Fading Memory, Retail Renaissance, and Standby on SpaceX 6/23/26

Summary

The Exchange – CNBC
Episode: Fading Memory, Retail Renaissance, and Standby on SpaceX
Date: June 23, 2026

---

Main Theme

This episode spotlights the volatility rocking both tech and retail markets, as well as pivotal trends in AI investment, debt-fueled expansions, and high-stakes IPOs. The focus is on whether recent pullbacks signal deeper concerns or short-term growing pains, including insights into Microsoft’s rare valuation dip, Target’s retail turnaround, the flood of debt funding in AI, and the heavy scrutiny facing new market entrants like SpaceX and Cerebras.

---

Key Discussion Points & Insights

1. Semiconductor and Big Tech Volatility

• Micron’s Crucial Earnings Awaited

  • Recent sharp declines in semiconductor stocks, particularly memory providers like Micron, are seen as a reflection of their meteoric rise over the previous year.
  • Quote [02:14]: “What goes up can also come down. And if you go hyperbolic up, you can go hyperbolic down just as quick.” – Michael San Satera

• Memory Deficit & AI Influence

  • Demand for memory chips is “greatly outstripping supply,” driving up prices but inviting questions about how long such favorable margins can persist. AI’s appetite is a driving force.
  • [03:34]: Discussion over "rerating" Micron due to questions around the sustainability of demand and margin strength.
  • Nervousness over whether “it’s different this time”—a dangerous phrase in investing.

• Volatility as the New Normal

  • Large-cap stocks are exhibiting historically higher volatility, attributed to their outsized index weightings, the entry of hot IPOs (e.g., SpaceX), and profit-taking.
  • Quote [05:59]: “You do need to gird your loins a little bit here.” – Michael San Satera

• Alphabet (Google) Talent Exodus

  • Alphabet’s recent stock drop blamed more on key AI engineer departures to OpenAI and Anthropic than on deeper business concerns.
  • [06:55]: Michael San Satera reinforces faith in Alphabet due to depth in their talent pool.
  • Quote [08:01]: “There’s never been one crux person that... could control it all.” – Michael San Satera

---

2. Debt-Fueled AI Boom

• Growing Reliance on Debt Financing

  • Tech giants are spending an estimated $750 billion on AI this year, an 80% surge, draining cash reserves and pushing them into the bond markets.
  • Companies like SpaceX, Alphabet, and Oracle have recently tapped bond markets; Amazon is poised to do so.
  • Rising interest rates mean cheaper debt is no longer guaranteed for big tech.
  • Quote [08:41]: “There is this renewed anxiety around some of the spending by these tech giants and then the growing role... of debt in this entire build.” – Kate Rooney

• Implications for Market Stability

  • JP Morgan notes Big Tech is a primary funding source for clients, possibly contributing to recent sell-offs.

---

3. Government Debt Auctions (Treasuries)

• Current Auction Results

  • US Treasury sold $69 billion in two-year notes at a 4.189% yield—11 basis points higher than the previous auction.
  • Demand strong enough for government and private sector needs (e.g., AI infrastructure).
  • Quote [12:56]: “Demand for these US government treasury auctions is holding up pretty well.” – Rick Santelli

• Quality Demand

  • Despite record deficits, sovereign debt is still regarded as the highest quality, attracting global buyers.

---

4. Atlanta Federal Reserve Shuffle

• Fed’s Search for Leadership
  • The search for the Atlanta Fed President is paused so new Fed Chairman Kevin Warsh can weigh in.
  • Michael Falkender, a former Trump Treasury official and Maryland professor, is among the candidates.
  • Debate over whether the Fed's regional leaders should have local ties.
  • Quote [17:31]: “If Kevin Warsh wants this, Kevin Warsh will get it.” – Matt Peterson

---

5. Retail Renaissance: Target’s Turnaround

• Wolf Research’s Upgrade on Target
  • Target is named Wolf’s top retail pick, replacing Five Below, due to revitalized merchandising, supply chain upgrades, and strong comp outlook through 2027.
  • New CEO’s risk-taking and structural shake-ups are credited.
  • Quote [21:52]: “We’re in a new age of Target. They’re back to playing offense here.” – Spencer Hannah
  • Caution remains for Five Below due to tough upcoming comps after benefiting from trends like “squishy dumpling.”
  • Quote [23:17]: “We see a lot of upcoming catalysts here..." – Spencer Hannah

---

6. Microsoft: From Growth King to Value Play

• Microsoft’s Valuation Hits Historic Lows
  • Despite its worst month in 25 years, some see a buying opportunity as MSFT now trades at under 20 times forward earnings.
  • Quote [27:48]: “It’s the first time we’ve put it in our value fund in more than 10 years... traded at 90% of the market.” – Chris Grisanti
  • The sell-off is thought to be indiscriminate "baby out with the bathwater" action by institutions burned in software.
  • Barriers to entry in hyperscale cloud/AI are highlighted as a moat.
  • Quote [28:33]: “It’ll be a disruptor. Because Microsoft... is one of the four big hyperscalers.” – Chris Grisanti

---

7. AI Infrastructure: Cerebras’ First Public Earnings

• Cerebras’ Unique Chip Story
  • Makes ultra-large AI inference chips with memory built onto the same die, aiming to solve latency in AI queries.
  • Premium valuation based on future AI infrastructure needs; OpenAI is a major buyer under a “take or pay” contract.
  • Quote [33:35]: “Cerebras is betting on AI inference... builds the memory directly onto the chip... could process AI requests much faster.” – Christina Parts of Elvis
  • Concerns over customer concentration (OpenAI, Amazon), margin pressure during build-out, and reliance on TSMC for manufacturing.
  • [35:45]: Watch for margin impact, backlog composition, and nature of Amazon partnership.

---

8. SpaceX: Hot IPO or Overhyped?

• Stock Under Pressure Post-IPO
  • Despite initial excitement, SpaceX fell below debut price before rebounding.
  • Massive bond offering and cash reserve disclosure prompt debate about valuation and future capital needs.
  • Quote [38:33]: “I just cannot make this stock fit... I can’t pay this much for this stock.” – Victoria Green
  • Index inclusion will force many managers to own it, making it a consequential decision for portfolio performance.
  • Concerns about cash burn (Starlink, Terraforming projects), execution risks, and general IPO performance.
  • Would consider buying below IPO price, after more transparency on capital needs and early results.
  • Quote [39:48]: “Owning or not owning SpaceX may make or break how you do versus your benchmarks this year...” – Victoria Green

---

Notable Quotes & Timestamps

• “What goes up can also come down. And if you go hyperbolic up, you can go hyperbolic down just as quick.” – Michael San Satera [02:14]
• "It's still a commodity space and it is in massive demand and it is being massively influenced by AI..." – Michael San Satera [04:49]
• “There is this renewed anxiety around some of the spending by these tech giants and then the growing role... of debt in this entire build.” – Kate Rooney [08:41]
• "You do need to gird your loins a little bit here." – Michael San Satera [05:59]
• "There’s never been one crux person... that could control it all." – Michael San Satera [08:01] (on Alphabet)
• “If Kevin Warsh wants this, Kevin Warsh will get it.” – Matt Peterson [18:29]
• "We're in a new age of Target. They're back to playing offense here." – Spencer Hannah [21:52]
• "It’s the first time we’ve put [Microsoft] in our value fund in more than 10 years... traded at 90% of the market.” – Chris Grisanti [27:48]
• “Owning or not owning SpaceX may make or break how you do versus your benchmarks this year...” – Victoria Green [39:48]
• “Cerebras is betting on AI inference... builds the memory directly onto the chip... could process AI requests much faster.” – Christina Parts of Elvis [33:35]

---

Key Timestamps

• [01:00] – Show introduction, market context
• [02:14-08:13] – Michael San Satera on memory/semis, Alphabet, market volatility
• [08:41-10:25] – Kate Rooney on AI-driven debt boom
• [10:58-13:49] – Rick Santelli on US Treasury auctions and market implications
• [17:06-20:16] – Matt Peterson on Atlanta Fed leadership and implications
• [21:11-25:17] – Spencer Hannah (Wolf Research) on Target & Five Below
• [27:24-32:58] – Chris Grisanti on Microsoft as a newly-minted value play, broader macro risks
• [33:35-36:56] – Christina Parts of Elvis on Cerebras’ public debut and AI chip battles
• [38:33-41:09] – Victoria Green on SpaceX: IPO risks, index impact, why not a buy yet

---

Tone and Style

The tone is dynamic, informed, and at times wry—balancing Wall Street hard facts with witty banter and the occasional self-aware joke about the intensity (or volatility) of the moment. Experts candidly admit uncertainty while highlighting actionable signals for investors, giving the episode an energetic and pragmatic spirit.

---

For Listeners

Whether you’re tracking semis, sniffing out value in tech, watching for the next AI infrastructure player, or wading through the retail renaissance, this episode delivers a candid and nuanced view of what’s next. The confluence of tech leadership shakeups, retail strategy pivots, and capital-raising bonanzas highlight just how much the market’s old rules are being rewritten—forcing investors to stay nimble and, above all, vigilant.

Transcript

[AT&T Business Wireless Spokesperson]

Before we had AT&T business wireless coverage, our delivery GPS wasn't the most reliable. Once our driver had to do a 14 point turn to get back on route. A 14 point turn. An influencer even livestreamed the whole thing. Not good for business. Now with AT&T business Wireless, routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though.

[Brian Sullivan Kelly]

AT&T business Wireless connecting changes everything.

[Shopify Advertiser / Shannon Maldonado]

When it's time to scale your business, it's time for Shopify. Get everything you need to grow the way you want. Like all the way. Stack more sales with the best converting checkout on the planet. Track your cha chings from every channel right in one spot. And turn real time reporting into big time opportunities. Take your business to a whole new level. Switch to Shopify. Start your free trial today.

[Christina Parts of Elvis]

You're listening to the Exchange.

[Brian Sullivan Kelly]

Here's today's show and I am Brian Sullivan Kelly. We'll be back tomorrow. Welcome to the Exchange, everybody. Tech's still under pressure right now, but we are off session lows at the start of trading. The NASDAQ down as much as 2 1/2 percent. The chips, they're down. Microsoft losing about 10% as the world waits on Micron's earnings tomorrow night. But it is not all bad. IBM, it keeps going up. It got an upgrade over at JP Morgan that's helping those investors. Microsoft actually higher right now. And what has been a lousy month. Microsoft coming into today on pace for its worst month in nearly 25 years. Welcome everybody. Obviously there is a lot of news, a lot of trades and a lot of important data to get through. So let's kick it off right at the top. Michael San Satera is Sylvan Capital Management CIO and he is here for your opening exchange. Michael, welcome. We have got a lot to get through and listen, I understand you are not a specific semiconductor analyst, but these are companies you may own or keep an eye on. They have been the source of a lot of money making the last year, but not the last few days. So what do you make of what's going on right now?

[Michael San Satera]

Yeah, I think the most important thing we're seeing is what goes up can also come down. And if you go hyperbolic up, you can go hyperbolic down just as quick. The memory guys in particular, right? You mentioned Micron in the opening statement. Everyone's focused on Micron opening their mouth tomorrow night and the stock has had a meteoric rise. Arguably had a rerating from a multiple perspective going from 5 times to 10 times. The question is, is it different now? The question is where are they sitting? I mean, I don't think there's any doubt that the demand for memory will continue and it's greatly outstripping supply. So pricing is strong, but we've got to look down the road and see how long does this last. Right now stocks and semis in particular really getting pulled back because of this fantastic returns they put up in such a short period of time.

[Brian Sullivan Kelly]

Yeah, and listen, we could put that chart back up and I want to make it very clear to our audience that context is key. Okay. The Korean stock market fell limit down 9.9999% overnight. The Korean stock market's up 240% in 12 months. Microsoft or Micron? Rather not Microsoft. We'll get to that in a minute. Micron about the same. So let's just put everything in context. But you had said, Michael, that you quote rerated Micron a short while ago. Why?

[Michael San Satera]

The question really is how long does this memory undersupply last? What does it look like from a new capacity perspective which we know is coming. How do the, the GPU manufacturers like Nvidia deal with the memory glut and the issues that it's running into from a, from a processing standp as well? Do we see a KV cache or a more segmented portion of memory better handle some of these models? There's a lot of questions we have to answer and to answer those questions in the know is to say, you know, that the memory is still a commodity and that this is all short lived. If you start to say yes to some of those questions, what you're really saying is okay then it's different this time. And we all know that when you say it's different this time, that's, that's a real risk. So the rerating really is how long can margins stay strong at a Micron? How long? Not just the gross margin, but the operating margin.

[Brian Sullivan Kelly]

We're going to find out tomorrow night, Michael. I mean, right, the Micron earnings are out tomorrow night. Then I would assume you're watching them close. I'm sure you watch a lot of things closely, but right now is Micron at least this week the most important stock in America?

[Michael San Satera]

I don't know if I go that far, but it's definitely the most important stock to tech investors for the next 48 hours. How about that?

[Brian Sullivan Kelly]

We'll take it.

[Michael San Satera]

Listen, it's still, it's still a commodity space and it's, it is in Massive demand and it is being massively influenced by AI and it will continue to do so for the next few years. However, they'll have a strong quarter, they'll have good guidance. Will it be sufficient in a short term basis to make traders happy? Hard to say. Probably not. You? Probably not. It's never quite enough. When stocks go straight up.

[Brian Sullivan Kelly]

The NASDAQ 100 right now is down 2.8%. I mean that is a big number. 2.8% is a lot of percent. Okay. But in the last couple of months, really the last couple of years, Michael, we've seen these market moves on big name stock, not micro cap, small cap, penny. Those stocks move 10 and 20%. These are big name companies that are rising and falling a lot all the time. Is this kind of the new normal, Michael? In a sense that investors, your clients, the people watching, listening, right now, they've just got to get more inured, get their stomach lining ready to have these bigger moves. Because it feels like from this side of the desk we're having a lot more of these periods. They're a lot faster, but they're more common.

[Michael San Satera]

Agreed.

[Shopify Advertiser / Shannon Maldonado]

Yeah.

[Michael San Satera]

And I think you do need to gird your loins a little bit here. This is, this is a spot where we've got very, very large index weights and by the way, they're all changing at the end of the week, particularly in the large cap growth arena. So you've got a lot of money being moved very quickly. You add in a few IPOs like SpaceX and then the Cummings Anthropic. Anthropic and open air and you've got folks taking profits, you've got folks trying to play these stocks. Tactically, we're long term investors, so we're not in and out in the day, but you can see more volatility around it. I think you do need to get used to it.

[Brian Sullivan Kelly]

Okay, Alphabet, we're showing a chart, your top stocks in your large cap growth fund. Alphabet, Google 5%, fifth biggest holding. Google had its worst day yesterday in over a year. Some people said it was because two engineers, one's whatever, Nobel Laureate or something left. I found that a little bit hard to believe. What do you think is going on with Alphabet and are you changing anything about your position in the company?

[Michael San Satera]

Yeah, no change to our position in Alphabet. We think they're well positioned, particularly with Gemini and how well they've, how far they've come in AI modeling. I think actually the two folks leading yesterday is what spooked the market and it doesn't Take a lot right now to do that. They're losing, you know, one, one person to OpenAI and one to chat, one to anthropic. And I think that's a reminder that this space is highly coveted. These jobs are very, very, very coveted and hard to get. Right. If you want to lead a portion of one of these companies, you've shown you can do some really difficult problem solving. So it's a scarce resource. The folks that can really do some of the high end modeling. So no surprise that you see a little bit of move. But if you've been at Google for nine years and you're moving to another firm, you've got decisions to make. Right. You're making a, you've probably done pretty well to begin with and now you're saying I can, I can take it a whole notch higher.

[Brian Sullivan Kelly]

Yeah, but you just said it's not, it's not changing your thinking on the company. These people may be geniuses, they may be important, but it's not important enough, Michael, that you're going to change or re rate or whatever Alphabet because of these departures.

[Michael San Satera]

Correct. It's still, there's still teams below them, there's still lots of very smart folks at Alphabet. No, there's never been one crux person that we've known of from a programming standpoint that could control it all.

[Brian Sullivan Kelly]

Michael San Satara, really appreciate your time. Great way to kick off the show Michael. Thank you very much.

[Michael San Satera]

Thanks Brian.

[Brian Sullivan Kelly]

All right, meantime, concerns over how the AI race gets paid for and who might be the nest to tap the markets. The debt markets are still hanging out there and that has contributed a little bit to investor concerns about the mega caps, maybe contributed a lot of it. Kate Rooney has more on the debt fueled side of the AI story.

[Shopify Advertiser / Shannon Maldonado]

Kate.

[Kate Rooney]

So Brian, yeah this story is really about sentiment today when you look at big tech, there is this renewed anxiety around some of the spending by these tech giants and then the growing role, as you mentioned, of debt in this entire build. So these companies, the backdrop here, are expected to plow about $750 billion into AI this year. It's up about 80% from last year and then they're depleting cash reserves at the same time as a result. So Goldman recently noting that capex as a percentage of free cash flow is at its highest level since the dot com bubble. Space X yesterday was the latest to tap into bond markets. Alphabet did the same thing. One of the largest debt financings in this cycle. You had Oracle as well. And then there is Amazon Widely forecasted to see negative free cash flow this year, it did lay the groundwork to tap credit markets with a shelf offering. So that's essentially pre approval from the SEC to do this. This group really, Brian, used to be relatively immune to the bond market thanks to fortress balance sheets. But rising rates are much more of a factor now for these companies. It used to really only matter for the smaller money losing tech companies. With this growing debt load though, rising rates could move upstream here become a lot more relevant for the mega caps. Another topic weighing on big tech this week, cheaper AI models. Microsoft CEO has been one of the leaders talking about this and the recent trend. He is reportedly considering offering access to these ultra cheap Chinese models to deep seek on the Microsoft platform also unveiled its own fleet of discount models. The other thing to point out Brian, is in terms of the bigger picture here, JP Morgan noted recently the Mag 7 have also become a major source of funding for their clients. So it could be part of the reason why we're seeing a lot of these names sell off at least in the past month.

[Brian Sullivan Kelly]

All right, K. Rooney, it's an important story there and one that we are watching very closely. Kate, thank you very much.

[Kate Rooney]

Thanks.

[Brian Sullivan Kelly]

All right, something else that we're watching. There's three things that we're watching. Number one, we're going to watch Rick Santelli in Chicago because we can't wait to get Chicago, Chicago on Thursday. Number two, there were two year notes up for auction. And number three, Rick, I just want to say with love and affection that we know Kelly and I know we owe you a burger. Your bet on oil going below 75 was indeed correct. We're at 72 and change. So off the air, send us your favorite burger place and we will arrive on Thursday with some meat.

[Rick Santelli]

Rick Santelli, that sounds great. There's nothing like a little meat on the bun in Chicago. Can't wait to see the gang on Thursday. Today, Brian was the first of a 3 auction offering from the US Treasury. Today of course was the two year notes. We're looking at 69 billion of them and the auction went off pretty well. The yield was 4.189 which is about 11 basis points higher than the auction we had on May 26. And the reason I bring that up, that was the last auction and of course it was before the Fed meeting. That put the Fed in more of a potentially tightening mode and that is reflected in those 11 basis points. So the yield 4.189 as I said was slightly lower than the when issued market lower yield higher price. The government was a seller pretty much most metrics of this auction were pretty close to 10 auction average. The pricing went in a positive way, hence C C the grade I gave for this first leg and do realize that yesterday's close was the highest yield close going back to February of 2025. We have reversed a little bit. We're about a handful of basis points lower and we want to make sure we pay attention because of course yesterday we was a high watermark on this entire move that we have had on this cycle at 5 or 423 tomorrow will be 70 billion five year notes followed by 44 billion sevens and suffice it to say with all the scrutiny based on your last story about the government of course competing for investor dollars with all the AI issuance to build all these sites. Well at least thus far it certainly looks like demand for these US Government treasury auctions is holding up pretty well. Back to you so.

[Brian Sullivan Kelly]

Well it sounds like Rick then there is enough money and enough buyers. They're buying Treasuries. Not great. You gave it to C plus but there are enough buyers. Or tell me if you think there are for all the debt issuance for the US Government but also all the debt issuance around AI.

[Rick Santelli]

Well considering how many years central banks manipulated rates to either near zero or negative in, it doesn't surprise me that there's a pretty good amount of depth in demand for good securities. And we could argue that what's going on in the AI world with all this issuance. One thing we can argue with though is is that they're pretty juicy yields and on the government side, listen, we could talk about debt and deficits. It doesn't seem to matter much to the treasury complex because in many ways sovereign debt is of the highest quality in many investors minds.

[Brian Sullivan Kelly]

Well said Rick Santelli. Can't wait to see you on Thursday. Really appreciate it Rick. All right, speaking of Chicago, on Thursday Kelly and I will be broadcasting from the C boat. Now in addition to seeing Rick in person and yes bringing him lunch which we owe him from a losing bet, we're going to also have a huge lineup for you. Look at that. Austan Goolsbee, John Rogers, Craig Donahue, Michael o', Grady, Bill Nygren and maybe some surprise guests. Who knows? That all kicks off Thursday. Heck, what's called Central time Noon, Central Time 1:00 clock Eastern Chicago. I love you. Can't wait to see you in just a couple of days. Ahead of that, do not miss our CNBC interview with Treasury Secretary Scott Bessant. That is tomorrow morning on Squawk Box 7, 30am Eastern Time. All right, we are not done yet. On deck, the markets working hard to make a comeback. The Dow it is higher. Buyers dabble a little bit back into big tech. Speaking of tech, is Microsoft now too cheap to ignore? Why one firm is finally adding it to their value? On Microsoft, a value stock. It's true and we'll talk about it next. This is the exchange on cnbc.

[Keith Lansford]

Trading at Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful webcasts, articles, engaging videos and more, all curated just for traders. Plus guided learning paths with content designed to fit your unique interests. And no sifting to find exactly what you need so you can spend your time learning to trade brilliantly. Learn [e-mail] trading not every sale happens at the register.

[Shopify Advertiser / Shannon Maldonado]

Before AT&T business Wireless, checking out customers on our mobile POS systems took too long. Basically a staring contest where everyone loses. It's crazy what people say during an awkward silence. Now transactions are done before the silence takes hold. That means I can focus on the task at hand and make an extra sale or two. Sometimes I do miss the bonding time. Sometimes.

[Brian Sullivan Kelly]

AT&T business Wireless connecting changes everything.

[Shopify Advertiser / Shannon Maldonado]

My name is Shannon Maldonado. I'm the founder of Yaoi, a gift shop from the lens of artists and handmade objects. I chose Shopify because when I was testing other platforms, it was definitely one of the most user friendly. It was important to me to think about where we would be in the future. All of the tools for reading your sales, like planning inventory, they're just right there on your dashboard. For anyone starting a small business, the biggest thing I can tell you, it doesn't have to be perfect. Shopify can help you build upon it. Start your free trial on shopify.com.

[Brian Sullivan Kelly]

All right, as the animation says, we've got some breaking news. This one on the Atlanta Federal Reserve, CBC senior economics writer Matt Peterson joining us now. Matt, good to have you on set. What is the breaking news on the Atlanta Fed?

[Matt Peterson]

So this job has been open for some time. The previous guy stepped down in February. And what we've learned is that the Fed has paused its search to try to find somebody new for that job so that Kevin Warsh, the new Fed chairman, can have a say. And we've learned that among the candidates for this job that the Fed has looked at is a fellow named Michael Falkender, who was a senior treasury official in this second Trump administration.

[Brian Sullivan Kelly]

Okay. So my broader question about Michael Falkender is who is Michael Falkender? Obviously, you just mentioned what he did. What else might, if anything, we know about it?

[Matt Peterson]

Well, he is a finance professor at the University of Maryland. That's what he did before he joined the Trump administration and what he's doing after he joined the Trump administration. I think something important to point out about him is that it's not really clear that he gets along very well with the president. He was asked to resign last year. And so this is going to be. If he does end up being the final pick, and we don't know that he is, this might be a kind of messy situation in terms of the Fed's independence. Yeah.

[Brian Sullivan Kelly]

Sometimes the president gets mad at people. I don't know if you've noticed this. So if the president was not a big fan of Michael Falkender, but Kevin Warsh was, and I'm asking you to speculate, Matt, what do we know about the odds of the chances of him becoming the Atlanta Fed president?

[Matt Peterson]

I would think that they would be pretty good because really, this choice is up to the Fed, and that's the Fed sort of writ large. Not just the chairman, but the Atlanta Fed itself. Its board of directors gets a vote here, too, although the final say goes to the Washington Fed. But it's really a thing that gets decided inside the Federal Reserve System. So if Kevin Wash wants this, Kevin Worship will get it.

[Brian Sullivan Kelly]

Michael Falkender is a professor at the University of Maryland. I am not a geography expert, but I do know that Maryland is not Georgia. Atlanta is in Georgia. So does it matter if a Fed person doesn't live? I'm assuming he would move, I guess. Otherwise, in your history, Matt, does it matter if somebody lives near where they're supposed to be running a Fed? Right.

[Matt Peterson]

Well, you know, like, could the Cleveland

[Brian Sullivan Kelly]

Fed president live in Dallas?

[Matt Peterson]

Right. Yes. So Treasury Secretary Scott Besant has made exactly this point. He has said that he wants to Fed presidents to have lived in the District for three years before they're picked. That's not a rule right now. It's something that Kevin Wash said he might be open to thinking about when he took over. This is one of the reasons I think that this process has been paused is that there have been these sort of bigger questions about how do you decide exactly who should be in these really sensitive jobs. But no, to answer your question, you know this person we're talking about, former Deputy Treasury Secretary Michael Falkender does not apparently as far as I can tell, have any ties.

[Brian Sullivan Kelly]

So there is no clear I mean because members of Congress will get slammed. It's like, well, they represent this district of California, but they actually haven't lived in California in 37 years or whatever it might be. Doesn't sound like that same level of scrutiny would be applied here otherwise. He's not an Atlanta, but he is, I don't know.

[Matt Peterson]

I do not believe he is an

[Brian Sullivan Kelly]

Atlanta and be a long commute to Silver Spring.

[Matt Peterson]

It would be a long commute. I mean he would presumably move. But you know, again, the decision's not been made yet. Right. And these are the kind of things that are probably going to be discussed among the Fed as they make this decision.

[Brian Sullivan Kelly]

Well, interesting story there. Matt Peterson, we appreciate you coming on some breaking news around the Atlanta Federal Reserve. Mike, thank you very much. Thank you. All right, Matt Peterson. All right. For the full story by the way on this because there is more, go to cnbc.com and check it out. All right. So it is not all about technology or the Atlanta Fed today. Wolf, research making a big call on retail. And we will say that research is on Target because Wolf upgrading Target to an outperform and says it is now their retail top pick. Let's talk more about that with the analyst behind the call, Spencer Hannah, senior analyst at Wolf. We've got a lot more to talk about but let's start with Target. Spencer, what do you see? What do you like with Target and its new ish CEO?

[Spencer Hannah]

Yeah, for sure. Well, thanks for having us on. You know, we've really seen the pace of change at Target pick up here pretty dramatically. They've been in a turnar process for years and we're starting to see real improvements when we walk stores. When you look at the out of stocks that are in the in the stores, when you look at the merchandising, the assortment. And while Fidelke has been been at the company for a long time, he's made a lot more change. What we were expecting less about blaming the macro like we've seen with previous CEOs at Target and much more about what Target can do, you know, just in their own power to get back to growth. And we've seen signs of that in 1Q. We think that's continuing into 2Q and that, you know, that we're in a new age of Target. They're back to playing they're back to playing offense here.

[Brian Sullivan Kelly]

Okay. Is this really like all the new CEO, I mean, Brian Cornell, you know, is on CNBC a lot. He leaves. The new guy comes in. The new guy, by the way, took a lot of heat because they're like, well, he's basically just the old guy because he worked for them for whatever, a couple of decades. But is he really implementing these kinds of changes or was the turnaround already happening and maybe it's kind of more of a right place, right time type situation?

[Spencer Hannah]

Well, I think it's, we think it's a little bit of both. They're laughing over really easy compares for multiple years of negative comps, which help them to be able to post the strong results so far. But then we've seen him really reshuffle a lot of the key leaders at Target. He's brought a new head of supply chain, he's brought in new merchandisers and he's really like giving them more ability to take risks in terms of how they're sorting the stores. And he's moving the business a lot faster than what we've seen in the past. And so I think it's a little bit, it's definitely both things that are happening here. But you know, that was a concern that he wasn't going to make changes. But we've definitely seen a lot of change happening, which I think is, is, is needed at Target. And, and you see that in the numbers too. You see that in where the comps have come in and where we expect them to, to fall in the coming quarters.

[Brian Sullivan Kelly]

Okay, well, to your point, those comps pretty easy to lap because they were bad enough. So you don't have to be a huge gain. Say, okay, they're, they're better than they were. But then in a couple of quarters you got to lap the lapping. So does it get, it must get incrementally more difficult from here. Why are you still recommending to your clients that they buy the stock?

[Spencer Hannah]

Yeah, well, we see a lot, we see a lot of upcoming catalysts here that we think are going to allow them to see comps accelerate. The resets that they're doing in cat in over 40% of the store are going to help them to be able to drive sales higher, we think into the back half. They also have, you have an Ulta refresh that they're, they're going to refreshing their Ulta section of their store. They've got some, some important media launches coming later this year. And then they have all these little partnerships that in and of themselves are not big needle movers, but together they' driving a lot more traffic back to Target. And so, you know, the compares are easy for, you know, really through the rest of this year. We don't think they're going to be running into tough compares, you know, until later in 27. So there still is a pretty good Runway from here.

[Brian Sullivan Kelly]

Target is your new top pick. Target replacing five below. Which one of which was one of or was your top pick? Is this a case of just five below did what it needed to do or is something materially changed with the story?

[Spencer Hannah]

Yeah, when we launched, when we launched on the sector in September, 5 was one of our top ideas and you saw the comps accelerate. They were able to re resort the store. They had a new CEO in their Winnie park who has done a fantastic job of getting them back on trend. And then they benefited from this squishy dumpling trend in the first quarter. But we think that is going to be a very difficult comp for them to cycle next year. We took our comps down for the first half of, of 27 and there's just a lot of uncertainty today about what's really underlying improvement at 5 below versus what's the trend and how long is this fad going to last at five. And so as a result, we felt like it was, it was the right call to take it off our, take it off our off outperform and move to the sidelines until we just get more certainty on what, what's really happening, you know, with the underlying business. They're lapping over price increases they took last year. So there's a lot of things here that they have to cycle that's, that's going to make it tough.

[Brian Sullivan Kelly]

Yeah, stocks come down a lot. Five below down a little bit more than 5%. Not just today is down two and a half but off its high 233 a couple of months ago. Either way, Target the name to watch now Wolf Research is Spencer Hannas. Thank you very much, Spencer. Really appreciate your time.

[Spencer Hannah]

Thank you so much, Brian.

[Brian Sullivan Kelly]

All right, take care. All right. Coming up, Wall Street's fear gauge on the move and the options market is taking notice. We'll get more on that next.

[Michael San Satera]

Shell V Power Nitro plus fuels every

[Brian Sullivan Kelly]

drive with a fuel like no other. It removes up to 100% of performance,

[Michael San Satera]

robbing deposits to rejuvenate your engine's performance. That means more power when you need it and more performance with every drive. Shell V Power Nitro plus premium gasoline. More power, more performance. Formulation unique to Shell in gasoline direct injection engine fuel injectors with continuous use of Shell V Power nitro plus premium gasoline compared to lower octane fuels.

[Brian Sullivan Kelly]

Actual effects and benefits this episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

[Keith Lansford]

Join host Keith Lansford for this information

[Brian Sullivan Kelly]

packed daily market Preview delivered in 10

[Keith Lansford]

minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading.

[Brian Sullivan Kelly]

Download the latest episode and [e-mail] MarketUpdatePodcast

[Keith Lansford]

or find Schwab Market Update wherever you get your podcasts.

[AT&T Business Wireless Spokesperson]

Before we hit ATT Business Wireless coverage, our delivery GPS wasn't the most reliable. Once our driver had to do a 14 point turn to get back on route. A 14 point turn, an influencer even livestream the whole thing. Not good for business. Now with AT&T business Wireless, routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though.

[Brian Sullivan Kelly]

AT&T business Wireless connecting changes everything. Microsoft having its worst month in decades. But Microsoft also one of the few big cap tech stocks that is up today. And your next guest says that sentiment around Microsoft has gotten so bad, maybe it's a good thing. Let's bring in Chris Grisanti. He is chief market strategist at Capital Management. Talk about that and more. I know you got three worries. We'll get to those because you're paid to worry, my friend.

[Chris Grisanti]

I am. I'm a value guy.

[Brian Sullivan Kelly]

Which means you're always worried.

[Chris Grisanti]

Absolutely.

[Brian Sullivan Kelly]

That's, that's, that's why you get paid the big bucks. But let's talk about Microsoft because Microsoft stock is 53% below the average analyst price target on Wall street. Worst month in 25 years at least. Coming in to this morning, is Microsoft's valuation now low enough to make it a value stock?

[Chris Grisanti]

It sure is, Brian, and we're excited about it is the first time we've put it in our value fund in more than 10 years and it's the first time it's traded at 90% of the market. Valuation hasn't been this low since 2016. So we're excited about that. And what's happening here is pretty clear. It's getting painted with the broad negative software brush that so many other software companies are getting painted by. And we think that's a big mistake. We think what's happening here is that it's not going to be disrupted. It'll be a disruptor. Because Microsoft, as you of course know, is one of the four big hyperscalers and the barriers entry to that business are so big and they're going to be a player and they're going to earn revenue, which by the way, they're already earning. So we think it's a gift to investors to be able to invest at this level.

[Brian Sullivan Kelly]

Somebody selling it. Why do you think people have suddenly decided they didn't want to own Microsoft?

[Chris Grisanti]

I think there's a lot of institutions that are been absolutely pummeled in the software trade and they're throwing the babies out with the bathwater. And I think that's what's happening. And also, you know, look, Microsoft has been on top of the tech Mountain for 30 years. It's the longest lived tech story there. Is that still current? And so folks are a little afraid of obsolescence. I wouldn't, I'd push strongly against that. And we like it a lot here.

[Brian Sullivan Kelly]

Yeah, you look at it, I don't know where everybody's got different numbers. I'm looking here, my facts at 19 times near term earnings, 22 times longer term earnings. Are you comfortable under 20? Like what would be your valuation?

[Chris Grisanti]

The way our estimates show, it's about 18 times forward 12 months, about six, not four. Exactly.

[Brian Sullivan Kelly]

Everyone's kind of got their different.

[Chris Grisanti]

Right. And so if you look at an average where the average is kind of low to mid 20s and compared to the market, which is obviously, as we all know, pretty expensive right now, it's, it's really cheap compared to the relative fee. So that's something US value investors have been waiting to buy because we love growth. We can just never afford it. And here's one that we can afford.

[Brian Sullivan Kelly]

Okay, well you know what else is a little bit cheaper today and that's oil. Okay? Oil is at 72 and change. Oil is basically where it was one year ago. A lot of the war premium, for lack of a better term, is now out or almost out of oil. But as we've reported, I've said, listen, we're one errant missile or drone strike away, sure, from much higher oil. We want to be optimistic. But you're also saying as a value person, just don't be vigilant that things may not be over yet.

[Chris Grisanti]

Right. So one of my three big worries is that this war, you know, which has by the way, ended seven times now, is this is going to take a lot longer than we think. And remember it was almost two years to do the Obama nuclear deal. And this is not going to be any easier than that. I don't know if it'll take that long, but there will be fits and starts. And this president is obviously somewhat impatient. So I wouldn't be at all surprised if this is another source of volatility over the second half of the year here.

[Brian Sullivan Kelly]

Yeah. And if it's not, is that an all clear symbol for the equity market here? And if it is still back on because some rogue general, as we've talked about, wants to start things up again, what are the scenarios for the stock market in either case?

[Chris Grisanti]

Well, I think frankly, the war is the least of my three worries.

[Matt Peterson]

Okay.

[Chris Grisanti]

Big ones. I think the biggest event last week in the market was the Kevin Wash press conference conference. And he came out surprisingly hawkish and the fetters are off. So he's been appointed, he's been approved. I have a feeling by the end of the year he's going to be Trump's public enemy number one in the sense of regret over the appointment.

[Brian Sullivan Kelly]

The bromance will be over.

[Chris Grisanti]

The bromance will be over, as we have seen before, because I think the press conference showed he wants to prove his chops and he mentioned price stability about a half dozen times without mentioning the second part of the mandate, employment.

[Brian Sullivan Kelly]

Well, he got to give a short sort of terse statement. Part of his whole ethos is that he wants the Fed to be a little more invisible.

[Chris Grisanti]

Right.

[Brian Sullivan Kelly]

A little more quiet. So your three worries, the war that isn't really over, drama at the Fed and the wonder.

[Chris Grisanti]

The wonder of.

[Brian Sullivan Kelly]

The wonder of the wonder in quotes rise wonder in quote.

[Chris Grisanti]

Because everybody loves AI, except the wonder is going to turn into a focus on the problems of AI. And I've got two big problems, which is, you know, this is not mystery, this is public opposition to data centers and shortage of electricity. Now, we've all talked about those things, but they haven't shown up in the numbers yet. So what I'm waiting for is one company to come out and say, hey, our data centers are delayed either because there's public opposition and we can't sign the contracts or because the electricity won't be available until 2028 or something like that. So all of a sudden this capital spending gets pushed out and that would be bad.

[Brian Sullivan Kelly]

How do we rank those drama at the Fed number one, biggest worry?

[Chris Grisanti]

I think so that's the most like number two, I think the AI problem.

[Brian Sullivan Kelly]

So the Iran war is. It's a worry, but it's third. It's three of three.

[Chris Grisanti]

It's three of three. It'll get the headlines, but it'll have the least effect on the market, I think.

[Brian Sullivan Kelly]

Okay, there we go. I like it. Microsoft, also, your numbers 18, 18 and a half times right earnings Now Microsoft a value stock. Break out the zooms. Chris Chrisanti of Capital Management, thank you.

[Chris Grisanti]

Good to be with you, Brian.

[Brian Sullivan Kelly]

All right, coming up, Cerberus set to post its first ever numbers as a public company. Will they be good just because they're first part of that conversation coming up. All right, welcome back. Cerebras up about 16% since going public and investors will now get an idea of just what they are paying for this afternoon when they released their first ever public company earnings report. Christina Parson Elvis has more on that in today's tech check.

[Christina Parts of Elvis]

It was literally just last month I was here when the stock popped 68% on its debut at the Nasdaq. But like you said, it's just down about 25% from that first day close. Investors are just trying to figure out just how much to pay for this AI infrastructure chip story. Siri Risk for those that don't know is betting on AI inference, the computing power needed every time someone uses an AI assistant. So while most AI chips keep memory separate from the processor, so you possibly lose that latency when you're traveling, Cerebrus builds the memory directly onto the chip which is about the size of a Frisbee and that could process AI requests much faster, which is what you're seeing on your screen. Some of that chip you see how big it is. That technology has helped earn Cerebras a premium valuation with investors betting it become it can become a major player in the next phase of AI spending demand right now isn't the issue because OpenAI has already signed a take or pay agreement that provides revenue visibility. And Amazon is building service chips into AWS alongside its Trainium chips, although we need financial details on that relationship. So this report is more about execution than necessarily customer demand. So there's two things you need to look out for. Revenue, Wall street wants about $180 million more than double last year and then margins. Cerebrus is mid capacity buildout and those costs are expected to weigh on profitability before easing as more infrastructure comes online. So listen to for any update on the pace of that OpenAI rollout which they're executing into next year and whether Taiwan Semi can keep up on giving and making those chips for Cerebras. So for a company whose valuation is built on years of future growth, this report is less about what happened maybe just over the last quarter and more about whether the roadmap still looks intact.

[Brian Sullivan Kelly]

Brian okay, so what are the key things that Christina, Parts and Evolution investors are going to be looking at in this earnings release?

[Christina Parts of Elvis]

Well, the ones I see, you have the revenue amount, the margins amount.

[Chris Grisanti]

Yep.

[Christina Parts of Elvis]

To tsmc, if they still have, you know, the full supply coming from tsmc. I think that's a major issue for a lot of chip companies.

[Brian Sullivan Kelly]

Tsmc, obviously out outside of what you reference. I mean what are we, what are, what are kind of the whisper things that we're looking at?

[Michael San Satera]

The.

[Christina Parts of Elvis]

Oh, I guess it would be the impact on margins, the backlog, which is primarily just open air. And that's a little concerning when you know all of your business comes from one large player, a very large player that has a lot of money, but still that, that is a little bit alarming. And then us. So what kind of money are they going to be getting from Amazon? And will it be another take and pay agreement, meaning that Amazon will pay up front so that Cerebras can make these chips to incorporate into the Trainium systems.

[Brian Sullivan Kelly]

What do they, where do they fit in the chip schema? Like where the company, I didn't know the company before they went public. What do they specifically do?

[Christina Parts of Elvis]

They make chips as well, but they also provide the infrastructure and software. But their chips are much larger so that the memory can sit on the chip because other chips you have like a GPU or a cpu, then you have memory and they need to be connected to each other. And so sometimes you have a slowing down of AI queries when that highway grows larger and larger. And so the benefit for Cerebrus is that everything is on that particular chip. And so it provides a low latency type of answer to queries when you're doing your AI requests.

[Brian Sullivan Kelly]

All right, good stuff, Christina. Parts of us look forward to that and more. Christina, thank you very much. And by the way, Cerebras CEO Andrew Feldman will join Squawk on the street tomorrow morning to talk about the results that come out this afternoon, 11:00am Eastern Time. And by the way, ahead of that, I shall also be Hosting Fast Money, 5pm Eastern. We will no doubt talk more about this company whose name I just cannot seem to master. We'll get more on that at fast money 5:00pm all right, but we're not done here or on Power Lunch. And coming up, SpaceX set to snap a three day losing streak. Your trader says owning or not owning shares is one of the most consequential fund management decisions of the year. Wow. We'll find out why next. Welcome back to the exchange. SpaceX not there now, but earlier it did fall below its debut price of $150. Right now it's up 4%, about 160.77 per share. Now the stock did fall about 16% yesterday after space X announced a bond offering and disclosed about 100 plus billion dollar cash pile. That would seem to be good news despite the recent discount on the stock. Your next guest, still not a buyer. Let's talk about why. Victoria Green, G Squared Private wealth cio, CNBC contributor I guess not you, but any of our viewers, if they bought after the first trade, they've probably lost money. I mean it's been, it's been a tough ride for those who bought right after that first trade. Why are you still staying away from Space X?

[Victoria Green]

Yeah, and I feel like this takes going to get me a lot of hate, but I've tried every bit of mental gymnastics to get there of why I should own it. But look, I am a macro top down and a bottom up fundamental manager. That's my approach and philosophy of the markets. I just cannot make this stock fit. I'm sorry, I can't. Not at this valuation. I am not agnostic, agnostic to what Space X might bring us. I'm not agnostic to their cozy relationship with the government, their iron grip on space, what they might do with how wonderful starlink is. All of those are wonderful things. I just can't get there on a multiple. I just can't pay this much for this stock. I think it's possibly a wonderful stock. I think this is one of the more consequential decisions I make, especially in our core portfolio or our growth portfolio. Owning or not owning, Space X may make or break how you do versus your benchmarks this year, but on a valuation basis, considering the revenue, considering what I think is going to be a massive cash raise to get there, the cash burn to transition XI into this large language module, into this app from just running compute power. That's a huge capex expenditure. We're going to see a huge change. And just because you come out with a lot of, a lot of pomp and circumstance, big IPOs have honestly not fared that well in the last last probably decade. So I'm just nervous about where it's trading here. So I get.

[Brian Sullivan Kelly]

Hold on, Victor, I got to go. Why is it so consequential? Why does it matter so much? It's one company, it's one stock.

[Victoria Green]

Yeah, but it's a big old one. You know it's going to be added into every index. It's going to be added into Every growth manager is going to be added everywhere. Everybody is probably the most talked about stock. You know, two years ago it was Nvidia, this year's Micron, now it's Space X. So suddenly it becomes do you or do you not own it? And if it runs away from me, you know, obviously that's going to be a really difficult relative decision, especially as it gets added into the indices. Now I do get a bit of a breather since it's not going to the S and P. But again, as a fundamental manager is a really hard stock to buy even with all of the growth trajectories out there. Elon Musk often gets there, but it takes him significantly longer and significantly more difficult to hit. A lot of his vision. He's a visionary guy. Doesn't necessarily mean it's wonderful on execution.

[Brian Sullivan Kelly]

Yeah. So what would you be? Anything that would lure you into the stock that would entice you enough that stock price got to keep falling.

[Victoria Green]

Yeah, I think I get interested below IPO price. I get real interested, around 100 a share. I get more and more interested as we see, see how much capital they have to raise and their first couple of earnings announcements. So I think once we get a good look under the hood, we see what kind of cash raises they're bringing to the market. You know, this first bond, bond offering is actually being very well received. But we'll see as they have to continue to raise capital to expand because Terraform is going in about 20 miles away from where I live and that is a massive, massive commitment there. None of these things they want to do is cheap. Operating rockets are not cheap and that's

[Brian Sullivan Kelly]

a huge cash burn. Very. They are not. All right. Staying away consequential, but not in it yet. Victoria Green, always a pleasure to get your time. Thank you very much, folks. That is it for us here on the Exchange. Kelly will be back tomorrow. I'll see you in about two and a half minutes on Power Lunch right after this.

[Christina Parts of Elvis]

You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.

[Keith Lansford]

Trading at Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful webcasts, articles, engaging videos and more, all curated just for traders. Plus guided learning paths with content designed to fit your unique interests. And no sifting to find exactly what you need so you can spend your time learning to trade brilliantly. Learn [e-mail] trading.