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The Exchange
Bubble Babble, Memory Mayhem, and a Spring Swing 5/12/26
00:43:51
Chip stocks, including Nvidia, Intel, Micron, Qualcomm and AMD, are sitting near record highs and fueling concerns of a 1999 repeat. One Korean policymaker’s suggestion of paying citizens an AI “dividend” throws the memory trade into temporary disarray. Plus, home prices post their strongest monthly gain in nearly two years.
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Kelly Evans
You're listening to the Exchange. Here's today's show. Thank you very much, Frank, and welcome to the Exchange. I'm Kelly Evans. The hottest trade in the market taking a breather today. The chip stocks and memory names falling and taking the NASDAQ down with it. You saw that 2% drop a moment ago. Micron, Intel, Qualcomm, Sandisk, all lower by about 10% or more. Qualcomm down nearly 15% right now. It's having its worst day in more than six years. Of course, we're still on track for the chips to have their second best first half ever. And the street isn't too worried yet. Wells Fargo raising its price target on the biggest chip name, Nvidia, seeing another 40% rally as Nvidia is down 1 1/2% today. So let's start there with the analyst behind that call, Aaron Rakers, who joins us for today's opening exchange. Aaron, it's great to have you here. Talk a little bit about the prospects you foresee even at a time when a lot of people think the whole space has run perhaps ahead of itself.
- [01:55]
Aaron Rakers
Yeah, thanks for having me. I mean, I, I think what we're still seeing is a compute demand environment that's outstripping supply. And so like the, the thing that we outlined in our note this morning was, you know, I think Nvidia's revenue is really predicated on their ability to shift gigawatts of capacity. And so we're modeling, you know, 11% above the street estimates for fiscal 2028. That's calendar 27 and about 15% above the street for the data center revenue into fiscal 2029 or calendar 28. And so we see this Demand continuing to outstrip supply and really feel like Nvidia moving forward with a trillion dollar pipeline that they previously outlined as executing on their ability to fulfill that demand as much as they can.
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Kelly Evans
The company's market cap, you know we're well aware of 4,000,000,000, and change. It's larger than the entire healthcare sector of the S and P. I don't mean to remind the healthcare people who have had a, you know, shaking their heads at what's going. It's up 14% in the four day run coming into today which added nearly 600 billion in market cap. So we don't want to make too much of the price action today. Could it be about this AI tax they evidently were kind of dangling out there in South Korea? Is that what started this sell off and correction that we're seeing across the space today?
- [03:14]
Aaron Rakers
Yeah, I mean it's hard to say, right. It could be that it could be just a risk off mentality. I mean at the end of the day as you let off, I mean, you know, the SOX is still up close to you know, 60% year to date, you know, and I think there's, there's clearly been some, you know, concerns around the supply chain if it's memory component costs, inflation, if it's just, you know, wafer capacity coming out of TSMC and others. So I think it's, it's more of a risk off. I don't think we've heard anything that's alarmed us from a demand perspective. And I think with that said, I would expect very solid results from Nvidia next week.
- [03:49]
Kelly Evans
Meanwhile, another analyst, a colleague on the street, a keybank analyst of people kind of digging through say what happened to the chip space today. They said shipment shipments of notebook computers were down 27% in April from the previous month. Below expectations, negative for PC exposed companies. I don't know if you've seen any of that data. Normally something like that wouldn't rise to the level of taking down the whole space. And I'm not even sure the name's falling on aren't necessarily the ones in that ecosystem. But how significant would it be if we're seeing a big drop in notebook shipments?
- [04:22]
Aaron Rakers
Yeah, I mean, you know, two weeks ago we saw extremely strong results from amd. Right. On the data center side, the server CPU revenue was up 50 some odd percent year on year they guided 70%. So the data center side, which obviously is the key driver For Nvidia, it's 50 some plus percent of Micron's revenue comes from the data center side. So, you know, I think there are pockets where you're going to see some weakness. I think on PCs there's been some concerns that with the memory price inflation, we were going to get a pull forward of demand in the first half of the year and that was going to create a tougher setup as we move towards mid and second half of this year. But I think, you know, from an AI perspective, if you look at the cloud results that we've seen, the notable thing that stood out to us was that not the capex numbers going higher, but the revenue growth re accelerating for the cloud vendors and also their backlog builds quite dramatically, which, which I think is a good signal for the durability of demand for somebody like an Nvidia AMD and the data center complex. Overall.
- [05:24]
Kelly Evans
Does it matter to you that Jensen Huang is not going reportedly on this trip to China with the President?
- [05:30]
Aaron Rakers
No, I, it honestly doesn't. I mean, I think that they're going to be a computext in a week or so. You know, I think more so than anything, it's what we outlined is their ability to ramp their, their, their scale of gigawatts of deployed capacity a quarter. I would go back to, you know, their purchase commitments that they've been leaning in on the supply chain aggressively. They had over 95 billion of purchase commitments last quarter coming out of, of January and that was up from 50 billion the prior quarter. So we think they're aggressively going after the ability to scale the capacity that they can deploy again in an environment where demand is outstripping supply, which I think is a good setup for the company.
- [06:14]
Kelly Evans
Finally, a question I'd just like to come back to. Can Nvidia be a $10 trillion company?
- [06:20]
Aaron Rakers
Yeah, I mean, I think over time, I mean look, the multiple trades at less than 15 times. If you start looking out to calendar 2028, the company also moved to a fully GAAP EPS number. So, you know, it's, it's a very clean EPS number. I think ultimately valuation matters. The company could definitely be more active on share repurchase and capital return, which could be a positive as well. And so we do think that we're still in the early innings of seeing the full demand and breadth of AI inference and the workloads that drive compute associated with that. And so we're still very constructive on Nvidia and believe the valuation is very attractive here from a setup perspective going into next week's earnings.
- [07:06]
Kelly Evans
All right. And I guess that goes without saying for those who are looking for a Pullback. I don't know if we'd if this yet amounts to 1, your price target is 315, about $100 above where we are now. Again, a good reminder, we will hear from them next week. Aaron, thanks for joining us, really appreciate it.
- [07:20]
Aaron Rakers
Thank you.
- [07:20]
Kelly Evans
Aaron Rakers over at Wells Fargo. The meantime we had a 10 year note auction, top of the hour. Rick Santelli tracking that action and those results over at the CME. Hi Rick.
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Rick Santelli
Hi Kelly. Indeed, 42 billion 10 year notes. The auction, roughly an average auction. My grade, C minus. The reason? Well, the yield was 4.468. That was about a half a basis point higher than the when issued market. Higher yield, lower price. Governments to sell are a little bit of an off grade based on that. But all the metrics were slightly below average other than direct bidders, which was a little bit better at 24.1%. This is the second of three auctions tomorrow. Now of course we will complete the supply with 25 billion 30 years. What's noteworthy here is that right now as we sit at a 4.45 yield, Kelly, should we close here? This would be the highest yield close going back to last July, usurping what is currently the highest yield close right around 4.44% back to you, highest since last July.
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Kelly Evans
And you gave the auction a C minus. Does that mean we're on our way to 4 1/2% or higher?
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Rick Santelli
I would think that that would be the case. I'm actually quite amazed that we haven't moved up there a little bit more quickly. But indeed there has been the last several sessions a much stronger upward bias with very few rallies pushing yields lower.
- [08:49]
Kelly Evans
All right, Rick, really appreciate it. For now, Rick Santelli, with those 10 year results on the same day, we're seeing oil prices drift higher as well. Let's bring in Phil Camporiali. He's the chief investment strategist at J.P. morgan Wealth Management. It's great to see you again.
- [09:01]
Phil Camporiali
Welcome.
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Kelly Evans
So. So I do think it's important to note we've got the AI trade roaring, maybe taking a breather today. Meanwhile, can we call it the nacho trade? Have you heard this, this moniker? Not a chance. Hormuz opens, meaning that people think we could see oil drift higher and bonds drift higher until the market puts enough pressure on that situation to resolve it.
- [09:22]
Phil Camporiali
Yeah, Kelly, I'm gonna take the other side of that actually. So if you would've said a couple of months ago that we'd have 70 plus days of the straight of Hormuz Being closed, you have gas prices at the pump up 50% from when even in New Jersey.
- [09:38]
President Trump
Right.
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Phil Camporiali
Even from when this thing started. Why would anybody have expected 16 all time highs in the S and P? S and P Up as of right now about 8%. And I think Kelly, just take a step back. Right. Signal and noise. The signal is we're in the midst we think of an earning super cycle. This is gonna be the sixth straight quarter of double digit earnings from the
- [10:01]
Kelly Evans
S and P. Double digit. What are you guys tracking for Q1? 19. Okay. 25, 28 and 18. 19, whatever that number is, is normally the kind of rip roaring growth you see coming out of recession.
- [10:12]
Phil Camporiali
Yeah, exactly.
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Kelly Evans
And this is not that. It's crazy.
- [10:15]
Phil Camporiali
Not that. This is not that. And I think the real reason for that is. And Rick was mentioning where the ten year note is today. Roughly four and a half. Again, I'll take the other side. Even though that is a high level, since last July there's been no rate volatility. It's actually been stuck right in this four and a quarter to four and a half even with this oil price and gas price surge. So you know, we're of the thought that because of this low interest rate vol that that also gives multiples a chance because equity investors hate when interest rates are moving all over the place. Right. If they're rallying hard it means there's a recession and if they're selling off like crazy there's an inflation problem. But actually they've been stuck in this four and a quarter, four and a half. Which I think is the signal throughout all the noise that we see.
- [10:57]
Kelly Evans
So but going the. I think the idea behind NACHO is that everyone is a little surprised like yourself. The problem being that that may not force a resolution to the situation. So does it mean that oil will continue going higher? Does it mean that bond yields will continue going higher until basically Hormuz quote unquote reopens or something more positive happens on that front? And again, maybe that's not that big of a risk, but it can't be helpful on the margin.
- [11:24]
Phil Camporiali
No, it's not helpful on the margin. And it certainly is eating into all of the optimism that we came into this year at. However I continue to or we continue to believe that this version of the United States is about as insulated to a spike in oil and gas prices that we've seen in recent history. Right. We're energy independent, not dependent. That happened five years ago. Our research shows that gas prices would have to average $5 for the rest of the year. And we're at about 450 now. Right. Just to offset the fiscal policy come from the big beautiful Bill act.
- [11:57]
Kelly Evans
Wow. So $5 just basically slow the economy enough to overcome the benefit that we're
- [12:03]
Phil Camporiali
getting to overcome the benefit. And then don't forget, I know tech is pulling back today.
- [12:07]
Oliver Renick
Right.
- [12:07]
Phil Camporiali
It's been an incredible run in tech, but there was also that part of the one big beautiful Bill act that gave corporations, you know, a permanent extension of the full depreciation of domestic R and D. So in other words, AI capex probably up another 70% this year, semiconductor growth or supply is only going to be about, up about 30%. So even with this pullback today, Kelly, that AI story, the semi story story, places like Korea, places like Taiwan, these are places that we continue to like.
- [12:36]
Kelly Evans
So talk specifically then for investors who, you know, we, I know it's going to happen. People are going to look at the screen and go, here it comes, here comes the chip correction. So maybe we either wait for these stocks to come in and we pick them up there or we just get out. Should they, should they, should people wait at all or do you just press the bet on those parts of the market that have been the strongest?
- [12:53]
Phil Camporiali
Yeah. So we're leaning into that trade. That's one of our highest conviction trade and we're doing it both domestically as well as through the emerging markets. And then the one thing that I continue to talk about, Kelly, no matter what where I AM is this $22.7 trillion sitting in the combination of checking accounts, savings accounts and money market funds. The average Yield on that 22.7 trillion is 52 basis points.
- [13:16]
Kelly Evans
Wow.
- [13:17]
Phil Camporiali
So that liquidity, right, that massive opportunity cost of being out of the market we think limits a lot of these dips to just profit taking.
- [13:26]
Kelly Evans
And Nvidia's a hard one to claim is the poster child. It's PE is still so low. I mean, you heard our last guest who said the PE for 2028 is less than 15 times and that's on a GAAP basis.
- [13:35]
Phil Camporiali
Right.
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Kelly Evans
But if you look further down, there's lots of little companies that have grown to 10, 20 billion in market cap. They're up 400% over the past year. And I wonder if those are the areas where people are looking to say, yeah, I'd like a piece of that, but are those the areas that have become overextended?
- [13:49]
Phil Camporiali
Kelly, we probably. Right. But we think this AI story is a generational story. Right. So you look at days like this and this AI usage basket. So that mention AI on their on their conference calls. Their margins are growing. This is happening right now. Right. So we're of the view again, chips us em. Great story. A generational story and we're leaning into that trade.
- [14:14]
Kelly Evans
All right, maybe they can rest a little bit more easy then. Phil, really appreciate it. Thanks. Good to see you today. Phil Camporiali with JP Morgan. Coming up, the CPI posting its biggest annual gain in three years. Today the biggest surprise was a jump in housing costs. We'll walk through what's happening there next. With housing stocks falling sharply and on track for a fourth straight day of losses. Plus the reversal we're seeing in the tech trade today, are we seeing the early signs of a bubble or even the other side of one? Gene Munster weighs in on that ahead on the Exchange.
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Kelly Evans
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- [16:39]
Kelly Evans
A couple of housing names in those 52 week lows. CPI posting its biggest year on year increase today in three years. And while the jump in gasoline and airfare that was expected but food and shelter costs climbed as well. With Chicago Fed President Austan Goolsbee telling NPR this morning the worst thing about today's report was the non energy price increases. So what impact is all of this having on housing companies. Diana Oleg is here with more and also to explain the trends that we're picking up in rents and home prices.
- [17:07]
Diana Oleg
Yeah, this one is complicated, so you got to put on your thinking cap for this. Kelly so this shelter component of housing stayed elevated and that was kind of unexpected, but not totally unexpected. The index for shelter rose 0.6% in April after it had been cooling. But there is a big caveat. This count is done on a rolling six month basis and it stayed unchanged in October because of the government shutdown. They didn't count. So when they did it again in April, they got a year's worth instead of six months. So the monthly change is kind of like twice as much as it normally would be. So all right, what's the real situation now? Apartment rents in April were up 0.5% from March according to Apartment list, but that is a smaller gain than we usually see in the spring. Rents are now down 1.7% from April of last year. That is the lowest annual growth since 2017 and actually lower than what we saw in the early months of the pandemic. Rent is down 5% from its 2022 pandemic peak. Vacancies have dropped a tiny but they are still elevated. Now. The owner's equivalent rent, which is the theoretical rent that a homeowner would pay, stayed elevated even though home prices and easing are easing and mortgage rates have come down a little bit. That said, during the call yesterday with the national association of Realtors about April existing home sales, I asked if they were seeing a pop in the pending sales. That's the contract just signed this month and they said definitely now with limited supply on the market, that is going to light a fire again under home prices. Now we also had an in depth piece than this on the apartment rents and the REITs that are impacted. So make sure you're signed up for the property play newsletter cnbc.com propertyplay Kelly
- [18:47]
Kelly Evans
so the shelter index was up 610 and it had been cooling. But there's a catch up thing going on here because of the shelter index.
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Diana Oleg
That's what I was saying because they just didn't it was flat and it shouldn't have been flat in October. So you roll that in and it distorts the number. So I'm not saying that rents aren't still pricey. They definitely are. And home prices are not easing up as much as we expected them. Mortgage rates we thought were coming down toward the 5% range. You know what happened when the war started, they shot right back Up. They're a little off those recent highs, but not by much. And they went up a little bit today too. Yeah, so. And that's as you said, hitting those builder stocks and every aspect of fascinating
- [19:24]
Kelly Evans
Home Depot 52 week low.
- [19:25]
Diana Oleg
Anything Connected Builders first source.
- [19:27]
Kelly Evans
Diana, thanks for now. Appreciate it. Our next guest is already seeing April home prices post their strongest monthly gain in nearly two years. Let's bring in Andy Walden, he's the head of mortgage and housing research at Intercontinental Exchange. Again, Andy, to kind of go through the last week we were having a conversation where I was asking if home prices were declining. Now we're talking about exactly the opposite. Diana's talking about some of the upward. The OER is not falling the way we thought it would. Right. Home prices as you're picking up, you're seeing some acceleration.
- [19:56]
Andy Walden
Yeah, that's exactly right. And you got to keep in mind when these homes went under contract and you look back 35, 45 days from April and we were at the low of, low of interest rates. Right. To, to Diana's point 45 days ago, 5.95% mortgage rates, low 6% mortgage rates. Best affordability that we had seen over the last four years. And that picked up home price growth. And you saw that really throughout February, March and April. A little bit of pickup there. I think it's important to keep in mind we're still seeing annual rates below 1% but certainly more firmness early this year on that. That lower rate environment.
- [20:29]
Kelly Evans
What explains that?
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Andy Walden
It's just a simple improvement in home affordability. Right. Inventory has not rebounded yet. We're still 11 to 12% short of where we should be. Interest rates dropping, the low sixes, high five buying power goes up. For an average buyer out there to buy a medium priced home, it cost you about $170 less a month this February than it did last February. And so you're seeing more demand out there in the market and it's picking up that home price dynamic.
- [20:53]
Kelly Evans
And does it keep going, do you think, with prices kind of sticking?
- [20:56]
Andy Walden
That's the key question, right? Yeah, I mean, I think that's the key question. If you look at where 30 year rates have gone from there to Diana's point, again, they're up 40 basis points. If you look at what that means for buying power out there in the market, it's down about 4% from where it was in February. It's still better than it was at this time last year. Mortgage rates, despite 10 years being in a similar range to where they were at this point last year. Spreads have tightened. Mortgage rates are 40 basis points below last year's levels, which means we're more affordable than last year, but not as affordable as we were early this year. And again that, that 4% reduction in buying power should soften things up a little bit here over the next couple
- [21:30]
Kelly Evans
of months for those in so many in the markets, from the bond watchers to, you know, the Fed watchers, everybody wants to know when are we going to start to see inflation broadly coming down? And the shelter component is a huge piece of that. When do you expect we might start seeing disinflationary pressures on either home prices or rents or both in the, in the months to come?
- [21:52]
Andy Walden
Yeah, I mean I think we in terms of shelter inflation to Diana's point. Right. I think we should continue to see that take place. It tends to, to lag home price growth by about 12 to 18 months. We've been seeing annual home price growth come down for the better part of the last two years. We're, we're running believe between 0 and 1% right now, which to me signals that shelter inflation should continue to soften. Any reacceleration from the low rate environment that we see early this spring wouldn't be seen until late this year, early next year in terms of shelter inflation costs. So we should continue to see that. And again, despite that modest reacceleration early this year, we're still seeing home price growth below income. We're still seeing affordability gradually improve. And so I think we're still in that range where housing is slowly moving on the path that we want it to in the leg up in 30 year rates again. It'll take a little bit of heat out of that market this year I think keep us in that, that low single digit range.
- [22:45]
Kelly Evans
All right Andy, thanks very much. Appreciate checking in with you. And from ICE, coming up, retail traders are crowding into the Mag 10 at a historic rate. What's the Mag 10? That's the big seven plus, AMD, Palantir and Broadcom. Up next, a live report from the floor of the CBO on what's driving that action. The Exchange is back after this.
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- [24:12]
Julia Boorstin
What made you confident that you could do something that hadn't been done before?
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Diana Oleg
I have no fear of failure.
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Monday.com Advertiser
Trailblazing women, changing the game One of
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Kate Rooney
my favorite pieces of advice, Think about what your boss's boss needs.
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Kelly Evans
We don't. Leadership can look in many, many different forms. It really does come down to just trusting yourself.
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Kate Rooney
Life is short and you just got to think big to accomplish big things.
- [24:34]
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- [24:42]
Kelly Evans
Welcome back with some breaking news on tariffs. You can see some names there touching all time highs in the market today. Let's get over to Megan Casella with the story. Megan, what's happening?
- [24:51]
Megan Casella
Kelly an appeals court has ruled that President TRUMP Section 122, 10% across the board tariffs, tariffs are allowed to remain in place for now while an appeals case is ongoing. So you'll remember the Court of International Trade ruled last week that the Section 122 tariffs were unlawful. They issued an injunction just for the plaintiffs in the case. It was a narrow ruling saying the tariffs had to be paused and refunded for two small companies as well as the state of Washington. The Trump administration appealed that case, taking it to this Court of Appeals for the Federal Circuit. Now that court saying that they will pause that ruling in the lower court while they've have agreed to hear the case. So now they say the plaintiffs, those small companies, have to respond within seven days. The government gets three days to respond again after that. But we will see this appeals process lay out its status quo for now while it does. After that, we could see further appeals up to the Supreme Court. For now, though, everything remains as is.
- [25:41]
Kelly Evans
Kelly, we may, Megan, hear from the president momentarily, is that right? As he gets ready to leave for Beijing.
- [25:46]
Megan Casella
That's right. We don't have an exact timing from the White House on this, but we do know he was expected to depart this afternoon. He's got to get to China. He's, he's set to land there Wednesday morning, Washington time. We could hear from him soon and we may well see him react to this when we do.
- [25:59]
Kelly Evans
All right, Megan, thanks. Let's take a quick look at the broader markets now as the Nasdaq continues to lead the declines. It's off the lows though. It was down as much as 2%, 1 1/2 at the moment. The Dow's little bit positive by 26 points and that's erasing a 396 point loss. So we're actually seeing a little bit better mood here. Meantime, the CBOs so called Mag 10 stocks are seeing some aggressive bullishness from retail traders. So much so that it's reminiscent of the action we saw during the post Covid trading frenzy. Oliver Renick is at the CBO with more.
- [26:30]
Oliver Renick
Oliver that's right, Kelly. Coming into today we had some very extreme signs of risk appetite, namely retail traders buying calls and big tech stocks at the fastest 10 day clip since COVID And at the same time, the price of a NASDAQ 100 call one standard deviation out of the money reached almost the highest in three years. So there is some irony in the timing that that stat arrives right before the market gets markets hit today. But here's the thing, a healthy correction can also happen in volatility because those bullish call buyers were getting paid on low probability bets. Basically up until today, a few key relationships were getting out of whack, namely the correlation between stock specific volatility and index volatility. Today those two are normalizing and anyone who's been hedging with VIX calls, which we pointed out last week did look cheap, are getting paid. It's also helping even things out for big players like the market makers here on the floor who are mostly selling those calls and had been starting to get squeezed a bit. Kelly, back to you.
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Kelly Evans
Same reaction I had as you is here we see these extreme readings and then we have Qualcomm down 15%.
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Oliver Renick
Yeah, a lot of these big names getting hit pretty hard. Big moves in stocks though are showing up in the index volatility in a way that creates a little bit of relief for some of the big players. So it's kind of like the F1 analogy I've been using of racing. We came into the turn really hot and now we hit the brakes a little bit.
- [27:57]
Kelly Evans
All right, trying to skid off into the grass or trying to continue that analogy, not having. Oliver, thanks very much. Appreciate it. Oliver Reddick, let's get to Julia Borstin now for the CNBC news update.
- [28:06]
Julia Boorstin
Julia Kelly's Wall Street Journal reports Google's in talks with Space X to launch the company's orbital data centers. SpaceX has struck a number of deals that have rewritten its balance sheet as it prepares to go public this year. People familiar with the matter told the Journal that Google is also in discussions with other rocket launch companies. A Florida judge granted prosecutors access to Tiger woods medication records during a hearing following his March arrest on suspicion of driving under the influence. The golfer's attorney had objected to the request, saying woods had a constitutional right to privacy. The records will be shielded from public view and only available to a select group, including prosecutors, law enforcement and expert witnesses. Officials in Nepal said that a Sherpa fell into a crevasse and died on Mount Everest as guides laid down the ropes that helped climbers get to the summit. It marks the third death in the past two weeks on the world's highest mountain. Ropes are expected to be constructed by this weekend, allowing climbers to start their ascents. Back over to you.
- [29:07]
Kelly Evans
Oh, so sad. That's why you shouldn't go mountain climbing. Julia, thank you very much. Coming up, the memory and chip names dragging the NASDAQ lower today. Qualcomm flirting with its worst day in over a decade. But the group had been heading toward its best first half versus the S and P since the turn of the century. Is this a buy the dip moment or wait for a better entry point? We'll talk to Gene Munster about that next.
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Narrator/Announcer
As our country celebrates its 250th anniversary, CNBC spotlights the leaders driving business and the nation forward.
- [29:45]
Paul Griggs
America, 250 years. To me, this is the story of reinvention. This country is adaptable, it is agile, and it is enabled. And to me, that results in an America that always leads. I'm Paul Griggs. I'm the US senior partner and CEO of PricewaterhouseCoopers. PwC as we know it today was the result of of a combination between Price Waterhouse and Coopers and lybrand back in 1998. But the firm has its origin story right here in this country. For more than 175 years. At PwC, we engage with more than 20,000 clients across the American economy. We help the system run and we help the system evolve. 175 years ago, we were focused predominantly on ensuring that the capital capital markets as we know them had trusted financial information. We're still putting trust into the capital markets, but we're also now helping businesses evolve. The next era of American growth will be defined by exactly what has gotten us here, which is you face disruption. You put people who have grit and agility alongside that disruption with the innovation that this country produces and that produces amazing outcomes that are far beyond what any of us could otherwise expect. America's superpower is no doubt its ability to reinvent PwC has been a part of the American story for 175 years. And I can't wait for 175 years more.
- [31:20]
Kelly Evans
Welcome back. A tougher session for the chips today with tech the worst performing sector of the market, Jeffrey is cautioning that semis have become the largest industry subsector at. They add that hardware holds the record high weighting for an industry group at 25% and that was during the dot com boom. Is this another sign we are destined to repeat that boom bust cycle? Let's ask Gene Munster, the managing partner at Deepwater Asset Management. Gene, it's good to see you again. Is it inevitable? I mean the chips by nature are so cyclical that it seems obvious we're going to kind of climb the mountain and then it's, it's going to turn at some point.
- [31:57]
Gene Munster
Point.
- [31:58]
Tim Seymour
We are going to get a turn at some point. Kelly and I think about this as the short versus the long term. In the short term, this rally has just been on fire and we have to recognize that even those present company included who believe we're in the early chapter of AI still think that we've got another five plus years of a strong market. The short term is something that needs to be recognized. I can't talk about specific companies but I can say Kelly, late last week in our Frontier Tech etf, which is L O u p, we started to pull some of those memory names out and are thinking about kind of rotating around just how much strength now the market has gone up since then. It's pulled back a little bit. But I think if you look at the big picture here and just use Micron I guess as the key example up still even with this pullback, 12% in the past week, up 80% in the last three months. I mean you just have to recognize even these moments. And that is a short term. It is also in some respects I'm getting cute. I underscore this idea that we still have five years left. But I do think investors who want to trade the market should be a little bit more cautious, especially around the memory names. Wait for that pullback. But that long term piece I think is very much intact and I think that this AI trade will still reward investors over the next several years.
- [33:20]
Kelly Evans
Right. I mean you could also think about it as the AI trade could include energy names, it could include, you know, we were talking to saitime, the Other day. They're the clock keepers inside this infrastructure. I mean, there's a lot of different ways other than the memory stocks to play it. I'm curious which ones you pulled out and which ones you'd leave in. Because we spoke with Joanne Feeney, who, you know, had a previous life as a semi person yesterday, and she noted as a word of caution that again, she's also positive on it long term. But she said in Micron's case a lot, almost all of their earnings growth has come from price volumes only up 17%. So that was one that she was a little bit more cautious on.
- [33:54]
Tim Seymour
Well, I want to zero in on this. The Micron, because I had mentioned it and you mentioned this, of course, is kind of the signature company about this breathtaking move around some of the memory piece. But if we go back and look at a year ago and this is important about the long term AI trade, about the health, why it is still healthy. If we go back a year ago and look at what Micron was trading at, it was a similar multiple as it traded at today. So basically it was trading at an eight times forward multiple. That's a similar multiple where Micron is today.
- [34:23]
Kelly Evans
Wow.
- [34:23]
Tim Seymour
The stock over the past year is up 700%. So essentially that's what the earnings have increased. And I think what that really underscores is just in terms of the broader AI trade, which I think is the most important is related to ultimately that the fundamentals of these businesses are strong. Of course, it begs the question the sustainability. And I want to pose to your viewers a question that doesn't get asked very often. I think the common view here is that we're in a bubble. I think if you ask most investors, that's their sense, we're in a bubble, we're going to get some sort of bigger pullback. But my question is what would happen? Imagine what would happen in the market if we are not in a bubble, if in fact the substance of AI exceeds the hype. And this can continue for several years. And the reason why that's important is that that comes back to this idea that the fundamentals will continue to be strong. I think we're going to see indications of just how the strength of the fundamentals will be next May 20th in terms of Nvidia's results. Whether the market rewards Nvidia for those, what will be higher numbers going forward or not remains to be determined. But I think the underlying fundamentals of this trade are rock solid.
- [35:37]
Kelly Evans
So that goes back to this discussion we had with Dan Niles yesterday. And he credits Openclaw, or in other words, kind of the whole Claude Agent revolution as driving the latest phase of these gains. It's remarkable that Micron trades at, you know, seven or eight times forward earnings. So even with the caution about how much is priced and how much as volume, if you believe that this is real and this could go on for years, would you have exposure to the entire AI supply chain?
- [36:06]
Tim Seymour
Yeah, not equally. And I think there's a conversation below the surface, and you hinted to it a minute ago, just in terms of, it's not just AI, more broadly. I think, you know, there are periods to talk about some of the, the positioning we're doing around what's happened with memory more recently, but there's also what's going on with energy. These are kind of the subtopics to AI. The big boom in AI has been around GPUs, but again, kind of going below the surface. What the key drivers are now is related to memory. Energy is a big piece that's underappreciated. And I just want to, you know, focus for a quick minute on that, that energy piece. And you think you asked about kind of where we're, how we're positioning this relative to what's going on with the, on the memory side, this energy piece, if you look at the memory index of the last six weeks, it's up 60%. The NASDAQ's up 23%. If you look at what these energy stocks have done, they're up 11%. And so now I think that speaks to a very boring but much underappreciated part of this AI trade for the next several years.
- [37:15]
Kelly Evans
We're showing SanDisk, which is not what you're talking about, but I mean, nine times forward earnings, come on eight times for Micron. So you think names like Siemens Energy, cameco, Vistra, that they could be an area where there's kind of more room to run. And again, let's go back to the multiples on the semi names or the, I'm sorry, the memory names, if this has even a few more. Those, yes, they are highly cyclical companies. They ought to trade at a discount. But seven or eight times.
- [37:45]
Tim Seymour
Yeah, the reason why they trade seven or eight times is investors don't believe it's sustainable that that real number is going to be like 25 times. But I do believe sustainable. And then just in terms of the memory, you did mention a few names that we do own. And I would just mention this piece around it, just a quick one. On one over the past, kind of call it 75 years in the U.S. we went through this boom of energy from 1958 to 1975. That was kind of the nuclear energy output in the US grew about 7% a year from 2000, 2025. It was basically flat. There was no growth. Growth. I think for the next decade we're looking at 3% annual growth in U.S. output. That's 3% per year. That means 10 years from now we'll have about 35% more power in the U.S. that's a huge build out. This is as slow as it gets in terms of getting this capacity online. And I think that will reward patient investors.
- [38:42]
Kelly Evans
All right, Gene, appreciate it. Five years or so to go. I'm writing that down. Yeah. Gene Munster, thank you from loopcat Capital. Coming up. Quote, extremely uncomfortable. That's how Sam Altman said the idea of giving Elon Musk a long term controlling stake in OpenAI made him feel. We'll have more testimony of his from the ongoing Musk vs OpenAI trial when we come right back. Welcome back. Sam Altman taking the stand for the first time today in his trial versus Elon Musk. Kate Rooney is at the courthouse with the details in today's tech check. Kate?
- [39:23]
Kate Rooney
Hi, Kelly. So Sam Altman is in the courthouse behind me. He is testifying as we speak and is talking about Elon Musk wanting absolute control of OpenAI, pushing back on the narrative that we've heard over the past couple of weeks that OpenAI deceived Elon Musk. According to Altman on the stand today, Musk thought the AI lab would fail, quote, lost confidence. He said that Musk did not believe we were going to be successful. So there was a 0% chance of OpenAI actually succeeding. And then Elon Musk left the board. Second and related, according to Altman, he said that Musk wanted to start a new AI effort over Tesla and then didn't want to be conflicted in that. Talking about the reason why Musk left the board. Altman is also testifying that merging OpenAI with Tesla actually came up multiple times over the years. And then it's come down. Musk's attempt to control the company. That has been a central theme for the defense in Altman today. He said that Musk wanted 90% of OpenAI's equity at 1 point said that softened, but it was always a majority. And then Altman went on to talk about him being extremely uncomfortable, in his words, with all those attempts by Musk, shared what he called A hair raising anecdote, Kelly, where he talked about control of OpenAI, what would happen if he passed away. And then he said, I hadn't really thought about it, I think I would pass it on to my children. That was one anecdote we got. Altman also said that it was a morale boost when Musk actually left eventually that he would use stack ranking for employees and then that demotivated some of the key talent. Quote, I don't think Mr. Musk, as Altman's calling him in there, understood how to run a good research lab. He did also discuss some fears that Musk would bash OpenAI on Twitter as we have seen play out in the recent years. And Altman did reiterate this larger point that we have heard from the defense so far that Musk wanted this to be a for profit. Control they say was was the actual issue. It wasn't about mission creep. And then Musk is now, they say, trying to derail OpenAI as he builds a competitor. Of course, Xai Musk on the other side is suing OpenAI on grounds that he was deceived and then Altman helped steal a charity, in his words. OpenAI denies that. Kelly, back over to you.
- [41:28]
Kelly Evans
How much more will we hear from Altman and then when do we think we'll hear from Musk?
- [41:33]
Kate Rooney
So we expect cross examination. He's still getting basically interviewed by his lawyers and so that tends to be kind of a friendlier vibe. And then we will get cross examination which tends to be a little bit more confrontational, intense. And then Musk we actually got in week one. So we have heard Musk's side of it, which talk about confrontational. He really went back and forth with the defense attorneys and his side of the story was basically it was a nonprofit. It's now an 850 billion company billion dollars company. That's not fair. They stole a charity. And we have heard a completely opposite, opposite tone and side of the story for Open. I'm really Altman up there is saying it's still a mission driven company. We just needed to raise money because of compute. That is such a big topic that we still talk about daily in terms of how expensive these models are to run. That has been their justification for needing to be a for profit.
- [42:19]
Kelly Evans
All right, Kate, for now, thank you. Appreciate it very much. Kate Rooney. Coming up, a suggestion from a policymaker. Taking the Cosby for a bumpy ride today was down as much as 8% percent closed lower by about to. The South Korean market still up 80% since January. But if you're concerned about narrow leadership, well, buckle up, because just two companies are more than 40% of the index. So are things getting overheated or is there more room to run? That's next.
- [43:01]
President Trump
We're very good meeting. I spoke with President Xi. We look forward, we both look forward to the meeting. It's going to be great.
- [43:10]
Kate Rooney
What is, Mr. President? What is going to be your red line to end. To end the ceasefire for you? What will it take to call the plug?
- [43:17]
President Trump
Well, we're going to see and we'll be thinking about it on the flight and we'll be thinking about it for the next little while. But we've beaten their military very soundly. That's over with. The blockade is very effective. It's been 100% effective. And one way or the other, it's going to work out very well. It's going to work out very well. I think you're going to have so much oil, you're going to have a gusher of oil like you've never had before. So when oil goes up a little bit, I thought it would go up much more. If you go back back three, four months ago, when we were contemplating, we assumed oil would go much higher. Yesterday was at $99. And if you think about it, I would have taken that all day long because it's very simple. Iran cannot have a nuclear weapon. They will not have a nuclear weapon. They know that. They've agreed to that. And then that's not what they said to me when it came to, we don't play games. They're not going to have a nuclear weapon.
- [44:17]
Kelly Evans
You promised to bring inflation, Mr. President, you promised to bring INFL down is now at its highest level in three years.
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Kate Rooney
Are your policies not working?
- [44:24]
Diana Oleg
What's happening working?
- [44:26]
President Trump
Incredibly, if you go back to just before the war, for the last three months, inflation was at 1.7%. Now, we had a choice, let these lunatics have a nuclear weapon. If you want to do that, then you're a stupid person and you happen to be. I mean, I know you very well. Anybody that wants that them to have a nuclear weapon is a stupid person. So we said, we're going to take the greatest stock market in history and we're going to go down a little bit. And actually that turned out to be incorrect because our stock market is now at the highest point in history, which frankly surprised a lot of people. It's a very simple message. Iran cannot have a nuclear weapon and they won't have a nuclear weapon. And that's 100%. The Navy is gone, their air force is gone, their anti aircraft is gone, their radar is gone, their leaders are gone. They're all gone. Iran will not have a nuclear weapon.
- [45:28]
Kelly Evans
President Trump leaving there getting ready to depart on his trip to Beijing making just a few comments where he said regarding Trump and Xi we both look forward to the meeting. It's going to be great. He said we'll be thinking about the Strait of Hormuz on the flight the blocking decades effective and it's going to work out. Tim Seymour is standing by. He's the CIO of Seymour Asset Management, a CNBC contributor. Tim, we were going to talk about some of these big moves and the chip names in Korea and that market as well today. Anything here that could between China and the Iran issue that could derail this
- [45:56]
Gene Munster
once again I think they're the headlines out of China and the Xi Trump summit will probably be constructive on both sides working towards peace. I think this is really about about innovation and technology and control of the digital world going forward and I also think that the headlines are going to not necessarily be consequential and for investors that have been investing and waiting for kind of an upsurge in in Chinese equities going into this I think you might have some surprises to the upside on conciliatory tone.
- [46:27]
Kelly Evans
Are you positive there broadly speaking? I mean we've talked about Korea, this AI tax the politician had to walk back but it was enough to kind of shake the market. Is that a warning sign?
- [46:38]
Gene Munster
I don't know. You know Korea's down as much as as Micron and Sandisk and memory names. I mean I think it's been parabolic everywhere. Those headlines weren't great. They were qualified, they rolled them back. It's a politician saying things that probably have to be said at the end of the day. Samsung at 6 times 427 is, is the cheapest company in the world of its size and of its importance. It's not even close. So I actually just think that the infrastructure build out on Fab capacity doesn't come online for Hynix or Samsung until 3/4 into into next year at best. I think markets would have discounted some of that already. I, I think there's actually more to go there. I, I, I'd probably be buying this this pullback.
- [47:17]
Kelly Evans
JP Morgan just raised its bull case for the cost be to 10000 25% upside. So it sounds like you agree we'll leave it there for the for now. Tim President taking some of your time, but I appreciate it. Tim Seymour, Seymour Asset Management that's it for us. Thanks for watching the Exchange. I'll join Brian Sullivan for a packed power lunch right after this break.
- [47:35]
Kate Rooney
Foreign
- [47:39]
Kelly Evans
you've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [47:46]
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