. While our Magic 7 index is basically flat. XPO has surged nearly 18% over the past month, getting a boost, in fact, from higher fuel prices. Mario Horik is the CEO of xpo and he joins us with our very own Frank Holland, who's here on set with me. Welcome to you both. Frank, kick us off.
- [34:58]
K
All right, Kelly, thank you very much. Mario, good to see you. Stocks higher right now, up about 60% year to date. We were hitting on that earlier, but looking at oil prices, they've moved even higher than your stock has.
- [35:09]
C
Gas.
- [35:09]
K
On the call, you cited higher demand from customers. You also believe you're going to get higher yields. Does that hold if oil stays above 100?
- [35:17]
L
Well, overall, Frank, oil has always been part of the economics of the LTL business and customers do expect that they're going to, you know, there's a pass through on those, on those fuel charges. Now, we haven't seen the higher oil prices impact the demand environment. Actually, for us, if you look at the first quarter, we have seen an acceleration in demand from, from customers and we see that hold as well through the month of April here so far. Now, keep in mind, though, historically you've had oil prices being high because demand is high. But for us in transportation, if you look at the industrial economy in the country over the last three years, demand has been low. So we're coming off the trough of the demand cycle and we are seeing a lot of green shoots and optimism from industrial customers about an acceleration of demand in the back half of the year as well.
- [36:00]
K
So while we were looking at some of your customers right now, I want to go back to your point about fuel xpo you charge a fuel surcharge surcharge so you don't lose money when oil prices move higher, you actually make money. Something you said on the call, about 16% of revenue came from those fuel surcharges. But I want to go back to your customers. When we're talking about demand, can you differentiate between some of the customers that are part of this data center build out like an Eaton compared to some other more traditional industrial customers like a Ford? When it comes to demand, is more of that demand coming from the tech focused industrials and manufacturers? Is it equal? Kind of. Give us a breakdown of what saying you're seeing.
- [36:33]
L
Well first if you take a step back on the industrial economy, if you look at the one of the indices we monitor is the IS and manufacturing index and if you recall Frank last time we spoke it's been sub 50 or in the contraction space for the better part of three years. And as of the beginning of this year we have seen it be above 50 which is expansionary over time. So we are seeing the overall industrial economy be in a better place. Now if you double click on the subsectors of the industrial economy as you point out, we are seeing electrical continue to see very strong signals of demand and higher demand. We have seen the chemical part of the industrial economy continue to show strength. We have seen heavy equipment and equipment for the agriculture industry also improve from an overall demand perspective. And here in the month of April we have seen the auto sector also starting to pick up as well. Now if you look at other parts of the industrial economy, for example manufacturing or short cycle manufacturing, we haven't seen that yet pick up but you could tell from based on where we have been on the demand environment, a stripe for an inflection point as well as we head into the back half of the year.
- [37:37]
B
Mario, what's the impact Ben, of the Iran war? I understand that you guys basically can pass along rising fuel prices but at some point do customers push back?
- [37:46]
L
Well if you, if you look at the fuel prices historically when we have seen the WTI oil index be in that $100 range, it doesn't has not necessarily impacted what you see from an overall demand perspective. So we are not seeing it yet. Now if there is a prolonged type of, type of disruption in the oil supply that could impact the macro, could impact the economy but we're currently not seeing it yet.
- [38:09]
K
All right Mario, you mentioned the ISM report that is coming up this Friday and as you also mentioned three weeks, excuse me, three months of expansion to start the year. However, I want to go back to that report. In that report, prices jumped up 8%. New orders actually declined by 2%. Is that a trend that you expect to continue in this upcoming report? Again, we've seen fuel prices rise quite significantly. And although you're saying you're seeing some parts of your customer base continue to see strong demand, as Kelly pointed out, some people have to be impacted by this, whether it's on the consumer side with their customers or just on the fact that they're having some trouble planning. You're an LTL player. You have customers bringing in only finished goods, but raw materials, you know, works in progress. I mean, you got it. Something has to be impacted by the uncertainty around this war.
- [38:52]
L
Mario by the way, Frank, on the demand side also, the signals, the indices and the customer expectations are very positive. But when you look at the underlying shipments or tonnage that we're seeing in the environment, it's still very early innings. So there is more, more upside to go from here in terms of demand. But going back to your question on the impact of fuel, I do think that the timeline of how long these disruptions go on for could impact demand. But overall, since we are starting from a much lower baseline of demand, having been in a three year industrial recession in the country, you have more to effectively gain in terms of growth over the month and quarters to come as opposed to give back.
- [39:28]
K
What about the broader inflation not only from the fuel, but just things are more expensive across the board. The inputs are more expensive. The transportation, including the transportation you provide, is more expensive as well.
- [39:38]
L
Well, on the inflation side for us, where we have seen a acceleration in overall, what we call yields in our business had been driven by incremental services that we are offering the customer. So Frank, if you, if you look at it for us in the first quarter, our service product for the customer has never been better. And over the last year we have launched new services that our customers are subscribing to and that also leads on a higher revenue per bill. So that has been driven for us based on the segments of business that we are onboarding, a tremendously improving service product and these extra services the customer are asking for.
- [40:11]
K
All right, Mario Horik stocks up after earnings we didn't get to AI. You are an AI scientist yourself. Didn't get to that. But thank you for your time. Appreciate it very much.
- [40:20]
B
Kelly back yeah, I noticed in their quarter that they said productivity gains from AI tools drove a four point improvement in Q1. I mean when we're looking for you know, Kevin Wash and everyone's debating this in the top level. This is an example of a company deploying that technology.
- [40:33]
K
Absolutely. Their company also another company that reported earning CH Robinson has had a lot of success in reducing headcount using AI.
- [40:39]
B
Is that a good, is that a good story or.
- [40:41]
K
Well, it's not a good story for the workers, of course, but for the stockholders, I mean, what stockholders don't want to see lower cost and higher margins.
- [40:48]
B
Right. Another great point, Frank. Thank you. Appreciate it very much today, Frank Holland, Coming up, the combined $700 billion in CapEx announced by the four Mag7 names that reported last night. That's greater than the GDP of Ireland, Singapore and the UAE. And even that isn't as big as Anthropic's latest valuation. We'll have those funding details next as we head to break. Check out the list of names hitting all time highs today. It's far more than just Amazon and Alphabet. Iron Mountain, Steel Dynamics, Cisco, Ventas and Intel. We're back after this.
- [41:23]
A
As our country celebrates its 250th anniversary. CNBC spotlights the leaders driving business and the nation forward.
- [41:34]
M
My name is Dan Amos. I'm chairman and CEO of Aflac. Aflac insures more than 50 million people worldwide. Our objective is to offer health care to fill gaps that are located in their health care care system, either through national health care or through individual policies that they own. AFLAC started in 1955 by the Amos brothers. We used to say we were not poor, we were broke and we had to find a way. So we went door to door selling stock in our company. We started on a regional level and then went nationwide. And then the big change was in 1975 when we started doing business in Japan. Here we are now 50 years past and we have a $60 billion company that's owned by people all over the world. The boldest thing that I've done in my 36 years as CEO has to be bringing on the Aflac duck and the ability of it to captivate the American public. Our sales doubled in a matter of three years. I always say I based my whole career on a damn duck. If I had to choose one word to describe America 250, the word would be excitement. I believe the opportunities that America offers are unlimited. I don't believe there's any way that Aflac would have been as successful as it's been were it not for the great country we live in.
- [43:27]
B
Markets overall are moving higher with a new high for the S and P. We have a lot of individual movers we're watching as well today. Shares of Nvidia in particular are bucking this market move and lower by 4%. Not necessarily any new news flow there but we're still waiting to hear from them now that we've heard from Tesla and four of the other of the MAG7. Meantime, Blue Owl shares are up 10% and on pace to break an eight month losing streak after reporting a profit beat. Private credit lagged but wasn't as bad as feared. Management saying quote, it's working down its exposure to software. On the earnings call, Blue owl is up 9%. Actually having its third best day ever. And it's been a tough week for Open air. Reports of missing key targets. Sam Altman on trial against Elon Musk. And now rival Anthropic's business may have caught up. Kate Rooney has more in tech check hiking.
- [44:18]
H
Hi Kelly. So that's what we're hearing. I am hearing that Anthropic right now is in talks to raise another round of capital. If it does go for forward as planned, it could value its AI giant at as much as $900 billion. This is according to a source familiar with those deal talks, Kelly. No term sheets have been signed yet from what I'm told. Discussions are still ongoing and Anthropic did decline to comment. But this would be more than double the company's last valuation in private markets and then put it ahead of rival Open Air which was last worth around $850 billion. That was after its record fundraise earlier this year. Does come as both of these giants look to go public as soon as the end of this year according to sources. Could depend on market conditions. But Anthropics exploding revenue growth has been the main reason that investors have been lining up to back them. So Anthropics last reported run rate was around $30 billion. Sources now tell me that is closer to 35 billion. It would be up from 10 billion just last year. So Claude Code has been the major revenue driver here for this company. Also a lot of intrigue around Mythos. This of course is the cybersecurity model. It's gotten a lot of buzz. It is now only available to a select group of companies. But it's really added to the allure for investors when we talk about the potential power of these models. In the last hour though, Anthropic did make another move in the cybersecurity space. It launched cloud security. This is just for enterprise customers. Company says it's going to be Giving security teams a way to find vulnerabilities. Hundreds of organizations, politicians, they say, have already used it. But it is not Mythos. This is a model that's already publicly available.
- [45:53]
B
Kelly, I think can become publicly. We are twinning again, Kate, but my fault because every day, every day because you're in front of the courthouse there. Is there any update on the Altman Musk trial from the past 24 hours?
- [46:08]
H
I'm glad you asked, Kelly. We actually just saw a bunch of photographers run that way and Elon Musk. Musk left the courtroom, so he's off the stand. We had his cross examination today. The big highlight was really the back and forth between Musk and Altman's attorney and really just this disagreement over whether a nonprofit can become a for profit for OpenAI. Musk really just accusing them, trying to simplify the story as they stole a nonprofit, they stole a charity. And that is not right. That has been Musk's explanation of it. OpenAI has said Musk knew about it. He supported the pivot to be a for profit at certain points. And he's now a competitor. They basically said this is sour grapes. This is a competitor using the court system to attack a rival. And we're hearing now from Jared Birchall, who is a close associate of Musk. He runs Neuralink, which is one of the many companies in the Musk empire. Count indeed.
- [46:56]
B
Kate, thank you very much for both of those stories. Appreciate it. Kate Rooney there. And before we go, don't forget, we'll have that exclusive interview with Western Digital CEO Irving Tan right here on the Exchange tomorrow at 1pm Eastern. Really looking forward to hearing from some of the memory names after the bell today, but don't go anywhere. Thank you for watching the Exchange and I'll join Brian Sullivan for Power Lunch right after this quick break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [47:33]
A
Building a portfolio with Fidelity Basket Portfolios is kind of like making a sandwich. It's as simple as picking your stocks and ETFs, sort of like your meats and other topics, and managing it as one big juicy investment. Mmm. Now that's pretty good. Learn more@fidelity.com baskets Investing involves risks, including risk of loss. Fidelity Brokerage Services LLC Member nyse, SIPC member.