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Big Tech’s Big Week, Time for Some A.I.R (AI regulators), and a China Chip Debut 7/27/26
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Four of the Mag 7—Apple, Amazon, Meta, and Microsoft—report this week, our experts get you ready. Former Nasdaq CEO Bob Greifeld makes the case for AI regulation sooner than later, and draws a page from the SEC’s playbook. Plus, China’s most valuable company is also its best chance at homegrown AI chips.
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Thank you very much Mike. The next big test for the trade a mega chip IPO in China and a Fed decision this week. It's a big one. I'm Kelly Evans and welcome to the Exchange. Stocks are mixed like Mike just mentioned, S and P down a quarter of a percent were well off earlier highs despite that cooling of tensions in Iran and a big drop in oil prices. WTI down 7% as both sides agree to pause hostilities for now. Meantime, the chips are under pressure including the memory space, the DRAM ETF down 4%. Not helped by a Chinese state backed company planning mass production of chip making machines. Also in China, a blockbuster IPO with CXMT surging more than 460% in its debut. Meanwhile, concerns over AI spend and circular financing continue. Nvidia reportedly providing a $250 billion backstop to OpenAI those shares on pace for their worst day since early June as Sam Altman heads to the Hill to pitch policymakers and former Nasdaq CEO Bob Greife says the only way to get AI right is to establish a national regulator. He's here to make his case, but we begin with tech today as four of the Mag seven get ready to report earnings this week and the debate over how much I spend is too much or too little continues. Apple by the way, hitting a new all time high today. Let's bring in Michael San Satarra. He's the Chief Investment Officer at Sylvan Capital Management. Michael, how are you getting Ready for
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things, just going through all the numbers, making sure expectations are manageable and getting, just getting prepared to see the delusion numbers we're about to see this week, Wednesday and Thursday.
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What was your reaction to Google's CapEx number last week?
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Actually we were fine with it. You know there's no, there's no surprise. There shouldn't be any surprise to AI investors at this point that 2006 and 2007 capex is still going higher. The good news is is the rates declining if that makes you feel better. But we're okay with that. We recognize this is a grab compute time. This is a time to extend your, your lead. If you are Microsoft or Amazon or Alphabet, that's what they're doing. No surprise for us.
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C
How about these? You know in China, cxmt, we've been talking about this IPO for several weeks now. They don't do the, the highest level, you know, memory stuff, the high bandwidth memory for specifically for AI, but they do a lot of the rest of it and it's very tight market. What's your response to the ipo? Is it something you'd consider investing in? Does it disrupt the likes of Micron and other memory names here?
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D
Yeah, we don't, we don't think so. It's not something we're looking at closely right now. Of course we'll take a look at it as time passes but I don't think that lower end of DRAM is particularly attractive at this point. You want to stay a little bit more focused on the higher portions now they're going to. China has been making this stuff for some time now. It's just a matter now of how much bigger will they get. And the market itself in China is really quite large as well. So I don't know that it actually has to cross over into the United States. I suspect that they'll have plenty of business in China. Probably be very, very focused there for a while. Right now we're not looking at it.
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C
That DRAM chart we're showing right now kind of from April up through now, you can see it going up the hill. It's Roundhill Memory ETF coming, coming over the hill. It's really moved broadly lower in the past couple of months. Does that, how do we, how do we finish that chart you think into the end of the year?
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D
Yeah, I think you have to be a little bit patient but I think we're still higher over, over the next six months. Remember, you know, if you look back Even at the Sox's retracement it's been a 25% pullback largely due to memory and, and yet it's still up 100% in the last year. And earnings broadly speaking across semis were up 120% in that time frame. So we overshot it slightly and now we've seen the pullback. I think that's normal digestion. I think that probably clears itself pretty quickly, but in the meantime it's got a lot of folks nervous. It gets a bit of a roller coaster. But ultimately the demand is still far outstripping the supply for pretty much every memory that the air is eating into.
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C
And what do you do with Apple is this one that you now kind of chase into it. You wait for a pullback, you think that, you know, maybe in the long run turn around a year or two from now and go, all right, that was all time highs. But you know, it didn't get with the program. I'm curious how you're thinking about that.
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D
Yeah, that's a great question. We are slightly underweight Apple in the Sylvan Focused Growth Fund. I think our goal has been to believe that their AI monetization was the most important metric. And I think with price increase being revenue but memory costs hurting gross margins, we're kind of in a blank spot right now with Apple. I think part of the reason why the stock's done well recently is they're not cranking up on capex like everyone else. So they're not really a hyperscaler per se. So I think they're getting a little bit of hiding in there there. So we like it a bit, but we don't like it enough to be over to the index weights. More of a risk control position for us.
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C
Finally, what do you think about this in video deal? Kind of helping to provide backing for these data centers that are super expensive. This one's for, I think an energy arm of what you call them out, a softbank. Yeah, yeah. You know, people say, but go ahead, it's your.
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D
I think it's, it's, it's an opportunity for Nvidia to continue to control the dominant position in GPUs and at the same time at this point lend its balance sheet to the promise of credit. They're not writing a check for $250 million. They're giving their balance sheet and their ability to have a debt raise. If you look at OpenAI as an example, they don't have an investment grade debt rating yet. So you get a little bit cheaper rates longer term. This is Something that's a five to ten year project. I think it's the numbers and the magnitude are a little bit sensational, but I think the, the promise is really going to be more based on, you know, we obviously haven't seen the details of the contract. I suspect it's going to be more based on what you can get done when and that'll be ultimately driven by consumers and actual demand of the product. So I think it's not as much, quite as much risk as people are building it into.
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Wednesday we're going to hear from Metta arm, Microsoft Thursday is Apple, as we already talked about, do you have kind of broadly positive expectations for everyone?
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Yeah, but with I guess, sort of varying degrees. Right. Meta got punished pretty badly last quarter for raising capex, but now I think everybody knows it. I think somebody on the previous portion of the section was saying that that's accurate. At the same time, you know, arms, ARMS growth into semiconductors is a little bit different than the pure license and royalty business that they've been in. So they're in a bit of a transition period. I think investors who own ARM know that Apple we talked a little bit about, you know, we've got a product cycle coming that's going to be more of a driver, I think, short term. But then we got to see is the, is the foldable phone cool enough to generate more sales, etc. Broadly speaking though, AI demand, CapEx, the monetization and ROI of these models are all going in the right direction. So we are encouraged fundamentally. Yeah.
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I'm always skeptical, you know, an Apple's folding phone, then I end up owning three of them. You know, kind of like with the iPad.
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I'm with you on that. Yeah, I don't think. I think I'll break it if I get one. I'm almost sure.
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Finally, Amazon on Thursday they've got the anthropic deal throw flow coming through. Kind of several. Do you feel pretty positive then about that one in particular?
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Yeah, we do, we do. We think Amazon and Alphabet are nicely positioned right now. Microsoft. It's not that Microsoft isn't. I think Microsoft may still have to fight last quarter's discussion between who gets the gpu, is it the Azure client or is it Microsoft himself? But Amazon does look well situated. Anthropic will start flowing through and there's a lot of processing power available. Amazon at Amazon Web Services, we think that that quarter should be pretty good.
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All right, Michael, really appreciate it.
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Yeah, my pleasure.
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Thanks. Kick it off this week, Michael. San Satarra with Sylvan Capital. The focus may be on tech, but my next guest says don't forget about opportunities in the broader market, especially with a steeper yield curve. Paul Christopher is head of Global Investment Strategy at Wells Fargo Investment Institute. We have not, Paul, been talking at all about the steeper yield curve, although the financials have performed very, very well. And we do have a Fed meeting this week as well, which I don't know if that could throw a wrench into the works.
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Yeah, hi, Kelly. No, we don't think that this week the Fed is going to be live for a rate hike that may come later this year. Yet to be seen. Much depends on what goes on in the war and with energy prices. But yeah, we like financials here. We've liked them for a while, have been waiting for them to take off. The last eight weeks have really proven that out. They're outperforming the S and P by 12 percentage points and eight straight weeks of gains. It looks good to us both from a lending standpoint but also from, from, you know, others, other standpoints for, for, for financials here, especially, you know, when you think about private capital and other areas that they can get into.
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C
Yeah. How are you thinking, Paul, about the markets more broadly at this kind of interesting juncture? Again, some of the market leadership areas have continued to move sideways or lower the last couple of months. And, and yet, you know, when, when's the last time the S and P made an all time closing high? Was it still back in June? Here we are almost in June.
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Yeah, yeah, yeah.
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So I'm just.
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Yeah. So the broader market, broader, broader market has been rotating and we don't see anything necessarily wrong with that, but we are starting to see some volatility below the surface. If you look at the Vix, so implied volatility for the S&P 500, it's 1617. That's not an unhealthy number, that's not a worrisome reading. But if you look at the VIX eq, which measures the volatility of individual stocks, what you're seeing is quite a bit of breadth and quite a bit of really correlation. Inflation is breaking down. And so what we want to do here, we want investors to focus on our favorites. We mentioned financials. Tech is part of that mix as well. You're going to see some questions arising about how is tech going to be financing all of this? How is tech going to be making profits from all this? Increasingly there are questions about, well, gee, you've got such A backlog of construction. What happens when some of these obligations actually come due? What will that do to the income statement? What will that do to earnings? We're seeing waves of questions about tech. We saw them last October, we saw them again in February, we're seeing them again now. So the thing to remember about tech is we like the trend, but we don't want to overpay. Now that the forward PE ratio price to earnings is back down to about 21, which is where the S and P is, we think this is an attractive entry point. But you're going to see some more volatility. You're going to see some more churn from these stocks that are sort of below the surface and having quite a bit of volatility. So put the money into tech, but do so number one, in a gradual way. Don't expect a lot from the first couple of months until we get maybe to the, to the elections are passed, and then try to find a way to play tech in a way that plays the trend but doesn't overpay. So we, we, for example, like utilities and industrials quite a lot for the data center play last year we got out of industrials. Last month they got a little bit expensive. But utilities still look like a good deal to us as well as materials, we added materials so for the building out the data center. So there are ways to play the trend without overpaying and you get a chance to play the broader market.
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And does the Iran war and those associated risks become kind of complete background noise to you at this point?
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No, not really. But if, you know, if you look at, like you're one of your previous guests was talking about the put buying in the markets and we're seeing quite a lot of what's called negative skew, that is to say people who are betting that oil prices are going to come down, so they're trying to get a bet in there that they don't fall too far. Especially if you're an oil producer, you don't want those prices to fall too far. You want to guarantee a little bit. So you're going to, you're going to sell, excuse me, you're going to buy puts in there. And that's going to create negative skew. It's the same skew that we saw in 2022 in the Iran when the Ukraine war started. We saw it again in 23 and 24 when Israel and Iran were going back and forth with each other. And we're seeing it again now. That tells us that the Markets are not really looking for an extended or much more substantial increase in energy prices. The back off today, 6% in crude tells you that, you know, the pause is something that was anticipated. Just the timing is going to be tough here.
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Just going back to the 10 year where we're still kind of the 460 level. You know, as you say, the steep, relative steepness here might be something of a help for financial stocks. But why do you think we are steepening or have and what continues to drive that? Is there a risk that where we get positive news, maybe it's out of Iran.
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Right.
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There's a lot of correlation between the 10 year and energy prices. Look at, you know, kind of what's happening today. Could that bring back, kind of bring us back down, flattening position, make that investment less attractive to you in financials? Just I'm curious how you're thinking about that.
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Well, I think if you're going to, if you're going to see financials get less attractive would have to be from the short end of the curve. That's where banks are paying deposits and if the Fed's going to raise rates by a lot of then that might become a headwind for financials. But that's not what we're expecting at this point. And in fact, if you look at the rise in the 10 year treasury over the last couple of months, it's been almost exclusively from term premium. In other words, investors demanding additional yield as they face uncertainties in the market. Uncertainties about what? Well, about the war, uncertainties about treasury issuance. There was a pretty weak 20 year auction last week. Uncertainties about liquidity. The treasury continues to add money to its checking account at the Fed. Where's that coming from? That's coming from cash or from reserves rather. And so as reserves go down, there's less money to lend to investors. So there are concerns about liquidity, concerns about the war, concerns about treasury issuance. All of these are helping to drive up the 10 year treasury yield. And until those uncertainties come back down, we think that's a pretty good tailwind
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for, for financials is a great explanation. And all the more reason to keep an eye on what happens on Wednesday or doesn't happen, what happens on the two year portion of things. Paul, really appreciate it. Thanks.
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Thank you, Paul.
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Christopher from Wells Fargo. Coming up, does the US need a national AI regulator? A lot of voices are saying yes. Former NASDAQ CEO Bob Greifeld is here in studio to make his case and explain how he thinks it should work. But first, crude oil prices are lower as the US Pauses its strikes on Iran, with the president set to meet with Israeli Prime Minister Benjamin Netanyahu tomorrow. Where are we on the path to peace in the Middle East? That's next on the Exchange.
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So it's pick up a pack today. Angel Soft. Let's take a look at this. Probably the biggest mover in the markets today outside of the typical memory space. WTI crude is down 7 and a half percent to around 82 a barrel. Brent is below 90 now, down about 7 and a half percent. 8 as well. This comes after the US has paused its strikes on Iran. Amen. Jabbers is in Washington with the very latest Amen where people, you know there's big debate all weekend long. Is this because he was told that we have to be careful of running out of arms as this continues, or is it on its own merits? So I'm curious what we've learned.
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Yeah, Kelly, that's right. And we just got some new comments from the president about a half an hour ago on exactly that. But let me update you where we are right now because we are seeing a potentially significant merging of the wars in Iran and Ukraine this afternoon after Iran's foreign minister condemned an attack by Ukrainian forces on an Iranian ship in the Caspian Sea which killed a sailor. The Iranians called the attack a direct violation of the UN Charter and warned of retaliation. Ukraine's foreign minister Minister responded by denouncing Iran, saying the regime in Tehran is a direct accomplice to Russian aggression against Ukraine, fueling Moscow's criminal war with weapons that have killed Ukrainians since 2022. And on social media yesterday, Ukrainian President Volodymyr Zelensky also linked the two conflicts, saying his country has intelligence showing Russian satellites are conducting surveillance of US Military facilities in the Middle east and sharing those images with Iran. Now, asked about this on Air Force One on his way to Michigan about a half hour ago, President Trump said, we'll find out if that's true. I'll ask Putin about it. But he said that if it is true, Russian support for Iran, in his view, hasn't had much impact. And the president dismissed, Kelly, those concerns about low levels of American munitions as a result of months of combat in Iran. In Michigan this afternoon, we will see the president. He'll be taking a drag race and vehicle demonstration later this hour and we're expecting sort of some campaign style remarks from him. But this question of munitions is an ongoing one and it does raise the question of whether or not there is a strategic narrowing of military options for the United States here given that constraint.
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C
Well, it's interesting that the juxtaposition is concern about munitions while at the same time seeing these two mega global conflicts as potentially linked and interrelated. And I don't know what that means for opening up more avenues to bring it both of those to a conclusion or not. Is leverage on one now leverage on both? And how do we strategically deal with both of them at the same time in this more, you know, constrained situation?
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Well, a couple of thoughts. One is it's tricky because they're not the same war. In one war, the United States is involved directly, militarily, US Troops, US Air pilots, pilots are flying missions. And the other, the US Is involved only indirectly. So you can see from Volodymyr Zelenskyy's point of view, he might like an expansion of the war which brings Ukraine in against Iran and on the side of the United States as a way of buttressing support from the United States for the Ukrainians. Is that in the best interest of the United States? You know, the Biden administration certainly and the Trump administration very concerned about the idea of direct US Military conflict with Russia because you've got two nuclear armed superpowers there. So that's one constraint. And the other one is just simply a question of, you know, what are we going to see over the next 48 hours? We are expecting to see Benjamin Netanyahu and Volodymyr Zelenskyy in Washington this week talking to the president. So it does feel like this is one of those hinge moments where the sort of the future of both of those conflicts is going to be discussed at the White House.
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Right.
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Does Zelensky see leverage in combining, you know, the Iran war now with his in order to increase the US Involvement? We'll see.
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Right.
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Eamon, thanks very much. Appreciate it. You bet, Eamon Javers. Coming up, a crisis of confidence is starting to emerge in the country's food safety system. We have the details next, as restaurant stocks try to rebound from their recent weakness. All this amid the cyclospora outbreak. We'll be right back. Soccer teaches us lessons we can take
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episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.
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to lettuce are higher today, but they've been down quite a lot in recent weeks. This comes as signs of a crisis in confidence is emerging in the country's food safety system as the cyclospiriasis outbreak continues. Brendan Gomez is here with the latest tracking. You know, we thought this was going to be kind of a bad outbreak. Then we got our hands on it.
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Now we did.
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And now we still don't have an answer. It sounds like as to what's going on.
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That's right. And a source possibly spreading in terms of what actually is causing this. But right now the CDC says more than 4,100 people across the US have been sickened in the summer's cyclospora outbreak, with thousands more illnesses under investigation. Now the illness is an outbreak in nine states up from four, with expanding investigations in Illinois, Kansas, Oklahoma and Pennsylvania. Now the FDA continues to identify shredded iceberg lettuce supplied by Taylor Farms, New Mexico as the likely source, relying on traceback and supply chain data linking illnesses from restaurants and stores where that exposure occurred. But now, complicating the investigation further, the CDC says it is tracking multiple cyclospora outbreaks at the same time. That's something several experts early on told me was likely going to surface. It's becoming more likely that not every case reported across the country is connected to lettuce. Health officials in North Carolina linking an investigation to parsley and cilantro. Grocers telling me there's been no formal recall on certain items yet, but they remain in touch with the CDC for guidance now monitoring items that contain those herbs. Ultimately, this is just renewing questions, though, Kelly, about the resilience of the nation's highly centralized food system process. We're going to hear from some of the companies that are reporting earnings later this week as well. We have Chipotle as well as Taco Bell parent company Yum Brands, which is really at the heart of this.
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I mean, I wonder if they're. This is how I feel. You go, you can go a day or two trying to avoid greens and slash and then you just have to throw your hands up and say, I mean, honestly, you just what are you going to do? You can't just not eat any of this stuff. And I know some, some people are don't know if we have an update on those data points and traffic or anything. You mentioned also the kind of consolidated food system, but there's no going back from that, is there? Unless for people who are lucky enough to grow a garden.
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K
And that's the thing, is that some of the experts that I spoke with did say that the consolidation within the food supply system is part of the problem here. You have also experts on the other side who say while having a more centralized food processing system does allow for resources to go into testing, to tracking. So some of these companies that are larger, the Ciscos, the US Foods, they actually are better at tracing back to where it was originally sourced, the distribution process. But there's still this question as to if we had not had this massive consolidation, would we be able to pinpoint the specific farmer, the specific processor, and then therefore the distributor.
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C
The latest on Taylor Farms being implicated in this is that there's still signs they might be or it looks as of now like that was just random coincidence.
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K
It's the might be because again it's all epidemiological data which is basically tracing it back there. It's what people have said that they, that they had in the last 24 hours or the last two weeks that they've been exposed.
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Right.
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But they're still trying to find the scientific data that links back there. There is a world in which we get to a place where we're not necessarily able to find that.
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I love how the scientists keep saying, don't worry, it's just a summer thing, it'll be over soon. What are we just going to not eat all summer long? I'm sure these restaurants feel the same way.
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Yeah.
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And more people are testing. And that's part of the problem too. Not the problem, but it's to help to find the solution. But because more people are testing, it's wide and more complicated, therefore widening.
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C
Exactly. Brendan, thanks very much. Brendan Gomez, appreciate it.
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K
Thanks.
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C
Let's get over to Frank Holland now for the CNBC news update. Hi, Frank.
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Hey, good afternoon, Kelly. Kentucky Senator Mitch McConnell's office said in an update today the former majority leader is still not ready to return to in person work as he recovers from a fall at home. Last month. McConnell was hospitalized but is now receiving care at a rehabilitation facility. According to the office of the Attending Physician, he has missed the last 38 votes during his absence. A South Korean court handed a suspended 18 month sentence to former President Yoon Suk Yeol after he was convicted of making false statements during his 2022 presidential campaign. The case is one of several ongoing trials facing Yoon following his removal from office last year after he issued a brief martial law decree. Yun appealed today's verdict and his lawyer said it was based on a misinterpretation of the election law. And the son of Kansas City Chiefs executive, excuse me, offensive coordinator Eric Bien Ami was arrested and charged with shooting his mother in Virginia last night. Authorities say they found Biennami with multiple gunshot wounds and she's in the hospital in stable condition. Prosecutors charge 27 year old Elijah Zion Biennami with malicious wounding and discharge of a firearm. He's being held without bond. Kelly oh my gosh.
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Okay, Frank, thank you. Frank Holland. Coming up is establishing a national regulator, the way to safely govern AI. Former NASDAQ CEO Bob Greifeld is here to make the case for why the SEC could be a model for regulating. And as we head to break, take a look at Space X shares hitting a new all time low today, dipping below $110 for the first time. Shares have lost half of their value from their all time high post IPO and they're nearly 20% below their list price of 135. We're back in a moment.
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As America celebrates its 250th anniversary, CNBC
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spotlights the companies that rose with the
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nation and continue to shape its future.
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It's incredible to think about the fact that we operated across four centuries of American history and through all of the innovations that have occurred during that time, both for the nation but also for the financial system. I'm Robin Vince. I'm the CEO of BNY. In 1789, President Washington was inaugurated. Alexander Hamilton was the first secretary of the treasury just installed in his post. Hamilton believed in in establishing the credit of the nation and ensuring that the United States would be able to come together as one country. And he turned to the bank of New York at the time and BNY lent the money to the nation. $200,000, the first ever loan to the United States as a new nation. To be able to go about the business of building a country. If you think about the same principles that he brought brought to the bank of New York, it was to be resilient, to be an innovator, to be able to participate in that fledgling country of the time and to be able to power it forward. And then as the merchants gathered under the buttonwood tree a few Years later in 1792, the bank of New York was actually the first stock traded on the exchange. And it was really a moment of crystallizing that beginning of the capital market of that new nation. We were part of supporting the build out of the Erie Canal. We supported the build out of the subway system. We launched U.S. treasury clearing through computers here in the United States. It's that story of innovation, the reality that when you bring a group of people together with common purpose and setting a mission right wrapped in freedom and the opportunity to innovate, you can do amazing things. That is the story of the United States of America. And in a way, it's the story of the bank of New York, too.
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Welcome back. Sam Altman is it? Also in Washington, D.C. this week he's meeting with Trump officials and other lawmakers. Kate Rooney is here now with what is on his agenda. What's on his mind? What's he up to? Can Kate?
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H
Well, Kelly, I spoke to a source who was briefed on Sam Altman's plans. The OpenAI CEO, from what we're hearing, does plan to preview the company's newest family of models. Altman has a handful of meetings this week with Trump administration officials. I'm told he's meeting with senators and economists from both sides of the aisle. I am also told that Altman does plan to focus on the idea of AI teams as they're describing it with policymakers. So think of a fleet of agents working autonomously responsible versus just chat bots. And the way many of us interact with AI right now, productivity is going to be the key message there. And while that is of course Altman's goal, this person said he is expecting to field a lot of questions about cybersecurity after OpenAI's model did hack another startup in a test trial. And then the latest on this executive order. Also this heated debate right now over open source coming out of China especially OpenAI did jump into the crossfire on Friday signing a letter that was in support support of allowing that technology to thrive without quote, premature restrictions. That letter did argue that shutting down open source models would stifle competition and hurt the US Tech industry. That letter made waves in tech. It was first signed by Nvidia. You had Microsoft on their Metta as well. And Anthropic right now is the only major AI company that has held out. In signing, I am told Altman does plan to argue what one person described as sort of a third path for regulation, not essentially lobbying for a ban on open source or what's known as distillation or copying other models. Wants to make sure that distillation, if it is happening, isn't going down on a large scale in the way that would violate the company's terms of service. But he's really got to walk this tightrope, Kelly, when it comes to regulation.
- [31:03]
C
Indeed. For now. Thanks Rooney, we appreciate it. Whatever comes from his visit, my next guest says we need an AI regulator and before it's too late. He wrote in an op ed published just now on CNBC.com that the AI revolution is a global race and the balance of an innovation led market with proper regulation is a herculean task that we must master. He advocates using at least part of the SEC's operating model as a guide and he would have some knowledge about that. Here on set at CNBC headquarters is Cornerstone Financial Tech Management's co founder and former Nasdaq CEO Bob Greifeld. It's great to see you.
- [31:37]
F
Glad to be here Kelly.
- [31:38]
C
So what do you make of the various proposals or the pushback on on this idea of regulating AI?
- [31:43]
F
Well I think all the proposals have some merit, but none of them are looking at the whole system holistically and I seem to have some willing, willful denial of the reality. And when I started thinking about we needed a regulator, I said, okay, maybe I'm a little ahead of my time, but what happened last week with Hugging Face and Open Air, if that doesn't become the elephant in the room telling us we need a coordinated, comprehensive and consistent view of how to regulate this industry, then nothing will.
- [32:13]
C
In your idea might this, that incident might actually shed light on why you think your idea is the correct one or at least should be given serious consideration. Because what you would say is, and give us the analogy back to your early days at Nasdaq, but you would say have these models run by a regulatory body before they enter, kind of
- [32:29]
F
their public availability is completely, completely. Just think about what happened though, the AI model got out of control, attach itself to the Internet and then attacked another company. Right. We wouldn't have, we would have laughed. You're laughing now. It's out of a science fiction movie. So we have to have some form of regulation. I've never in my career said I wish there was more sec.
- [32:50]
L
Right.
- [32:50]
F
So for me to take this position,
- [32:52]
C
I was surprised a little bit.
- [32:54]
F
I am surprised too. But what the FCC did and I mentioned in the op ed, you'd have to submit the code and they would, would have to approve it. So we have to see something like that. And with respect to the issue of open source versus close, it doesn't matter. Right. You need the same level of control. That's a different debate.
- [33:11]
C
In other words, you would have anthropic OpenAI. I think Cisco or anybody who's producing a large language model, when that model is released to the public or before it's released to clients, they have to submit it for consideration to this agency. That would then how, how exactly?
- [33:27]
F
Well one, I believe when you look at the SQL, the sec, we have finra, which is a self regulatory body. So I think the concept of self regulation within the AI industry is a very good one.
- [33:37]
C
You do?
- [33:37]
F
I do. But, but no, that's in addition to having the national regulatory body. So the FCC delegates to FINRA some of the self regulatory effort. I'd like to see that model come forward because clearly the industry will have expertise and will know the right questions how to govern themselves. So it's not either or. It's a great combination that you can work with there. And like you say, it should be something that applies to all.
- [34:01]
C
How did this work for you back in those days? What was this experience?
- [34:05]
F
Actually it was a freaking pain in the neck. I Say I came from an entrepreneurial software background, we Release code at 2 o' clock in the morning for production the next day. And they said no, you have to submit it. So I said it's incredible. And I think in the op ed I said there's no way that regulation doesn't slow things down. Let's be realistic here. I'm not in my.
- [34:25]
C
How much would it slow things down? Are we talking about pending overnight 30 day period?
- [34:30]
F
I think at least 30, 60, 90 days. Right. You know when you these things had to be reviewed either at the self regulatory level at this sec, but let's not kid ourselves. It will slow it down but in the fullness of time you land up with a more secure system and all you have to say okay, I slowed down somewhat but if I can avoid having an open air model attack another organization then that is a net benefit.
- [34:58]
C
Let's talk about this hugging face incident. As we understood as it was explained to us, what happened was the model was close to being finished. It was in testing mode. So they could see how did it complete across those benchmarks so that when it's released they can say here's we're so great, you know, whatever. So they told the model, we're testing you, we want you to hit it 99 out of 100 ever. And the model decided, well the test is too hard. I'm just going to go get on the Internet, get go to the source of the test and give myself a good score. This is how we're told the story. So it achieved the goal. It just did. So in a very roundabout and undesired way to retell that story, I would ask what is it that a regulatory body like you're talking about could or would have done? I mean that test would have happened anyway even if that code was then later going to be submitted.
- [35:44]
F
You could have a definition of what a sandbox is. Right. So they were doing this testing in a, what's known as a sandbox. Right now the sandbox could be disconnected from the Internet. It should be. You know when you think about was it wasn't disconnected from a jump to the Internet. So you know they have rules, okay, you need to do sandbox testing and there's certain rules to the sandbox guardrails and one guardrail should be that you can't get on the Internet. That kind of checklist list regulation is definitely valuable and I'm sure that's part of their standard procedures and something just went wrong with the procedures there.
- [36:19]
C
And last quick question is opening all this up to review, especially in the age of prediction markets. And I mean, I'm not saying we should legislate as if people are going to break the law, but does it make that system too porous? I mean these are highly competitive models, highly competitive field.
- [36:35]
F
Yeah. But regulation has to apply to all equals point. Right. And again, regulation has a lot of downsides. Right. So I come here saying this with due consideration of the downsides there and it will slow things down, but it has to be at the end of the day fair and equally applied across open closed source models. Hard stop.
- [36:55]
C
Well, hopefully this will spark people's interest to hear more in the piece and maybe continue the discussion because we've talked a lot about what the best approach is and whether this is the best one. One Bob, thanks very much.
- [37:04]
F
Thank you.
- [37:05]
C
Really appreciate it.
- [37:06]
F
Appreciate it.
- [37:06]
C
Bob Greifeld, as mentioned, head over to cnbc.com/tec if you want to go directly to that link. CNBC.com/tec coming up for mag seven names report earnings this week. It's the busiest of the season. We'll get some trade ideas ahead of those results. But first, the memory names are under pressure after 6mt, a Chinese chip giant has absolutely soared. Top line of your screen there in the first place, day of its trading. We'll go live to Beijing for more details next on the Exchange. Welcome back. The company that could be China's best hope to build a homegrown chip industry going public in Shanghai overnight. Eunice Yun has more on that for today's tech check. Is it IPO mania over there, Eunice, or is it just this one?
- [37:53]
N
Well, this one has a whole lot of mania. XMT shares popped by over 500% and this has made the company the most valuable that's listed in mainland China. So the company itself isn't a household name here either, as in the United States, but it is the largest memory chip maker. It raised $8.6 billion. It says it's going to use that to mass produce memory wafers. IT currently holds 8% of the global DRAM market. And it's made progress in a more advanced, advanced memory chip, DDR. And it's hoping to be able to scale up an even more advanced chip called the hbm, or High Bandwidth Memory Chip that's used in AI data centers. So that puts it squarely against the likes of sk, Hynix, Samsung as well as Micron. And investors see CXMT as a national champion and really critical to the country's efforts to become self reliant in memory chips. The investors of SMT are largely dominated by government entities and they are local governments as well as the national, what we call here the big fund. So the national big Chip fund. The sentiment towards them is also giving the IPO a boost and that's because in the past week or so there's been a tech sell off and then securities regulators had scrambled a whole bunch of meetings over the past week is trying to get everybody on board and saying that the, that Beijing prioritizes what they describe as a stable market operation and that's been sending a signal that the money is there, that the support is there from the market side to be able to get some money flowing
- [39:32]
C
into the tech sector especially Eunice. We also today have one that's one thing pressuring the US chip space. There's also reports I think it was of the information that said that China might be developing a duv machine kind of like the EUV machines that are so important for the manufacturing of semiconductors. And that's been something that obviously ASML and the like has done, you know, been the market leader on. Do you know anything more about that?
- [39:56]
N
Only what's in that report but like you said this is a really important part of China's efforts to become self reliant and that is not only have the chips but also to be able to make the chip. So you have those, the machinery for the chip making. But as far as I understand this is a huge chokehold, choke point for, for China that they haven't been able to really get the secret sauce when it comes to machines like asml. So we'll have to see whether or not this report by the information actually turns out to be true.
- [40:29]
C
Right. But it is a reminder that you know, we can't take for granted I think what's happening in, in the US and the race is certainly on for these market leading spaces. Eunice, really appreciate it. Thanks Eunice. Yoon. Quantum stocks are climbing after AT&T said it will expand the use of its quantum computing tech across network operations. It's partnering with D Wave but the news is giving a boost to names like we're getting IonQ and the quantum space as well. Coming up, Microsoft, Metta and Amazon all announced spending increases last quarter. But with capex concerns climbing and with Metta and Amazon both issuing debt, are they poised to suffer the same fate as Mega Cap peer Alphabet? Those shares are higher today but they're still down about 5% since its report last week. Almost 6%. We'll discuss that next. We're also watching shares of Comcast popping on the news that NBC Universal's Peacock will be included in domestic YouTube Premium subscriptions starting early next year. Comcast shares of up about 4% although NBC is still planned, I believe, to be spun out. We're back with more after this. Welcome back. A little bit of a quiet mood here in the markets as we digest those lower oil prices that we came out of the weekend in with. And also the big events this week. The Fed meeting, which even if it's a non event, it still could be an event. The big tech earnings that are coming our way. The financials are hitting an all time high, by the way. And the Dow and S and P are on track for their worst month since March of this year. The Nasdaq on track for its worst month since March of 2025. And that comes amid concerns over spending. A major theme of last week sure to be front and center as we hear from Apple, Amazon, Metta and Microsoft this week. And Alphabet raised its CapEx outlook for the second quarter in a row last Wednesday, the shares saying about 7% on the announcement. My next guest says its parent company is being unfairly punished. Let's bring in Surat seti, managing partner at DCLA and a CNBC contributor. It's great to see you, Sarah. And I always love to know which side you're taking of this. Is it that you want to see those CapEx plans raised or you'd maybe prefer a little bit more discipline?
- [42:45]
O
I would prefer more discipline, but when I look at an Alphabet, which is one of our core holdings, they have so many different levers to toggle. If you look at, you know, definitely on the Gemini side, but you've got YouTube, you've got Cloud. And I think they can always pull it back if at some point two things happen, one of the return on investments not there or the market by itself, which it did last week. But now again today it's saying, hey, listen, we think there's enough going on here. I worry about some of the other companies that are spending, you know, what's going to happen in terms of the capex for them and what is the reaction of the stock market because that's going to be the report card right there.
- [43:23]
C
And we, I mean other areas of where the market has been unhappy. IBM comes to mind. Forget what you were sort of saying about that one. So you know, as you say, you agree with this idea that customers are not spending on hardware. We've talked a lot about what that might mean for other software names. So how are you positioning now to kind of navigate continue through the this period of earnings season and then you know into the rest of the year.
- [43:45]
O
So if you talk tech, you know, definitely you've got the Alphabet on the side. We own that. We own Amazon on that side and the selling side, you know, I got Qualcomm and Video there too and what I do like. And you know, this kind of, we've talked about this for a year, software and micro. If you look at kind of what IBM said and you said what SAP said, people are still spending on software. It's the hardware that they're holding back on because not only do they need to make sure that they have enough to spend an AI, the United Software and security. So those are going to be important things to watch for I think going forward and you've seen a little bit of rebound. And I think Microsoft's the one that I kind of, I'm wondering where it goes because it's already down double digits since the beginning of the year. It's very software heavy and most of their money is being spent on R and D. So I do like the company, but I do think they have, they're the one of the few that have to show the return investor faster than the others.
- [44:35]
C
What did you think of ServiceNow? And I will point out to you to what you were saying that Salesforce earlier was leading the Dow with a nearly 5% gain.
- [44:42]
O
So I think ServiceNow came out exactly what people said. They hit their numbers. They didn't say anything about, hey, we're seeing a softening in the back end. They are firing all cylinders and now it's exactly what we thought they have to all these software companies have to execute and they have to show people the cash flow, their good balance sheets. They're buying back shares. Today SAP announced they're buying back billions of dollars a share. So companies wouldn't do that if they don't have confidence in the future. Right now it's just where the allocation of capital is going. And now you're seeing that kind of moving back and forth between semi software, hardware and I think hardware is the one that's going to lose the most. But the ones that have the highest return are going to be the best
- [45:20]
C
return of it, which is another inversion of the narrative. Earlier this year it was hardware is the new software and now you're saying hardware, software is the new hardware. And anyway ServiceNow is up 9%. For those who are keeping track, you get the final minutes to talk about Stryker, Thermo Fisherman, Striker and jnj.
- [45:36]
O
So one of the things that we've seen in this market is, you know, money went from value to momentum and then it started going from high quality growth at reasonable price companies to momentum. And we're seeing that come back. So Stryker, which is hips, Knees, Thermal, Life Sciences, even the jj, these are high quality cash flow companies, really great balance sheets earnings. And I think you're seeing money come back to a health care sector that's the smallest of the S and P that it's ever been. So we're not talking about, you know, speculative this company might have actually earnings. These are real companies that are growing. Each one, I think has its own specific catalyst going forward. And these are ones that I want to hold for the next couple of years.
- [46:17]
C
All right, so it's great to check in with you. Thanks. Really appreciate the time. Surat SETI of Thanksgiving L A That's it for us. Thanks for watching the exchange. I'll join Brian Sullivan for Power Lunch after this quick break where we will speak with one of the world's largest data center CEOs, Digital Realty, whose shares are up 25% this year. That's coming up after the break.
- [46:47]
G
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