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Chips Rally, Credit Score Changes and Battle of the Bots 10/2/25
00:43:33
Semis continue to rally as Nvidia hits an all-time high. FICO shakes up the credit score market. Plus, Jeffries puts three AI chat bots to the test.
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Melissa Lee
Hey Fidelity, what's it cost to invest with the Fidelity app? Start with as little as $1 with no account fees or trade commissions on.
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Mike Santoli
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Phil LeBeau
Hmm.
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Melissa Lee
That's music to my ears. I can only talk.
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Mike Santoli
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Mike Santoli
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Stacy Raskin
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- [00:32]
Melissa Lee
10 years from today, Lisa Schneider will train in her office job to become the leader of a pack of dogs as the owner of her own dog rescue. That is a second act made possible by the reskilling courses Lisa's taking now with AARP to help make sure her income lives as long as she does. And she can finally run with the big dogs and the small dogs who just think they're big dogs. That's why the younger you are, the more you need AARP. Learn more@aarp.org skills.
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Mike Santoli
You're listening to the Exchange. Here's today's show.
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Melissa Lee
Thank you Frank. Welcome to the Exchange. I'm Melissa Lee along with Mike Santoli. Stocks mixed with the S and P and Nasdaq pulling back after hitting fresh records at the Open. Just moving fractionally right now. Semi is though having a very good day. The SMEs trading at all time highs. Nvidia on track for six straight days of gains, the longest stretch since late June and Intel higher once again on news it may be adding AMD as a customer.
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Mike Santoli
Shares of Tesla are lower, not able to hold on to earlier gains despite a surprise increase in deliveries in the third quarter. And on the same day Open Air valuation hits half a trillion dollars. So does Elon Musk's becoming the first person ever to be worth that much.
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Melissa Lee
Just a mind blowing trillion and a.
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Mike Santoli
Half market cap for for Tesla today of course it's down today but it's had this blistering run. It's up like by a third since late August.
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Melissa Lee
What do you make of this? The run though markets really seeing the moves in semis rent Robinhood not coincidentally hitting a new high as well today.
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Mike Santoli
It's all the excitable parts of the market they don't want to calm down. The rest of the market is I think trying to get its feet back under it, digest the gains we've had. It's rotating around. You know we had a peak in Mag 7 outperformance relative to the rest of the market about 10 days ago. Been working that off. It's been going sideways. And so far we're still managing to make new highs in the S and P. So at some point, you know, that choreography breaks down, but it hasn't just yet.
- [02:28]
Melissa Lee
And it's almost helpful that we're not getting jobs data tomorrow.
- [02:31]
Mike Santoli
It might be. It might be. I mean, we see banks are weak this week, the consumer finance stuff, so, you know, maybe there's some anxiety it could pluck at.
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Melissa Lee
Yep. We mentioned chip stocks hitting new highs. The SMH ETF on track for a fifth straight week of gains in its best week since June. Lam Research and Video, Micron, KLA and Taiwan Semi all hitting record highs today. But Taiwan Semi shares have given up early gains as President Trump's plan to increase domestic chip production apparently hit a roadblock. Christina parts nebulous is here to explain.
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Mike Santoli
Christina, I would say Taiwan just threw cold water, let's say, on the Trump administration's semiconductor ambitions.
- [03:03]
Diana Olek
Why?
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Mike Santoli
I say that because Vice Premier Cheng Li Chung, Taiwan's tariff negotiator, returned from Washington and pretty much made it clear they never discussed Commerce Secretary Lutnick's 5050 chip production split and they would, quote, not agree to such conditions. And this matters because Secretary Lutnick has been threatening companies or he's saying that he will, with a choice, manufacture one chip domestically for every chip you import into the US or face 100% tariffs. But maybe the math doesn't work. And why do I say that? Raw semiconductor imports were only $45 billion last year. That's 1% of all U.S. imports, according the Information Technology and Innovation Fund. The vast majority of chips, though, come into the country inside finished products like iPhones, data centers, servers, cars, laptops, you name it. So enforcing this would really mean tracking every single chip in every device, calculating domestic content offsets across global supply chains. Wedbush, for example, estimates that kind of component level tariff system really could add hundreds of dollars to device costs and really create an administrative nightmare. The stocks, though, to watch the usual Texas instruments GlobalFoundries, TSMC, Arizona specifically, and intel because they do have larger US manufacturing footprints and would benefit from onshore push here in the United States. But Taiwan's flat rejection really raises questions about whether any of this is actually happening or just posturing before President Trump meets Xi Jinping later this month.
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Melissa Lee
It feels like one of these tactics to get companies to invest more in the United States. And when you rewind the tape back to the reports that Taiwan said we were going to invest in intel and everybody thought, oh, that doesn't make any sense. Why would you do that? Maybe it makes a little bit more sense in terms of the possibilities behind such an investment.
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Mike Santoli
And it makes sense because you can make these promises by throwing out $500 billion, $100 billion now under the Trump administration when they're threatening tariffs and then not have to actually execute on building said manufacturings within the next four years because it takes so long. Right. So you could throw out these promises and the lack of a lot of these headlines, that is, there's no specific time frames on when they're going to be building, the staffing, power, water consumption, all of these are major headwinds that we're not really addressing. But yet all of these headlines keep coming and it's pushing shares like Intel AMD up today.
- [05:17]
Melissa Lee
Yep. Christina, thanks. Christina Parsonavilis Nvidia is up 10% in just the past two weeks, lifting the entire semiconductor sector. Our next guest sees plenty more Runway ahead, at least for two names in the trade. Joining us now, Stacy Raskin, managing director and senior U.S. semiconductors analyst at Bernstein. Stacey, great to have you. Broadman in video, you know, sky's the limit here. I mean, at what point do you start getting worried?
- [05:41]
Stacy Raskin
Yeah, you know, the worry that people would have on all these is that the music stops. Like the numbers have gotten so big so quickly that, I mean, you worry about sustainability and that that's always been the big concern. But I think a lot of the things that we've seen over the last few weeks and months suggest that, that things can be sustainable for longer. Right. We had Broadcom reported earnings a few weeks ago where they talked about a new major AI customer next year. Looks like it's open. And the CEO Hock Tan has agreed, who's like 73 years old, by the way, has agreed to stick around until 2030. And his retention incentives are all around revenues that get to some very big numbers by the end of the decade if he hits his targets, you know, as much as $120 billion within video. You know, we had the Open Air investment, I guess, a few weeks ago, which actually gave people a little bit of pause at first. But at the same time, you know, the first tranche of that doesn't even come until next year, which suggests that OpenAI is going to be buying from them for quite a while. And then you start to see some of the numbers that Open Air themselves is starting to throw out. And the Oracle RPO number that was Just, I mean, hundreds of billions of dollars. It's becoming increasingly clear, I think, that the party is still going, at least for now. And I've said for a long time at some point there will probably be an air pocket or something. I mean it has to be. But, but it's not now. It's not this year doesn't look like it's next year. It may not be 2027 for now. I think this, these can, can, can still work.
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Melissa Lee
I mean the headline numbers seem great, Stacy, but when you think about sustainability, how do you think about the ability of these companies to pay in video in terms of financing costs, you know, the energy bottlenecks that could be faced if we want, do want to reach sort of these targets being thrown out by an open air etc. I mean, are there bottlenecks like that that you factor into the story or you don't?
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Stacy Raskin
Yeah, I mean, look, so in terms of like, how can all this be paid for? For now at least like the companies are doing most of the spending, are the largest, most profitable, well funded companies in the history of mankind. Right. I mean they have money to spend right now. And you know, they, I mean they basically said like we're going to do this come to hell or high water. So at least for now that, that is still going. If you talk about future bottlenecks, the one, the one that you mentioned that I think a lot of people are worried about or watching is power. This is a good, these things do use a lot of power and the bigger you build, the more power they use. And you can look at like at least electrical capacity in the US like it hasn't grown very much over the last 20 years. Like that, that's got to happen now. At the same time though, a lot of the customers that are doing these purchase purchases, they are trying to secure power now. They're doing it years in advance, three, four, five years in advance, even taking the hardware and building the data center. So this is something at least is not a surprise to the folks in the industry that are doing this building. But if you're looking for the one thing that probably will have to come to play, like in a much bigger way than we've seen in the past, it probably is the energy situation, Stacy.
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Mike Santoli
The market seems to in waves want to kind of widen the circle of the companies that are going to be beneficiaries of all this. The memory chip companies obviously, both in South Korea and here have been flying. I'm not sure, you know, you cover them directly, but does that make sense? Is the entire food chain still have, you know, radical upside to the, to their projected numbers next year?
- [09:02]
Stacy Raskin
Yeah, I mean, if, if the data center numbers are right, it drags a whole lot of other stuff along with it. And so look, you talk about memory. Like, all of these compute chips take a lot of memory with them. And there's another dynamic going on right now that's driven both the memories as well as the semicap stocks up, which is, I mean, clearly there's a lot of demand for AI memory, but also a lot of that capacity has gone to AI memory. And so it's actually starving the more commodity side of things, like commodity dram, for example, and flash memory, where prices are spiking and supply is now getting very, very constrained. And so, for example, a lot of the semi caps have started to rally on the, on the idea that we could have sort of a sustained, you know, trajectory of memory equipment spending to add supply to satisfy the demand. That right now is very constrained. And so, yeah, right. Right now, lots of things in the space are rising either directly or peripherally from these same kinds of trends.
- [09:56]
Melissa Lee
Stacey, I got to ask you about Intel. I know you're not a fan of Intel. The stock is up about 54% in the past month on various headlines. Most recently, Semaphores report that intel is adding amd. As a foundry customer, you're a fundamental analyst. But still, is it difficult to stand aside from the story when it does seem like it just wants to go higher and that with the Trump administration backing it, that there are other parties probably willing to jump in, even if it's just for, you know, winning favor, currying favor with the administration.
- [10:26]
Stacy Raskin
Yeah. Even if it's just for a headline. And you're absolutely right, it is. From a fundamental standpoint, I. Look, the company is still very challenged. I don't even think even the bulls would question that. Like, both the foundry business as well as the product business over there, by the way, are having pretty significant issues. At the same time, if your bull thesis is Donald Trump wants the stock to go up, that, that's a bull thesis of sorts. Like, I'm not even going to say there's nothing. It's not my kind of bull thesis, but I mean, I get it. I mean, Trump literally tweeted out a picture of himself sitting at a desk watching intel stock price going up. And I thought it was fake. When I, when I first saw it, it was absolutely real. He tweeted it out. So I guess that's a bull Thesis of sorts. We'll see how long it can last.
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Mike Santoli
Yeah, and it's actually not the only stock that seems to be moving on those dynamics by, by any stretch. Stacy. I appreciate the time today, Stacy.
- [11:19]
Stacy Raskin
You bet.
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Mike Santoli
All right, meantime, Tesla's third quarter deliveries got a boost thanks to the expiring EV tax credit. Phil LeBeau is here with the numbers and a look at the rest of the EV landscape as well. Hey, Phil.
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Phil LeBeau
Two huge numbers in the third quarter for Tesla, Mike. Let's start first off with deliveries coming in at 497,099 vehicles. That is way above the estimate of 456,000. And energy storage deployments. We don't talk about this a lot, but this has been a growing part of Tesla's business. 12.5 GWh last quarter the estimate was for 10.9. By the way, in the first three quarters of this year, they have delivered or deployed more energy storage than they deployed all of last year. Those are a couple of the good points that will be coming up when the company reports its Q3 financials coming up on October 22nd. Yes, there will be questions about margins. Yes, there will be questions about the pull forward in terms of EV sales here in the us but there's no doubt that going into the print in three weeks, there will be a lot of optimism about what they posted for the third quarter. Take a look at Rivian. They also posted their Q3 deliveries $13,201. But that's not the reason the stock is lower, it's the guidance. The company's guidance now is for full year deliveries of between $41,543,500. That is narrower on the top end from the previous guidance, which was between 40 and 46,000. BYD. This headline got a little bit of attention overnight and for good reason. The company's September shipments down 5.5%. Why is that news? First time in 18 months that BYD has reported a monthly decline in shipments. Understandable, given what we're seeing in terms of greater resistance to Chinese EVs in Europe. They're not going to be going in there as quickly as many people thought. And then finally, take a look at Stellantis. Its Q3 sales here in the United States, up 6%. There's also a report out that they are considering selling their stake in a car share business. Antonio Filosa, the CEO of Stellantis, is moving quickly to get this company back in shape because it was way out of shape for a while, guys. And that's the reason why Stellantis moving a little bit higher today. What? Up about 6%, Phil.
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Mike Santoli
You know, you bundle it all together and then I guess you combine it with numbers from Ford that we got this week as well. I mean, it seems to paint a picture of a little bit of a bump in general demand across autos. I don't know if that was off a low expectations or there were other factors besides the.
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Phil LeBeau
I would agree with that.
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Mike Santoli
Yeah.
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Phil LeBeau
Yeah, I would agree with that. Look, it's hard to know how much the EVs in terms of their sales and the expiring credit drew people in who were on the fence about buying an ev. So they said, sure, let's go ahead and do it before the credit goes away. And how much that juice the overall sales. But look, the sales rate for the third quarter is going to be coming in at about 16.3, 16.4 million. In September, it came in at 16.6 million, I believe, way above what people were expecting. So now the question becomes you've had strong pricing. The pricing has not dropped down. The incentives have not been growing. Is the consumer a little bit stronger than expected when it comes to new vehicles? I can tell you this, Mike. When I've talked with executives at the different automakers or with dealers, nobody's quite positive that that's the case. They're encouraged, but nobody is sitting there saying, oh, yeah, these are great times. There's almost a sense of, yeah, we like the way things are going right now. Let's, let's hope that they continue in that direction.
- [14:59]
Mike Santoli
Yeah, it's definitely noisy, obviously, because you've seen some of the, you know, the auto low numbers didn't look so encouraging. So yes, it's hard to really generalize, I guess at this point. Phil, have to keep monitoring it. Appreciate it.
- [15:12]
Melissa Lee
Coming up, no jobs report. No problem. The government shutdown may have shuttered the labor department, but we got new numbers from the private sector to help paint the job. Picture the details next.
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Mike Santoli
Plus pharma stocks on fire this week with some traders laying big bets in the options market. A look at what's driving that action is just ahead. The exchange back after this. This is the exchange on cnbc.
- [15:40]
Melissa Lee
What made you confident that you could.
- [15:43]
Mike Santoli
Do something that hadn't been done before?
- [15:45]
Diana Olek
I have no fear of failure.
- [15:47]
Melissa Lee
Trailblazing women, changing the game. One of my favorite pieces of advice.
- [15:51]
Mike Santoli
Think about what your boss's boss needs.
- [15:54]
Melissa Lee
Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short. And you just got to think big.
- [16:01]
Mike Santoli
To accomplish big things.
- [16:03]
Melissa Lee
Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday, wherever you get your podcasts. We're now 36 hours into the government shutdown. And since the Labor Department is not releasing September's jobs report, we turn to some private companies with data on the labor market. Indeed.com telling us job postings are down 9% year over year, but still 3% points higher than pre pandemic levels in terms of job losses. Challenger Gray and Christmas says layoffs in September are down 37% month over month. The firm expects the labor market to top 1 million layoffs this year for the first time since 2020. Analysts there saying company hiring plans overall are down nearly 60% year over year. And in terms of AI, the hiring platform says 100% of US roles are exposed to generative AI. On the flip side, Upwork says businesses are increasingly prioritizing human oversight to course correct what they call a work slop. I'm guessing that over time, as things get better with AI, there'd be less need for human oversight. But in the meantime, works, which Maybe.
- [17:10]
Mike Santoli
Is why 100% of roles are at risk for a high. If they're saying that, it's remarkable. I mean, what is Jay Powell's phrase is a curious kind of balance in the labor market. That's how he's characterized it. Not a lot of layoffs. Also not a lot of hiring. It's consistent with the jobless claims, which is low weekly new claims, but a buildup of continuing claims. And I suppose every company that's considering adding a position or filling one has to at least ask themselves a question about, about AI. But it's unclear if that's really displacing it.
- [17:39]
Melissa Lee
Yeah, exactly. Well, I mean, as we mentioned at the top, maybe this is a respite to not have jobs data. At the same time, we can just drive ourselves crazy trying to go through these, some of these surveys to figure out what the picture.
- [17:51]
Mike Santoli
Yeah, or consider ignorance plus one way or exactly. I don't know which it's going to be. All right. Meanwhile, the s and P500 and Nasdaq hitting new highs this morning as the government shutdown is in its second day. Our next guest says the deadlock in Washington doesn't change his overall strategy, but he did make Some moves for Q4, including lowering communication services to a market weight from overweight for the first time since 2023. Joining us now is Scott Kroner, US equity strategist at Citi. Scott, great to have you on here. So big picture, it feels as if, I mean the constructive forces remain in place I guess as long as earnings come through.
- [18:26]
Scott Kroner
Well Mike, you know, that's sort of our mantra. We're going to lead with a view towards fundamentals from here and we'll allow macros to influence at the margin. But right now the fundamentals set up in our view is still very solid. It's led by this growth part of the market. With the tailwind to your point, we did make a tactical decision to lower communication services which is where your big Internet names live from a long standing overweight to market weight. This begs a different issue as we go into the quarterly reporting period and that is how much good news is being priced in the stocks. And we do this reverse DCF work, we call it implied growth. And what jumps out at us on these media names is that there's a lot of expectation being built into these next prints such that the burden is going to be on beats and raises. I think just making or beating numbers may not be enough to support the stocks near term. Still positive on the tech sector, particularly semis and software. So we're still very much on board with, with the, the train.
- [19:24]
Melissa Lee
I thought the mood to consumer, consumer discretionary to market weight was sort of interesting. Scott, are you feeling a little bit better about the consumer or you just feeling better about the valuation of the group?
- [19:34]
Scott Kroner
Well, I think where we're going with this is where what we're trying to do is, is play this balancing act we're talking increasingly about. We've got two markets we're trying to navigate the half that's roughly influenced by AI and the other half that's going to be more akin to traditional macro metrics. And so what we're allowing for here as, as we go down this next phase of Fed rate cuts, we want to be aligned a little bit more aggressively with those areas of the market that should should fundamentally benefit if not immediately as we go into 2026. Consumer discretion is part of that. We're particularly keen on the, on the, the retail component which is where you're going to catch in Amazon, but as well on the consumer durables and apparel which is where the homebuilders live. And so what we're trying to do here is dial up a little bit at the margin how we're thinking about positioning for traditional lower interest rate sensitivity.
- [20:26]
Mike Santoli
And on that score, Scott, I know you kind of warmed up to small and mid cap after kind of letting it pass by earlier this year. Is that mostly a rate story?
- [20:36]
Scott Kroner
It's the same thing, Mike. So essentially when we think a small mid cap versus large cap in particular, much more traditionally economic sensitive ideal time to own small cap is coming out of a recession. We're not there. We're still looking at the soft landing backdrop. But soft landing plus lower fed funds rates does begin to set this up. Now, fundamentally, I'd also make the point that small bit has been in its own form of earnings recession over the past two years with Q2 results. We had the first positive inflection in earnings growth in that two year time frame. And so we're looking at that persisting going forward. So a combination of traditional historic rate, lower rate sensitivity combined with signs that we're turning corner in terms of the fundamental setup has us incrementally more constructive on the spit space as well.
- [21:21]
Melissa Lee
Scott, where's pharma in your portfolio? Health care? I mean, we just came off the best two days in the S and P Pharma index since October of 2008 because of some clouds clearing from the Trump administration. I'm wondering, you know, we've been talking about generalists being underweight this sector dramatically. Are you getting more friendly to it?
- [21:41]
Scott Kroner
Well, let's see. The way we discuss this in our quarterly sector outlook is that we completely complete, completely appreciate that within health care you've got the equipment and services and pharma components both are setting up more constructively from a traditional valuation perspective, particularly versus other parts of the market. But we've, we've also said that look at, you've got a lagging impact in this sector of ongoing policy effects that we need to navigate. Now. It's amazing what a change can happen in a couple of days. But our view is that we probably need a little bit more time here to kind of clear the policy storm. But what it potentially does is set up for the sector as we look ahead to 2026.
- [22:24]
Mike Santoli
All right, Scott, appreciate you bundling that up for us. Thank you. You bet.
- [22:29]
Melissa Lee
Coming up, the Trump administration reportedly trying to strike dozens of deals before the midterm elections, with the government potentially taking even more equity stakes. The details next.
- [22:42]
Mike Santoli
And now a next level moment from AT&T business. Say you've sent out a gigantic shipment of pillows and they need to be.
- [22:48]
Stacy Raskin
There in time for International Sleep day.
- [22:50]
Mike Santoli
You've got AT and T5G so you're fully confident, but the vendor isn't responding.
- [22:54]
Stacy Raskin
And International Sleep Day is tomorrow.
- [22:56]
Melissa Lee
Luckily, AT&T 5G lets you deal with any issues with ease.
- [23:00]
Mike Santoli
So the pillows will get delivered and everyone can sleep soundly, especially you.
- [23:04]
Stacy Raskin
ATT 5G requires a compatible plan and.
- [23:06]
Mike Santoli
Device coverage not available everywhere.
- [23:08]
Stacy Raskin
Learn more@att.com.
- [23:13]
Melissa Lee
Julia Boorstin sits down with Thrive Global founder and CEO Arianna Huffington.
- [23:18]
Mike Santoli
What advice would you give to young people now trying to navigate this crazy world? My advice is to pick a time at the end of the day that you declare as the end of your working day. Because let's face it, there is no.
- [23:34]
Melissa Lee
End to our working day. Julia Boorstin hosts CNBC Changemakers and Power Players. Listen now wherever you get your podcasts. Welcome back to the Exchange. The Trump administration reportedly targeting deals in pharma, AI, energy and mining ahead of the midterm election. Some of these deals could involve the government taking more equity stakes than American companies. Eamon Javors has been following this story for us.
- [23:58]
Eamon Javers
Eamon yeah, Melissa, look, this is clearly a trend that this administration is going to continue with. Talking to officials at the White House, they tell me there are more deals in negotiation right now, so we should expect more announcements in the days and weeks to come. I talked to Caroline Levitt yesterday at the White House press briefing. I asked her about this and it said, you know, what is the ultimate philosophy here from the Trump administration in terms of when they're going to take equity stakes or revenue streams from American companies? You know, how do you explain the rationale behind this? Here's what she had to say yesterday.
- [24:34]
Mike Santoli
Your administration took a 5% stake in.
- [24:36]
Eamon Javers
Lithium Americas and a stake in the mine that they're working on, and you've taken stakes in other companies and revenue streams from other companies. Can you articulate the broader principle here? When does the administration see it as appropriate to demand equity stakes or revenue streams from American companies? And what other companies are you going to be demanding those from?
- [24:55]
Melissa Lee
Ms. The president is focused on how can the United States government make more money, how can we make our country wealthy and rich again? And cutting some of these unique, creative deals with companies around the world and here at home is just one way the president is seeking to do that. And I know the Department of Energy just announced this new deal. It's another great deal for the American people and our government.
- [25:16]
Eamon Javers
So, Melissa, the word from the White House is, you know, this is about deficit reduction. This is about generating revenue for the United States and for taxpayers. So you can expect that they're going to do more of it in the future. And I think, you know, the way to look at this is Wherever this administration has leverage over a company, whether it's because you need an export license, because you need a government loan, because you need access to natural resources that the government can authorize. In those scenarios where the US government has leverage, I think you're going to be looking at a US government official on the other end of that transaction saying, well, what can you give us?
- [25:50]
Melissa Lee
Those are excellent examples, Eamon. But basically the government has leveraged over every single company in the United States through various means. And it's interesting that that Levitt didn't actually explicitly say it's for national security or even even just sort of an overarching theme that would sort of justify this. It's just to sort of portfolio. Manage a US Portfolio here.
- [26:13]
Eamon Javers
Yeah, I mean it's literally revenue generation. I mean the way she explained it yesterday, I mean you heard it right there. I mean they're saying, look, we've got a federal budget deficit and we need money and so we're going to go out where we have the opportunity and try to get that money. And that's, you know, it's interesting from an administration, this is an administration that has a lower corporate tax mission, it has a deregulatory mission. But at the same time you can look at these things that they're doing as taxes and regulation.
- [26:41]
Mike Santoli
Right.
- [26:42]
Eamon Javers
We're taking revenue stream from you, we're forcing you to do things with your business. And they don't see that as inconsistent. They see that as part of a piece. We're going to lower your taxes, but we're also going to demand some stuff from you on the other side.
- [26:55]
Melissa Lee
All right, Eamon, thank you. Eamon Javers. And you won't want to miss USA Rare Earth CEO Barbara Humpton. That's on the closing bell. Overtime, her second day on the job. Stock is up over 20% this week. Now to Christina Parts and Nevelis for a CNBC news update. Christina?
- [27:09]
Mike Santoli
Melissa, let's start with the Trump administration who's asking some universities to sign a deal for preferential access to federal funding. This according to the Wall street journal. The 10 point memo mandates that schools should follow a list of terms such as capping foreign student enrollment and banning the use of race or sex in admissions. Nine schools are sent the memo, including MIT and the University of Pennsylvania. The schools have yet to comment. French police today say they arrested the captain and first officer of a sanctioned tanker suspected of being part of Russia's so called shadow fleet. According to Reuters, based on its proximity to Copenhagen, the ship may have been involved in recent drone incidents around Denmark that forced several airports to shut down. And Warner and Universal Music are reportedly in talks with major tech companies and AI startups to resolve copyright issues. According to the Financial Times, the negotiations have centered on how the labels are licensing their songs for training AI models and creating AI generated music. Guys, back to you.
- [28:07]
All right, Christina, thank you. Coming up, the options market betting on an October surprise for certain companies. We'll look at the names, seeing the biggest bullish inflows. That is next. And as we head to a break, check out the QQQ Nasdaq 100 ETF on pace for its 107th consecutive close above its 50 day moving average that dates back to the end of April. And it would tie its longest streak in eight years, up 27% over that time. We're back after this.
- [28:37]
Melissa Lee
Welcome back. Pharma stocks taking a breather today after their recent run up driven by news of a deal between Pfizer and the Trump administration to lower its drug pricing. Our next guest is tracking the sector closely after seeing lot of action in the options market. Joining us now, Chris Murphy, co head of derivative strategy at Susquehanna. Chris, great to have you with us. What kind of flows are you seeing and where is it sector flows? Is it specific names?
- [29:00]
Chris Murphy
Well, it was in specific names Pfizer. Heading into the announcement, we had seen some bullish call buying. It actually screened pretty cheap. So we recommended that to our clients. Obviously worked out. Now it's more the the sector etf, the xlv. The health care has obviously still been a major underperformer this year and for a while. So even after the move, you know, some of the biggest two day move in health care in a long time, we're still seeing call buying October through January. Kind of the idea that, you know, it's going to be hard to pick the next move like Pfizer. But it does seem like a lot of the pressure on the health care sector is off. So we are seeing call buying heading into the end of this year.
- [29:46]
Mike Santoli
Chris, I wonder what the maybe the character of the flow is if it feels like people have been either short or underinvested and all of a sudden this, this kind of discarded part of the market starts to catch fire and they want to just have cheap exposure to it or maybe we actually are seeing a change in trend to the upside.
- [30:04]
Chris Murphy
Well, you know, I think it's a combination if you want to get the cheap exposure and, you know, you're not fully convinced on downside risks, you know, there's Opportunities in the, you know, it's kind of a defensive sector. You know, it's not as cheap option wise as it was a week or two ago, but still you can get some pretty good bang for your buck. If you like everybody else is underinvested in this health care sector you can get a lot of leverage with relatively cheap calls into your end.
- [30:35]
Melissa Lee
We were just talking about the so called Trump portfolio, Chris, and I'm wondering what kind of flows you're seeing in names like a Lithium Americas and in.
- [30:43]
Chris Murphy
Intel, you know, bullish in Lithium. It's so funny, we're learning a lot about small miners on our desk. It's not really our specialty but you know, you see a big options print go up in something like Lithium America and you say, you know, what is that stock? Okay, let's look into it, let's work backwards and let's see. Maybe this seems like a strategic name for something like the Trump portfolio. Seeing a lot of call buying even today, some real upside stuff in something like Alcoa. So it's been a learning experience learning some of these new sectors and you can kind of work backwards and see is this something that's important to America's.
- [31:26]
Mike Santoli
Plan And in terms of just the market wide set up, Chris, you know we've had this real orderly action at the index level and very low correlation among different stocks. So it's kind of like, you know, sort of busy under the surface, but it's netting out to, you know, basically just this grind on the index level when you have these periods when stocks are going their own way. Low correlations, does that mean it's a more stable market or does it build into. It could be fragile if that starts to break.
- [31:55]
Chris Murphy
I mean, you know, we've had kind of record low correlations. That's obviously not going to last forever. We do expect to see correlations remain kind of on the lower end especially through earnings season. You know, I think it's interesting to see even low correlation within the mag 7 and then you know, you look at the, these big deals that are being reported by, you know, you guys about, you know, OpenAI and Nvidia and it all seems, you know, so much connected. At the same time the correlation is low within even those names. So yes, of course this is not going to last forever. Doesn't seem to be super stretched or frothy yet, but certainly something to keep an eye on.
- [32:38]
Melissa Lee
Chris, great to see you. Thank you. Chris Murphy.
- [32:40]
Mike Santoli
Thank you. Coming up, Jefferies conducting a channel check on AI chat bots we'll dig into their findings and which bot took the top spot next. And watching shares of Lithium Americas, we were just talking about Canaccord downgrading the stock to sell on revised Department of Energy loan terms. The DOE now taking a 5% equity stake and a 5% economic stake in the company's Backer Pass project currently under construction. Canaccourd saying the recent rally is overdone and does not reflect the valuation implications of the revised deal. Lithium Americas is down today, but up more than 130% in the past month. Welcome back to the Exchange. Jefferies declaring a winner in the battle of the AI chat bots. The firm running a series of tests across OpenAI's Chat GPT, Google's Gemini and perplexity to determine the best user experience. While ChatGPT generated the most correct answers, Gemini was the standout. Jefferies writing, Gemini could be the quote leading co pilot for consumers, especially if it can integrate search AI overviews and Gemini AI mode into a single interface. Jefferies raising its target on Alphabet to $285 from 230 as a result. Joining us now is the analyst behind that call, Brent Thill. Brent, interesting stuff. Talk about what specifically you were you were testing for here and in what areas you thought Gemini performed well.
- [34:04]
Brent Thill
Hey Mike, we took 10 questions, we took our entire research team and we had the team independently go through and use Perplexity, ChatGPT and Google. Gemini and everyone independently scored what they found, whether it was looking for a laptop, looking for shoes, effectively doing a restaurant search, completely different skills in terms of what we were looking for. And we then ranked IT and ChatGPT came out ahead overall in the scoring, but Gemini was right there from Google in a very close position. Perplexity scores really well if you're looking for hotel or restaurant recommendations and you want multiple reviews. So I think the message is that all three do well in different areas and we're going to need multiple agents. As consumers, we can't rely on just one agent to do the job. For example, in Gemini, if you took a photo of a Toyota 4Runner in San Francisco, it gave me the listing of the color of the 4Runner that I wanted to buy and it told me the dealership that had it. If I went on the other systems, it basically told me the Toyota dealers that were in California. So in that case, you know, Gemini came out ahead. In other situations, Chachi Beat came out ahead. So I think what we see is a pretty close race. We see a future where we're all going to have multiple agents working for us because all the agents have different strengths and that maybe at one point we're going to need an agent to manage all the agents because there's going to be so many great agents. One may be good at booking restaurant reservations, one might be good looking for other, you know, and more advanced things. So overall we're continuing to be bullish about Google's position in this, in this race.
- [35:58]
Mike Santoli
That's going to happen right after we rebundle all the streaming apps into one thing again. I'm sure I'm interested in kind of what activity you think this is displacing is it mostly just would be multi step search that you would be doing on your own?
- [36:14]
Brent Thill
Yeah, it effectively would get rid of that. So in the old world you go into Google and you'd say okay, I'd like this color Toyota 4Runner and you would then get a bunch of links and then you get a bunch of dealerships, you get a bunch of advertising. You know, in this situation it basically told us exactly where the car is at what, what, what the year in that, in the color and, and effectively broke it down and said okay, these dealerships in the Bay Area and all the way up to Reno would have that car and effectively would cut through a lot of the, the steps that you had to go through. So I think a lot of this is manual work that you would go through. You could get there by just using search. But I think what's going to happen going forward is, you know, again we don't, if you go into chatbots right now, you don't get bombarded with, with advertising. So that is an advantage. Many consumers are starting in ChatGPT or perplexity because they don't want to get bombarded with, with advertising. So you get rid of that, you get to a more distinct answer and I think the system is going to become more personal. So Mike, I get to know you as your chat bot. I know your likes, your dislikes and I basically will never show you a pizza place because you don't like pizza, you like steak. And so the chat bots over time are going to get more relevant in terms of, of understanding your, your behavior. And so I think the world we're living in is it's just going to get easier to do things and they'll have personalities and that will be weird but will also be fun and it will be helping our day as we go throughout the day.
- [37:51]
Mike Santoli
All right. Weird, fun and basically a friend in a way. So I Guess we have that to look forward to.
- [37:58]
Melissa Lee
Monthly fee, that's all.
- [38:01]
Mike Santoli
I appreciate it Brent. Thanks a lot and see you.
- [38:05]
Melissa Lee
Open air hitting a $500 billion valuation milestone today, but it's their new Sora image generator going viral online and drawing backlash over deep fake concerns. Mackenzie Sadala has more on today's tech Check Mac.
- [38:18]
Mike Santoli
Hey Mel.
- [38:19]
Melissa Lee
So just as OpenAI officially becomes the.
- [38:21]
Mike Santoli
Most valuable private company in the world, it's also rolling out its first ever social video app, a T talk style feed.
- [38:28]
Melissa Lee
Filled with some of the most advanced AI generated clips that we have seen to date. It shows just how fast the company.
- [38:34]
Mike Santoli
Is moving compared to its big tech rivals where large legal and compliance teams.
- [38:39]
Melissa Lee
Often slow things down. OpenAI by contrast, is willing to make mistakes in public.
- [38:44]
Mike Santoli
They're known for releasing powerful tools early and letting society adapt rather than slow.
- [38:49]
Melissa Lee
Rolling new tech or over policing creative expression at launch. Case in point, Sora. The new app lets users create and.
- [38:56]
Mike Santoli
Share these hyper realistic videos like this.
- [38:59]
Melissa Lee
Deep fake style clip of CEO Sam Altman shoplifting GPUs. But even with safety guardrails in place.
- [39:05]
Mike Santoli
There'S been public backlash to some of.
- [39:08]
Melissa Lee
The disturbing clips circulating online. Altman responded yesterday saying Sora is partly.
- [39:13]
Mike Santoli
About transparency, keeping the public in the loop on its cutting edge work, and partly about monetization, which is key to.
- [39:20]
Melissa Lee
Meeting its aggressive build out goals.
- [39:22]
Mike Santoli
But Sora is also crucial to OpenAI's long game.
- [39:25]
Melissa Lee
Video is a missing piece in the race to build artificial general intelligence.
- [39:30]
Mike Santoli
Models need to understand the physical world not just through language, but through motion prediction and simulation. Sora helps train those systems by feeding.
- [39:39]
Melissa Lee
Right back into the model, all of.
- [39:41]
Mike Santoli
It helping to justify that half a trillion dollar valuation.
- [39:44]
Melissa Lee
Guys. Mac, thanks Mackenzie. Seagallos Coming up, FICO making a big move in the housing market and dealing another blow to big three credit bureaus. For will bring you the details and the cost impacts with FICO shares on pace for their best day in nearly three years.
- [40:02]
Mike Santoli
Welcome back. FICO shares up more than 20% and TransUnion and Equifax under pressure after FICO launched a new program for mortgage lenders. Diana Olek joins us now with the details. Hi Dan.
- [40:13]
Diana Olek
Hey Mike. That's right, fico, which is the credit score that's widely used by lenders to determine if you and I qualify for a mortgage and at what interest rates and estates, is now licensing its scores directly to lenders instead of going through the credit bureaus like TransUnion, Equifax and Experian. Those bureaus are the middlemen and charge more for those scores. And that's why their stocks are all taking a big hit today. The stock of Fair Isaac, of course, is way up on the news. FICO scores are used by 90% of lenders. FICO CEO Will Lansing said in a statement that the change eliminated the markups. Later, he said on CNBC's Money Movers talked about the impact to consumers.
- [40:50]
Mike Santoli
In the end, all these costs wind up trickling down to consumers.
- [40:54]
Stacy Raskin
So if we can contain the costs.
- [40:55]
Phil LeBeau
Through the system, the consumers ultimately benefit.
- [40:58]
Mike Santoli
I mean, FICO scores will cost less in many cases or they'll be flat versus last year.
- [41:06]
Diana Olek
Now you may remember last spring, FHFA director Bill Pulte, who oversees Fannie Mae and Freddie Mac, attacked FICO and the credit bureau's pricing, saying on X that he is, quote, not happy with FICO and was doing a full scale review of all credit bureaus. Pulte posted on X this morning that while fico's decision is a first step, it is appreciated. He encouraged the credit bureaus to also take similar creative and constructive, constructive actions to make our markets safer, stronger and more competitive. Back to you guys.
- [41:35]
Melissa Lee
Diana, doesn't FICO get its data from the big three credit bureaus?
- [41:39]
Diana Olek
Well, it's, it's a mix really. FICO gives it to the big three credit bureaus and then the credit bureaus charge, upcharge it to the consumer. So it's a FICO score which if you want to get your own FICO score, you can just go on to FICO online. And I think it's $5 and you pay for it, but it's incorporated into the credit bureau scoring.
- [41:55]
Mike Santoli
And Diana, was this ever considered much of a friction point? You know, in, in the mortgage process, we're talking about small dollar amounts relative to a loan. I just curious the impetus of it.
- [42:08]
Diana Olek
All and they asked the CEO this morning on Money Movers just that, was it ever really a problem before Bill Pulte brought it up in May and he kind of basically said no. I mean, as you look at it, it's $5 for a credit score. Is it $30? It's the question of, you know, if you're pulling multiple credit scores or credit reports from the different bureaus and for a mortgage, maybe your different homes, five or six reports, does that add up to a couple of hundred dollars? Maybe it does, maybe it doesn't. And these do seem like small prices. But the idea, I guess within the administration is anything that will bring the cost of buying a home down. But Before May, it was never really an issue that I ever saw.
- [42:44]
Melissa Lee
Diana. Thanks, Diana Olek. Coming up, a crypto climb, a done deal and tech tear that's next in Rapid Fire, the Exchange. Be right back. Welcome back to the Exchange. Let's catch up on a few more stock stories on our radar. Time for Rapid Fire. First up, Bitcoin crossing 120,000 for the first time since August on the second day of October. Compass Point writing that October is bitcoin seasonally strongest month of the year with prices increasing in 10 of the past the 12. October since 2013 and going six for six since 2019. But the firm also pointing out that the bar could be higher this year as Bitcoin gained 5% in September.
- [43:24]
Mike Santoli
So 12 years. This is the statistical sampling that we have.
- [43:28]
Melissa Lee
This is Mike's way of ridiculing, I mean sort of.
- [43:32]
Mike Santoli
Look, the reason, the reason it would work in this instance in my view is it is mostly just a self fulfilling market where people buy it because other people are going to buy it. And if we think October is a thing, then maybe they'll be right if.
- [43:44]
Melissa Lee
October really catches on. I'd never heard of it prior to this.
- [43:48]
Mike Santoli
They say it's the strongest three month forward. Performance is starting right now.
- [43:51]
Melissa Lee
Right now. Well, topic two, shares of Amazon now positive for the year, but still the worst performer in the Mag 7. Meantime, shares of Alibaba more than doubling up about 124,4%. And the multiples, of course, no surprise, Alibaba is cheaper than Amazon's, trading about 24 times forward. Amazon's at about 33 times forward. Yeah, but that is, that gap is, is closing quickly.
- [44:12]
Mike Santoli
I was going to say 24 is not super cheap relative to how Alibaba has traded in its own history. And you know, it gets to a certain valuation. You're going to have those questions again about what do you really own, you know, in terms of the weird corporate structure of Alibaba, things like that. But at this point point, you know, people just want access to that market.
- [44:30]
Melissa Lee
Well, you're mentioning the trade widening and this is part of the widening of the.
- [44:34]
Mike Santoli
Because it's going to be built in parallel.
- [44:36]
Melissa Lee
Right, Exactly. And finally, Berkshire making it official, agreeing to buy Occidental Petroleum's Oxycam for $9.7 billion in cash, Berkshire's biggest deal in three years. Occidental will use some of the proceeds to pay down debt with CEO Vicki Hollab telling CNBC squawk box that will enable the company to restart buyback index, Oxy shares down nearly 8% today.
- [44:57]
Mike Santoli
Yes. So Berkshire's biggest deal in three years, though not particularly big relative to Berkshire, which is a trillion dollar market cap or, you know, the 340 billion in cash that Berkshire has. But very, very kind of win win on this because Berkshire owns 28% of Occidental. If Occidental balance sheets better than its ownership is in better shape. And then of course, Oxy has paid Berkshire and Common and preferred dividends a lot of money in the last few years. So it's almost like, you know, Buffett got paid to buy the business that's helping him on the other end with his holding in Occidental. So it all works out pretty well, I think, for everybody.
- [45:32]
Melissa Lee
Yep. Well, I'll see you tonight on fast money at 5 o'. Clock. We'll delve more into this notion of Alibaba. Is Alibaba the better way to play the trade at this point with valuations here in the U.S. much higher?
- [45:45]
Mike Santoli
Yeah. As the markets try to hang in there and hover around record highs, you see the S and P holding above that 6700 level. That's going to do it. Thank you for watching the Exchange. Power Lunch begins right now.
- [45:58]
You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [46:06]
Melissa Lee
Julia Boorstin sits down with Thrive Global founder and CEO Arianna Huffington.
- [46:11]
Mike Santoli
What advice would you give to young people now trying to navigate this crazy world? My advice is to pick a time at the end of the day that you declare as the end of your working day. Because let's face it, there is no.
- [46:27]
Melissa Lee
End to our working day. Julia Boorstin hosts CNBC Changemakers and power players. Listen now, wherever you get your podcasts.