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Bigger than AI, Crypto Collapse, and Cyber Monday’s Clues 12/1/25
00:43:52
Kelly Evans is back in the anchor chair, and while investors are clamoring about the AI trade, she’s watching the 10-year yield. We’ll debate what its direction means for the markets and the economy. Plus, bitcoin is falling to its lowest level since April, and retail stocks are climbing on Cyber Monday. Morgan Stanley’s retail guru joins us with the names he expects to win big this holiday season.
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Access across all your devices, Try our most powerful trading platform yet@fidelity.com TraderPlus investing involves risk, including risk of loss. Fidelity Brokerage Services llc Member nyse, sipc what are you doing in a meeting? That could have been an email. Losing interest. Don't let it happen to your money too. Vanguard's CashPlus account can't help you at work, but we can help with your savings. Find out how much interest you could earn@vanguard.com cashplus offered by Vanguard Marketing Corporation, member FINRA and SIPC. You can. You're listening to the Exchange. Here's today's show. Welcome to the Exchange, everybody. I'm Kelly Evans. And after a rally that drove stocks and the S and P to its longest monthly win streak since 2021, we're kicking off December lower the Russell's, the small caps, the biggest loser. You can see, they're down half a percent, gold up, Bitcoin falling hard. We're going to talk a lot about that in a moment. And the trade, like Scott just mentioned, struggling a little bit to find its footing. One area of the market not following this narrative is yields, which are rising today. And that's where we want to start because today's action indicative, something I've been thinking about while I was out. While most of the focus has been on AI, probably the really most significant development is something else that you're seeing on your screen here. The 10 year yield regularly dips below 4%. We were at 4.8 back in February. Talk about a crisis for the budget and the economy. But to be down nearly a full point from that is a huge deal, maybe even a bigger deal, I'd argue than AI. And explaining the market's recent strong performance. Just look at some of these numbers, mag 7 multiples. They're actually down from three years ago. Multiples for the rest of market are up. Earnings growth for the Russell 3000 just hit a four year high last quarter. It's all because the Fed is done tightening. Inflation is still receding and interest rates are falling. And that's where we are today with a rate cut all but certain next week and hopes that yields will fall along with that because low yields have been an incredibly bullish development for the markets and for the economy. It is as big a story as I, I think. But let's see what my next guests think about this as well. Joining me, Dan Clifton is Strategic Research Partners head of policy and Dave Zervos is Jefferies, chief market strategist, a CNBC contributor, not Fed chair. Dave, unless you have anything you want to, you know, tell us about your conversations over the weekend, I've got no comment on that. Yeah, I understand.
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C
Talk about all the others.
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I understand. It is truly great to see you guys and I appreciate you being here today. Do you. I know, Dave, you've been pounding the table about this for a long time. You know, the fact that low yields themselves are a really important development. But I don't know, today, obviously a little bit of a different story because there was some dovish talk out of the bank of Japan and suddenly everyone's, you know, on a, on a yield strike. What do you think is going on here?
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C
You know, I think your chart was a very important one that you put up in the beginning, Kelly, that, you know, it's a nice perspective to be out for a while and come back. We've had an incredible run lower in yields. When I was first talking to clients in the beginning of this year, people were telling me, oh, we're going to five, we're going to five and a half, we might go to six and ten year yields. And here we are at four down from almost five. So I don't think a lot of people have this trade. We pushed pretty hard on the idea that neutral is going back to its original state of pre Covid, which is a very non consensus view and I think will continue to be one. But I'm going to keep pushing on it. It's coming my way. Got a little more to go, but I think it's interesting from my conversations with clients, I've seen more converts, meaning people here at these Yield lows toward 4% are actually much more open to the idea that yields are going to head quite a bit lower before all is said and done. So it's interesting. Maybe that's a bad sign because you always want to be against the grain, but I think people are more open to the lower rate narrative now than.
- [03:41]
A
They were, you know, the only other person who was out there talking about this, how the deficit might actually start getting better. You know, where I'm going. Dan Clifton it is playing out a little bit. I mean, on some level, I wonder if that's why crypto is crashing. You're taking away the narrative of, you know, dollar implosion and fiscal deficits to the moon and economic, you know, problems. And I don't know, crypto is probably suffering under its own collapse in leverage, but do you know what I mean? Like there's something here where you go, hey, the broader economy is looking okay at this point.
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B
Well, first, Kelly, welcome back. It's great to see you and thank you for having me on.
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A
Thank you.
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B
As you know, in the beginning of the year we were talking about rates going to 4% when they were at 4.8. Some of that was temporary. It was the liquidity boom that we were going to get from the debt ceiling. But it was also those other factors that you mentioned, the deficit improving, as well as being able to use the liquidity tools that are available to the treasury. And the treasury continues to to use those tools. And I think that they will continue to do so. And then you've got financial deregulation, which is coming up in early February, in early 2026, probably in February. When you see it changing the G Sib rules and trying to unlock that capital on bank balance sheets and being able to use that to get mortgage rates lower and bond yields lower. So there's a lot there. But I would just urge some caution here. There's some plumbing issues that are starting to develop. November was supposed to be a relatively easy month. And what you started to see was rates really creeping up higher at the end of the month, something that expect at the end of the month, but a little bit higher than than anticipated. And December is going to be a really tough month. You have corporate tax payments coming in which are going to destroy bank reserves. You also have, you have treasury settlements of about $200 billion. You get the end of the year settlements for the banks. So this is why the Fed is getting rid of kuts. That only gets them partial. We think the Fed is going to have to expand its balance sheet in the month of December to be able to make sure that there's not too much destruction in the bank reserves. So, so there's a lot going on and they have to be very careful because you could start to see at least the overnight rate starting to go up and creeping on rates. If the Fed is not proactive enough in dealing with this December liquidity crunch that's ahead of us.
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A
Dave Zervos, you were just kind of talking again about this today, this idea that if we got the balance sheet back to 20% of GDP and we were heading in that direction, that's a pretty good sign for normalization. So what happens now?
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C
Yeah, Kelly, I think it is a neutral balance sheet, as neutral was defined before COVID when we were kind of in that happy place of a 20% of GDP Fed balance sheet, a 2% interest rate structure largely across the curve, two tens and you know, I think that balance sheet neutrality sort of begs the question of why are rates 200 basis points higher today than they were Pre Covid in 2019 when you know, when the unemployment rate was at 3 and a half percent or lower and today it's almost 4 and a half percent. Why are you not working to satisfy your dual mandate of maximum employment and price stability when inflation expectations are largely contained? You've had a massive disinflation, you got a little bit of stubbornness, maybe the last 50 bits, but I don't know. I think this Fed has shown a little bit of a political bias. I've mentioned that a number of times on the show to you before you left for a little while and mentioned it while you were away. I think that's only increased and I think it's a bit sad. I think it's a sad state of affairs that were we're holding back this economy with rates that are 200 basis points probably above what we estimate neutral to be. And the Fed's done a pretty bad job of also understanding the evolution of neutral in the context of what the balance sheet was doing to neutral while it was large. I've been a fight, I've been fighting for a while.
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A
And you're in other words saying just people are following along, Dave, that they're holding rates higher than they should just because the President wants them to cut one a little bit. But, but there are people who I very much respect, the Larry Lindsey's of the world who are out there saying, you know, by some accounts this isn't an economy that seems to be begging for rate cuts either. You know, there's, there's enough firepower momentum there maybe because of large deficit. So I mean I think you can make an intellectual case. I think it's a confusing time frankly.
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C
Well, let me just give you a couple of stats. I mean we've seen the unemployment rate rise in the last two quarters even though growth has been at 4%. It's risen from 4.2 to 4.4. At the beginning of 23 we had a three and a half percent unemployment rate. We went up to 3, 8, then we went from 3, 8 to 4, 1. Over the course of 24, this unemployment rate has been rising even though growth has been incredibly strong. Kelly, we've got almost 3% growth now running for almost three years. And that's a story. What is going on in our labor market? Why is there so much weakness? I come back to two things One is AI and the disruptions that it's creating and the lower need for labor and the higher productivity. But the second is policy is restrictive and it's holding back aggregate demand, in particular in interest rate sensitive sectors like housing, like construction, like consumer. And those are places where it's hurting. If you could get people transitioning out of those jobs that are getting displaced by AI and into those interest rate sensitive jobs, we would have a much cleaner transition and I think a much better economy.
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Interesting. So they should, you know, if you're not, if you're not working in your kind of white collar job, you should go look at a bank or something where, where lower interest rates would, would actually.
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Mortgage broker.
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And we're seeing mortgage broker. It has been strong for the banks. Dan Clifton, last word here, then spin it forward into, as you mentioned, kind of some concerns about December. But does the picture look a lot better for 2026, whether in terms of the budget or the economy or other things, or do you still see some problems? Absolutely.
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B
Remember, the President imposed a pretty large tax increase to his tariffs and then sterilize that with fiscal policy and then you're going to get monetary policy. So as you get into 26, the tariffs begin to run off and you're going to get this kind of fiscal policy tsunami. $150 billion of incremental tax refunds for the consumer in February, March and April. That's about a half a percent of GDP on an annual basis. You had about $250 billion of business investment tax cuts that are going to go into effect. So I believe that we're going to get stronger GDP growth and acceleration of that GDP growth. The Fed made a mistake this year in assuming that those tariffs were inflationary, when in fact they were deflationary. So you got to get some catch up. Congress built itself around that. But as you get into 26, there's going to be a push to slow down some of those rate cuts because growth is going to be quite strong and coming back and you're going to have a new Fed chairman who's going to have to make those decisions. So I think 26 is going to be a little bit more of a defensive year for the equity market. I think you'll see an equity market rotation. I think growth will be strong, but it will be a bit more volatile in the equity market in 26.
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A
Still crazy to see Bitcoin below 85 there. We'll talk about that in a moment. But gentlemen, for now, thanks. Really appreciate it. Good to see you Again, Clifton, David, come back. Thank you. If you agree or disagree with me that yields are as important, if not more so, than I right now, we. You can write back to me and sign up for my newsletter. Just scan that QR code on your screen and send me your feedback. Looking forward to it. And let's turn to the collapse in crypto prices in the meantime because bitcoin is down about 7% today to hover, I mean, it's barely above 85,000 and it's having its worst day since March. All of this because of the bank of Japan. It's back to its lowest level since April. It's down 9% now since January. So let's bring in Mackenzie Seagalo. She's in San Francisco with a closer look. Mackenzie, first of all, great to see you again. Secondly, what are people saying about this? What explanation? I understand like a leverage implosion can happen anywhere and anything and that goes back to what's happening overnight. But how much worse could it get?
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D
So, Kelly, first off, it's so nice to have you back. But to your question, you're seeing a lot of risk off selling in crypto today and you've got traders pointing to, to your point, a classic deleveraging move. There's still a huge amount of borrowed money in the system. On some offshore exchanges, you can lever up a Bitcoin bet by 200x and that works great when prices are climbing. But on the way down, those same positions get hit with margin calls. We saw that in the last 24 hours, close to $1 billion worth of leveraged bets have been forced out of the market. And once that liquidation wave starts, it tends to feed on itself. But there's more at play here. There's also the calculus of a more cautious macro backdrop. You've got investors staring down a big week for US Data in the next Fed decision. And we've already seen money rotate out of some of the frothier AI and tech name crypto. It has been trading like a more volatile version of the nasdaq. So when people de risk there, they.
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De risk here too.
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D
And you can see that in the plumbing of the market, open interest in perpetual futures is coming down. Spot trading volumes on major exchanges are pretty muted. Signs that speculative appetite is cooling. But then keep in mind, you often see this kind of year end positioning following a huge run, essentially investors looking to lock in losses to offset equity gains for tax purposes. And that's what's at play here, Kelly.
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You know, I just, I go back to if you can't come up with a reason for why the price should be where it is, other than if it's a macro argument. And again, maybe that's a little bit less of a tailwind these days. It just felt like at some point this trade couldn't get any more crowded. You have the entire administration behind it. Everything that could go right went right. It went up to 120,000 and maybe it goes back to that level. But it seems rational that some kind of reset would happen. It was just hard to predict when it would happen or how much further it goes.
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D
Precisely. And you also saw the rise of that digital asset treasury trade this summer. So a lot of copycat companies to Strategy and the erosion of confidence in that trade. You know, strategy very much a proxy for what people believe in. When it comes to Bitcoin. That has eaten away at the larger narrative that institutional money is going to provide a floor here. And so you have the MSCI say that is considering whether or not to count a company like Strategy and other others that hold more than 50% of digital assets on their balance sheet, they might be reclassified, which would force them out of certain passive holdings like ETFs. That is a huge potential headwind. And that speaks to this larger narrative that so much of why we saw Bitcoin stay at an elevated price for longer than in previous cycles had to do with the fact that institutional money was here in a way that it wasn't previously. There are those spot Bitcoin ETFs over the past two years.
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Yeah. And now it's in. So you go, what's the next leg of the story? You know, is it the whales coming back? Like what is the next driver, you know, to those, to those new highs?
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It comes back to policy. So we got that stablecoin bill passed into law earlier this year. But what people are waiting for is this crypto market infrastructure bill. It's in the markup stage at this point. It is potentially going to come to the floor for a vote in Q1 of 2026. And that's part of why people are holding on. Because so much of what the pent up demand is, it has to do with whether or not banks can custody crypto currencies. And that would come from hard and fast rules from Capitol Hill.
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All right.
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All I know is the better it goes for crypto, the worse it goes for bitcoin, Right? They got everything they wanted and then it crashes. No, Mackenzie, thank you. We appreciate you staying on the story. Mackenzie Sagalos out West. Coming up, the deal of the day. It's another one in video is involved in this time. $2 billion in synopsis. We'll tell you they're getting out of it and what it means for the rest of the landscape. Speaking of which, our market guess is sticking with some of the large cap names in that space, including this stock coming off its worst month since 2001 on debt concerns. Our mystery chart is back. Need to log into Twitter to send me your guesses. Anyway, I'll figure it out. She'll make her case ahead. The exchange is back right after this.
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Welcome back In Video is taking a $2 billion stake in Synopsis as the company's partner on product development. Let's bring in Christina Parts and Evil List to explain. I heard the interview earlier, Christina. It's about their like software and design. But $2 billion isn't a huge bet for Nvidia. Why do they keep doing these?
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H
Well, this is actually about a $2 billion investment in Synopsys and it's really a signal about where Nvidia sees the next wave of growth. Synopsys, to your point, Kelly makes design software for engineers. So for example, let's say you're BMW, you're designing a new electric vehicle, or even a shipbuilder designing next generation vessels, you're probably using Synopsys tools. And Nvidia just bought a big stake in the company, even though both firms have been working together for years. So this partnership, this collaboration, this press release, most of it is not new. CEO Jensen Huang told CNBC this morning that Wall has been focused on tracking AI spending from tech companies like OpenAI, Anthropic, Google. But he says investors are really missing the bigger picture. Traditional industrial companies are about to massively ramp up their spending on engineering software and computing power.
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Here's his pitch. Listen in. And the percentage of R and D.
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They invest in, automation, in software, et cetera, is going to become exponential, driven.
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By the complexity and the sophistication of what they're building. So if they were spending 2% of.
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Their revenue in R and D dedicated.
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To the software automation, and the technology.
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Is going to get significantly higher, point.
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Out that's Synopsys CEO and what he's saying is that companies like gm, Siemens, major manufacturers, need more computing power as their products get more complex. And by investing in Synopsys, which already works with all of these companies, Nvidia is essentially positioning itself to capture that spending at a time when the market is of course, worried about Hyperscaler spending bubbles, etc. It's basically Nvidia and Synopsis saying our market isn't just AI data centers, it's every company that designs complicated products.
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A
Kelly, I understand again, why does Nvidia shouldn't they just be a beneficiary of the fact that all these other industries are going to use AI and therefore boost their business? Why do they need to invest directly?
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H
Because this is another way to integrate software. This is all about Nvidia integrating its Cuda software further into the stack. So you have Synopsys that provides the engineers with the design tools to build said chips. And now Synopsys is going to integrate Cuda Nvidia software further into its tools, which means that Nvidia will be able to further influence customers down the road that may not use certain Nvidia products. So it's just a way of Nvidia expanding its partnership. And Nvidia actually announced a similar type deal back in March with Cadence, who is a competitor to Synopsys. I did ask Jensen Huang this on a press call about, you know, at 10:00am Eastern time specifically about regulatory concerns. And he said that none of this is exclusive, that Synopsys can work with Intel, AMD, et cetera. We're working with Cadence, other companies, etc. Etc. And that there should be no regulatory concerns concerns because we're not forcing synopsis to buy chips even though Synopsys does buy chips.
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A
Interest. That's exactly the right question because you know, eight years from now in a different kind of administration are going to look back and go, you know, you struck all these deals and now it's just, you know, you like kind of narrowing in the business and perhaps it won't get to that point, but this would seem like a poster case for that if we go there in the future. Christina, thanks. Appreciate it.
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I
Thank you.
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A
Good to see you Christina. Parts in Evolis Nvidia right now is trading, get this and only 25 times forward earnings for all of its multitrillion dollar valuations. 25 times like a consumer staples company. This is back to prior trough levels in fact, where the stock has historically rebounded. And that's exactly what my next guest sees happening from here. Vivek Arya is back. He's the senior semi analyst at B of a. And Vivek, 25 times, I mean can all you really need to know with this company is how strong the earnings power can possibly be in the coming years. Is 25 times warranted if they say look the strongest gains are behind us and it's going to settle out now surely.
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I
I think there are a few debates that are happening right now. First is how sustainable is this spending on AI? And secondly, even with this pace of spending, will there be any shifts from a competitive perspective between Nvidia and other solutions out there, whether it is Google's GPU, whether it is AMD's GPU and so forth? I think the first thing on, on the spending, there will always be question marks about the spend ahead. But we fundamentally believe that we are essentially taking the computing industry from the era of trains to the era of rockets. That's the big transformation that is happening in this move towards accelerated computing. And we think we are still in the early stages of that. Every year at this point there is a debate about how much the spending will be people more than 20 or 30% growth. And the last few years that spending has been upgraded to 50 to 60% growth. Why? Because this is mission critical for these hyperscalers. So I think the pace of spending will continue to be very strong. Now when it comes to the competition. I think it's important to realize that there's a lot of constraints from a supply perspective. And part of Nvidia's investments, we think, have gone into aligning the supply chain with them. It's number two to make sure that the product is extremely flexible and versatile. So whoever is investing money in these factories is able to maximize the output from these factories. And given all that, we think the valuation at 25 times, which is essentially 0.6 or 0.7 times their earnings growth rate, is still too cheap for a company that can grow its sales and earnings at a 40 to 50% compounded pace.
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A
Right. So you remain bullish, which is the fundamental point here. I appreciate you explaining why Broadcom and Google have something in common. And you're quite positive, I believe, about this. What are TPUs and how does that play into the next phase of what kind of this back and forth overpowering AI?
- [23:07]
I
Sure. So when we are looking at accelerators, the majority of the market, 75 to 85% of the market, is built around Nvidia's merchant accelerator. Right. These are the GPUs. These are extremely flexible. One can find them in every cloud, whether it's Amazon Web Services. Even Google's cloud, by the way, uses a majority of Nvidia GPUs. Or you can go on Microsoft Azure. There's on premise deployments, there are sovereign deployments. So the point is that these are very versatile, very flexible. But Google has built a very capable product called the TPU that they have really only used mostly for their own internal applications, search, YouTube. But now there is a thinking that maybe they can start to rent it for other customers, for example, a meta. But I want to make a point that this isn't the first time we are hearing about the TPU. The TPU actually business started in 2016. At that time, Nvidia's data center revenue was less than 400 million. Now, in this decade since the TPU has been out, Nvidia's datacenter sales have gone up by a factor of 500.
- [24:15]
B
Right.
- [24:15]
I
So just keep that in mind that just because a TPU is there doesn't mean that Nvidia's business model is under a major threat. Yes, there is more competition, but we think there's a rising tide. The spending is going up by a factor of two to three times and of course there are going to be competitors on the way. But what's important to understand is that Nvidia's product does offer the most flexibility and Versatility in every, in every situation of deployment, not just for internal workloads.
- [24:40]
A
Right. But you are bullish on Broadcom for that reason. You positive Google doesn't exactly I think fall into your coverage universe. But are all of these companies going to when you have a couple of underperforms? Texas Instruments, Skyworks, I guess Intel. The synopsis interestingly enough.
- [24:56]
I
Yeah, I think there is. You know first of all, the global demand environment is actually not that great right now. There is one sliver of demand which is related to air that is doing extremely well. But if you look at consumer spending that is not that great right now. Industrial PMI is are still not that great right now. Automotive production, automotive demand is not that strong right now. But I think our view of semis, you know, tends to be influenced by these really large mega caps. But if you look at an average semiconductor company outside of the air complex, that's actually not doing as well right now. Which is why you see that distribution of views in our coverage.
- [25:34]
A
It makes sense. Vivek, thanks for joining us today to talk through it all. Appreciate it. Thank you Gary Vivek Arya with B of a coming up, ChatGPT turns three. Oh, the terrible threes. We'll take a closer look at how they shifted from disruptor to incumbent and what it means for the competition that's ahead in tech check. Stay with us as the market struggles today. If you are a fighter, Modelo is your reward. So listen close. You are strong. You are fearless. You are a fighter. And every last drop of this rich golden Modelo is yours. So raise it up high because you've earned it. Modelo, the mark of a fighter. Drink responsibly. Being reported by Carlinport, Chicago, Illinois.
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Welcome back. Let's get a look at the markets. The Dow is still down about a third of a percent, but the tone has certainly improved from the lows of the morning. At the lows we were down almost 400. Nasdaq S&P down about a tenth here in the ten year hanging in there at about 409. Old Dominion is the best performer in the S and P today, believe it or not, at 5%. BMO gave it an upgrade to outperform. It's 40% below the recent highs. So they're dropping their price target to 170. But they still think an improving freight cycle backdrop creates a favorable risk reward balance and that stock improving nicely elsewhere. The retail names are in the green on what we still call Cyber Monday. The XRT ETF is up 10% in the past six trading days, even with all this concern about the consumer Bath and Body works leading the group today and having its best day since April, up nearly 11%. But again, it's hovering near a five year low. It's down 9% since reporting disappointing 3Q results and slashing its full year outlook a couple of weeks back. That's when they cited those macro consumer pressures today again starting to rebound. Let's get to Bertha Coombs now for a CNBC news update. Hi, Bertha. Hi, Kelly.
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Welcome back.
- [28:15]
A
President Trump reportedly plans to meet with with top advisers today to discuss Venezuela, according to Reuters, which says the meeting is expected to include Secretary of State Marco Rubio and Defense Secretary Pete Hegseth. On Saturday, President Trump raised tensions in Latin America after saying the airspace around Venezuela should be considered closed, but gave no other details. Luigi Mangione, the man accused of killing UnitedHealth Care CEO Brian Thompson a year ago in New York in court right now for a series of hearings ahead of his trial. According to Ms. Now senior legal reporter Lisa Rubin. Mangione's lawyers appear to be trying to establish that the NYPD publicized the murder and pictures of the suspect because of who the victim was and therefore prejudiced the investigation from the start. And U.S. consumers expected to spend $14.2 billion today for Cyber Monday. That would be a 6% increase over last year, according to Adobe analytics, which says strong Black Friday momentum and the addition of shopping tools are driving sales. I shopped online today because it's a day ending in day. Exactly, Bertha. On Friday I was going to buy a few things and then I went, oh great, they're, you know, $10 off. It was just another day here online shopping. Exactly. Absolutely. But I'll take it. So great to see you. You too, Bertha. Thanks so much. Bertha Coombs coming up. Here's your last look at our first mystery chart with the name coming off its worst month since 2001. But our market guest is sticking with it. She says the concerns about its debt are overblown. We'll dive into that. Stocks are lower, yields are higher and that's a big reason why. Let's kick off the last trading month of the year diving into this pattern. December is historically a month for stocks with low volatility. But will this not be the same? Nancy Tanglar knows. She's the CEO and Chief Investment Officer at Laffer Tangler Invest. Do you like the seasonal investing discussions, Nancy, by the way, or do you find them a distraction?
- [30:26]
E
I do find, I count on them, but I don't, I don't really talk about it a lot. We're focused on the long term fundamentals as you know.
- [30:33]
A
So what matters most to you right now, the month of the year. Do you see certain opportunity? Oracle. That's not to, you know, reveal our mystery chart, but that's one where you maybe see an opportunity talk. What jumps out to you these days?
- [30:44]
E
Well, I mean I think the correction was good whether, whether the motivation behind it, the short sellers, the bubble talk which, you know, I don't think we were in a bubble as you know but I think we're focused on earnings and guidance. We get crowdstrike tomorrow. That, that'll be an interesting one just because we're winding down and so it'll be good to see if the, the upbeat guidance continues and if and whether or not they're able to produce a triple play. But generally we're listening to the companies and the companies are telling a very different, different story than the market is.
- [31:13]
A
What are they telling?
- [31:14]
E
They're saying that AI in my view, this is my paraphrase of the companies. They're saying that AI is real. So it's not just cost cutting, it's new product development, it's enhancement, it's expansion of the consumer or the customer experience. Walmart's our poster child and has been and they continue to deliver on all of those fronts. But we're hearing it's cross sectors.
- [31:37]
A
Just to jump in for a moment, we can show the this on the screen as well. As my producer Christina just pointed out, we were talking about Nvidia's P e which is 25, as you know. I don't tell you Walmart's is 39.
- [31:47]
E
Right.
- [31:47]
A
Is that still war? I mean, they're a tech company. They're on the Nasdaq now. They're using AI but it's 39 warranted.
- [31:52]
E
Well, I think that's a little bit lofty. But they are shifting to the Nasdaq as you know and they, they believe they're a tech company. We've been talking about them as our poster child of old economy that's pivoted to the new technologies. And then of course the Veuve Clicko that we've talked about by Walmart. But I think, I think you know, Nvidia is, is trading at a 0.5 times peg. So on a price earnings to growth basis they are one of the cheapest stocks in the market.
- [32:19]
A
Crazy.
- [32:20]
E
And growth is going to be still about 50% in 2026, 2027, 53% in 2026. And the, and the P E ratio is low. So it's all about what the market is telling us. This AI bubble. You know, OpenAI is going to potentially be a problem for many of these companies. It may. But as Satya Nadella said, the data centers are fungible.
- [32:44]
A
And so you like Oracle and we've talked about this one before, there's been some concern, you saw that kind of cbs. I don't know how high it got, but some concern about their debt. Lotus, they're really kind of investing hard for this future. Speaking of old tech companies that are reinventing themselves but you see an opportunity here.
- [32:59]
E
We do. We've owned it for about three or four years and we were trimming it in September not because we knew anything and then we just bought some again last week. But the story is the debt to equity ratio was 781% a year ago when the, a year ago when the company was growing half as fast as it is now. They've added 18 billion in debt but the debt to equity ratio right now is 500%. So this is a company that always used debt. PPE is growing at like 140% whereas debt's growing at 9. So I think you have to step away and say, okay, the CDF trade was a pair trade and people were using it as a narrative stock on what's wrong and that AI is in a bubble. But this company has, has a long history of utilizing debt. They have an RPO of $381 billion backlog. And when you're investing in plants and equipment, that's how you solve the backlog. So we see it as, I mean, did it run too far, too fast? Yeah, it did but we, we still see it as, as a name you want to own for the next three to five.
- [34:02]
A
Final question then. And this comes up where you say, okay, even if you step back and say fine, I agree with all of that but what about the old Warren Buffett indicator, right, the stock market total cap versus gdp? I know we're at quite elevated levels or what's the Q ratio? Is that price of sales or is that something else on, on those levels as well? We're kind of at historic highs. Do we just from a big picture point of view have an expensive stock market or no, I don't know.
- [34:26]
E
You know, in the second half of the 90s, the growth drivers, the stocks whose valuations continued to accelerate actually had contracting earnings. That is not the case now. And by the way, I read your newsletter this morning. I don't know when you get up and do it, but you're absolutely right that stocks are actually cheaper now in the mag 7 in some regard and I think not enough people are talking about that because we have that, that PTSD muscle memory from 2008, 2009, 1999 and 2000. But if you look at the story, if you look at the technology, it is transforming the way we do business. And last thing I'll say is the ism, you know, that number was kind of disappointing this morning, but production actually moved into expansion. It was employment that went down. And so if you think about that, if the economy is transforming to a more technologically robotic driven and it's going to be a different set of, of underlying denominators and numerators.
- [35:25]
A
And like you said, I like to play devil's advocate here a little bit, but you do sometimes just wonder, these numbers are so big, so huge, how many multitrillion dollar companies can we support? I guess the answer is a lot of them should be grateful for that.
- [35:36]
E
And sovereigns are now, you know, the new market for AI. So true. I mean there's a lot to like.
- [35:42]
A
It continues. Nancy, I appreciate you coming.
- [35:44]
E
So good to be back to have you back and to be back with you.
- [35:47]
A
Nancy Tangler with Laffer Tangler Investments. It's been three years since the world was introduced to my best friend chatgpt, and since then, nearly every industry has been disrupted. As we enter year four, is AI itself about to become disrupted? Let's talk about that next. Chad GPT turns three years old this week and the milestone comes as OpenAI is trying to shift from disruptor to incumbent. Maybe not trying to. It is shifting. Deirdre Bosa takes a look look at what to expect in year four. I love that they gave us the toddler story, Deirdre. You know, we can deeply relate to like we all love year four. Year five should be even better.
- [36:28]
J
I, you know, I always say it's not terrible twos, it's terrible threes.
- [36:32]
G
Right.
- [36:32]
J
But anyways, Kelly, it's a good note to come back on. Welcome back. I like the top of the show, by the way, where you said don't blame the AI trade, blame, you know, the 10 year yield that was, I like that.
- [36:43]
A
You know, it's like, it's fun to talk because this is so disruptive. Like we were just saying with Nancy or Vivek said earlier in the show, like this is the only part of Semis that's working right now and it's, it's taking up so much of the oxygen. But yeah, there's a lot more going on.
- [36:54]
J
Absolutely. And speaking of that, just yesterday was chat third birthday. It's a reminder that this industry does not move in straight lines. Investors treated the first phase like a land grab. A single model race where whoever pulled ahead would own the future. But three years in the pattern, it looks very different. Advances have been faster, but they've also been easier to copy. Model leadership has changed hands multiple times, sometimes in just a matter of weeks. So it's compute, distribution, cash, those are the new kings. And that is why the trade has really flipped the Google ecosystem outperforming the OpenAI one. But there is a new dynamic Kelly emerging. As we enter year four, the gravitational pull may shift toward the people who invented the playbook in the first place. Three of the most influential minds in the field, they have chosen to step away from trillion dollar platforms to build new labs from scratch. Ex OpenAI executives Ilya Sutskever and Mira Muradi. They have raised billions of dollars in seed rounds. You've also got Yann Lecun from Metta. This could signal a split in how the frontier is being pursued now. On one side you've got companies scaling existing architectures with massive capex. On the other, people who believe the next breakthrough requires new ideas, not just more GPUs. And even Jeff Bezos choosing to build outside of the incumbents, co founding a new AI startup aimed at reinventing engineering and manufacturing. Perhaps another signal that year four's breakthroughs, they may come from outside the platforms, not within them. But I would note here as well, Kali, that Google, even in that kind of race, is well positioned because it's Brought important people back into the fold. Sergey Brin, he's back sort of at the day to day. Noam Shazir going back as well. So it'll be interesting, a battle of the minds.
- [38:30]
A
I didn't use Gemini 3 yet, but as you know, I've using ChatGPT more than ever. Literally interesting for everything all day long. So I need to try. It's like muscle memory.
- [38:41]
J
Amazon was ChatGPT and now I'm flipping a little bit to Gemini and it's good. Gemini 3. I thought it was only for people who needed it for math and coding, but even someone sort of as simple as myself, I can see the benefit already of Gemini 3.
- [38:54]
A
No, it's great. All of it, all the chatbots, I love them. Deirdre, thank you very much. Appreciate it. Deirdre Bosa Coming up, The XRT Retail ETF is up 7% in the past week, but there are five names our next guest says stand out and he's calling them category killers. You're looking at one of them. It's up 56% this year. It's our second mystery chart today. The name and the trait is next. Welcome back. Cyber Monday, they tell me, is in full swing. More than 74 million Americans are going to shop online today, which is a 6% jump from last year. But Courtney, we're shopping online every day, all the time. You're in the Visa Cyber Fusion center. Where are you? Court.
- [39:38]
G
Yeah, yeah, exactly, Kelly. So this is Ashburn, Virginia. It's just outside of D.C. and this is one of sort of three major hubs around the world where Visa is constantly monitoring transactions 24, 7, 365, as many as 110,000 transactions per second on a normal day. Right. So they're monitoring, they're detecting potential fraud and then protecting if indeed they do see it. They saw that. They said rather that they stopped a 200% more potential fraud on Black Friday this year than they did the year before. So really interesting stuff here at Visa. And then what are shoppers doing on the Cyber Monday? Yeah, Kelly, they can shop anytime. But it's a big day. The TAMU app has been downloaded more than 940,000 times since Thanksgiving. That's followed by Walmart at almost 600,000, the Shop app, then Best Buy and Amazon. Hundreds of thousands of downloads. This is according to app Topia, cash back site Rakuten. They're seeing big increases in experience related purchasing. Well, overall shopping visits they say are up 4%. Travel site visits are up 40% on this cyber Monday. Compared to last Cyber Monday, followed by sports and outdoor visits, Those are up 37%. Visa is seeing similar trends.
- [40:56]
B
The experiential part of gift giving also is starting to show up and that often bears the form of travel. And we're seeing some pretty outstanding sales from many of the travel provider, the cruise lines, river cruises, even some airlines and hotels even offering more discounts during this holiday weekend.
- [41:18]
G
Now, Kelly, I think you mentioned it, but 40% of Americans, that's almost 74 million, are expected to shop today. This is according to the National Retail Federation. It would make today of course, the second most popular shopping day behind Black Friday of this five day stretch from Thanksgiving to Cyber Monday, which we often refer to as Cyber Week. And Adobe is forecasting that today will be the biggest online shopping day of the year with more than $14 billion spent. That's up over 6% from last cyber Monday. Visa says its top categories by spend so far this holiday weekend include apparel and accessories, electronics and home improvement. So Kelly, it sounds like you have not gone shopping yet. You still have plenty of time. The peak hour is not expected until around 9pm tonight.
- [42:02]
A
9Pm I kind of understand that. Would you say overall, what are you hearing? Are we hearing and seeing in the data? Is it a strong start to the shop is even a week one? I'm getting very mixed reads.
- [42:16]
G
I'm going to go with medium. I know that kind of sounds like a boring answer, but it feels like things are as expected. They're not terrible, they're not awesome, they're pretty good. But of course, this is just the beginning, right? Five days does not a holiday season make. But this is a pretty important read. And what we're seeing is that consumers shoppers do seem to be waiting to either visit stores or websites for these big promotional days, these big discount days. So we're seeing traffic fall less in store, for instance, on a Black Friday compared to the days ahead of Black Friday where shoppers were waiting and they were going to go out when they were going to get the best deals. And the promotions are about on par with what we saw last year, which actually is probably pretty good news for the health of retail too.
- [43:02]
A
Yeah, that's a great point, Courtney. Thanks. Good to see you. Courtney Reagan, let's ask my next guest. Well, what he thinks of the holiday season. He says the outlook is better than feared. And there are several names that can keep gaining share, like 5 below our other mystery chart today, up 56% this year. Simeon Gutman is here. He's senior retail Analyst at Morgan Stanley. I was just there the other day, in fact. Great place to pick up a few things. But the stock already reflects that news or can still keep going.
- [43:27]
F
It probably can keep going. And by the way, happy Cyber Monday. Happy Cyber Week to those who celebrate. Correct. It actually means that it's the timing of the Morgan Stanley Global Consumer and Retail conference so we can put the puzzle pieces together throughout the rest of the week. But yeah, five below is doing great. Good value seeking, value oriented toys, great merchants. A lot of momentum going into the holiday. Good merchandising along with that.
- [43:52]
A
You have Walmart. We've already talked about that one. High pe.
- [43:55]
E
We'll come back to that.
- [43:56]
A
Best Buy, Ulta, back at that. On the top of the list, Dick's Sporting Goods. They all seem pretty solid.
- [44:00]
F
Yeah. These are the categories that have been working, that have been selling sporting goods all year. Beauty, affordable, luxury, attainable price point and electronics. It's. It's back. I don't want to declare it the winner, but it's been a quiet sector.
- [44:15]
A
What's driving that? What's driving electronic? Last time I was in Best Buy, there's a lot of podcasting equipment.
- [44:19]
F
It's a little bit of a refresh cycle and a little bit of new technology. You still have some halo from phone, a little bit of laptop. Windows 11 created people back into store.
- [44:29]
A
Come on. No one's going into the store to buy Windows 11.
- [44:31]
F
Are they good pushback? I mean, but they are. We're probably midway through that, the laptop or PC upgrade cycle.
- [44:38]
E
Okay.
- [44:39]
F
So there's still a fun place to interact and Best Buy is executing well. It's been a couple years since they've come positive. They're back into positive territory. The question is what that category looks like. The out years. That's a, it's been a tougher category over the last five years.
- [44:52]
E
Yeah.
- [44:52]
A
Where would you say the soft points, the weaknesses are? Because it's still patchy and we've seen this, especially with spending, we've seen some of the delinquency rates on auto subprime, things like that. And I don't know if that's directly related to the restart of student loan payments or if you're picking up that in your data. But where, where are the soft patches?
- [45:08]
F
If you look overall from 20,000ft, look at what Walmart's doing, look at what's some of the credit card providers are saying and look at what the largest detailer is doing. The consumer steady. It's their selective. It's this funnel, it's the narrowing, the big winners are getting bigger and that's because there's fewer players taking share. So it's spotting and I think the way that Courtney put it was about right. It feels good but it's hard to see it concentrated. There are certain winners early on and then it diffuses over over the next several weeks.
- [45:35]
A
Target is probably one of the softer names and would you say that that ultimately comes down to them not being able in the, this has been said for years to invest enough to keep up with a Wal Mart and a Costco and you know, those kind of mega consumer names.
- [45:48]
F
They are the underdog, I think of the holiday season. You said it well. It's technology and supply chain. They've competed to stay in their lane, they haven't competed to get out of their lane. And based on how market share is being divided, it looks like the right approach was to compete to get out of their lane, to go against the largest retailers.
- [46:07]
E
Retailers.
- [46:07]
F
And so now they're iterating to find that magic again. Ultimately they look and kind of feel more like a mall store where you're susceptible to fashion trends. They don't have the regularity from some of the consumables the way that Walmart and other e tailers have.
- [46:23]
A
That's a great point. Anything else? Any final insights gleaned from your, you know, any 10 second conclusions?
- [46:28]
F
Well, there was a lot of foot traffic and it was surprising to see promotions were relatively tame. But I think ultimately we're going to see those same winners come to the top. Walmart's Ultas, Dick's, Best Buy and we think five below.
- [46:40]
A
And that's why Walmart trades at a 39 PE, I guess. Simeon, great to see you. Appreciate it. Simeon Gutman, that's it for us and thanks for watching the Exchange, but don't go anywhere. I'll join Brian Sullivan for Power Lunch right after this break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place. If you are a fighter, Modelo is your reward. So listen close. You are strong. You are fearless. You are a fighter. And every last drop of this rich, golden Modelo is yours. So raise it up high because you've earned it. Modelo, the mark of a fighter. Drink responsibly here in Port of McCarland, Port Chicago, Illinois.