Hesitation over Hassett, the Billionaire Tax Battle, and a Power Auction 1/16/26

Summary

Podcast Summary: The Exchange (CNBC)

Episode: Hesitation over Hassett, the Billionaire Tax Battle, and a Power Auction

Date: January 16, 2026
Host: Kelly Evans
Notable Contributors: Rick Santelli, Steve Liesman, Robert Frank, Drew Pettit, Gene Munster, Deirdre Bosa, Pippa Stevens, Victoria Greene

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Episode Overview

This episode of The Exchange dives into three major business and policy stories shaping the market’s narrative mid-January 2026:

• The uncertainty around the Federal Reserve Chair nomination after President Trump’s comments about Kevin Hassett and Kevin Warsh,
• The ramifications of a proposed billionaire tax in California, especially for tech founders,
• An emergency power auction prompted by White House demands that big tech companies pay to expand electricity capacity.
  The episode features real-time market reactions, expert debate, deep dives into AI and tech trends, and lively banter on core economic and regulatory developments.

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Main Discussion Points & Insights

1. Fed Chair Uncertainty: Hassett vs. Warsh and Market Impact

[01:31 – 11:53]

• President Trump publicly expresses a reluctance to move Kevin Hassett from his White House role into the highly anticipated Fed chair position, despite Hassett being the frontrunner. This "monkey wrench" throws the nomination process into chaos and boosts the odds for Kevin Warsh, a more hawkish and Fed-critical candidate.

  • Steve Liesman: “Warsh has openly praised the President’s economic policies and been highly critical of the Fed… Warsh is seen as more hawkish than Hassett.” [03:05]
  • Rick Santelli downplays the effect, suggesting technical market factors matter more than "water cooler talk":
    “All of that is really fun water cooler talk. But what’s going on is technical.” [08:13]

• Treasury Yield Movements: After the President’s comments, 10-year yields pop above 4.2% for the first time since September.

  • Steve Liesman: "Yields rose. You could ignore that if you like and superimpose your own personal views on what's happening." [10:07]

• Market Implications: Debate over whether the Chair's identity deeply impacts markets—Santelli argues the technicals and underlying economy matter more.

  • Kelly Evans: “Does a stronger economy mean we need higher rates?” [09:31]
  • Santelli: “Everything the economy in my opinion is going to get higher rates for exactly that reason. We’re going to get back to old school type trading. The Economy is going to do well and interest rates are going to go up a bit.” [09:35]
  • Liesman: Wall Street’s concern is about Fed independence if Hassett is nominated. [10:32]

• Fed Independence Debate:

  • Rick Santelli: Dismisses the drama, “The Fed is the Fed. Nothing's going to change at the Fed. There's going to be more eyeballs and more reporting on every twitch of the Fed now than there ever has been in history.” [11:41]
  • Steve Liesman (counter): “Kevin has said there's going to be changes at the Fed if Kevin Warsh comes in, that's for sure.” [12:08]

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2. Economic Growth, Inflation, and Market Resilience

[12:46 – 16:39]

• Drew Pettit (Citi US Equity Strategist): The economy is showing strength, demonstrated by robust industrial production and positive earnings growth across more stocks.

  • “The economy’s working. There’s more stocks with positive earnings growth. How you offset higher rates and equities is better growth.” [12:46]
  • Inflation at 3% is manageable for equities; pricing power remains strong, and input/cost inflation is normalizing, making the environment better for margins. [13:54]

• Small Cap vs. Large Cap: Pettit advocates for both small cap value and large cap growth, citing secular AI drivers and earnings momentum.

  • “You find risk at the corner in the size and style box… Buy growth, buy momentum, and you should have a pretty good portfolio.” [15:59]

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3. AI Trade, OpenAI Monetization, and 'Agentic Commerce'

[19:55 – 26:29]

• OpenAI to Launch Ads on ChatGPT: Julia Boorstin (CNBC) explains the revenue drive, directly challenging Google. Projections see potentially $100 billion in search ad revenue by 2030 for OpenAI if it can take significant share. [19:55]

• AI Investment Theme:

  • Gene Munster (Deepwater Asset Management):
    • Sees both Google and OpenAI as “winners”—user behavior is shifting, and time spent searching/using chatbots is growing overall, not simply shifting from one to the other.
      “This can be one of those rare cases when both companies can win. Consumer behavior is changing.” [22:00]
    • The next hurdle for AI companies is “Capex guidance”—how much the hyperscalers will invest in infrastructure. Munster forecasts even higher spending than the already-upgraded street expectations, predicting continued tailwinds for both large and especially smaller-cap AI infrastructure plays.
      “The inference market last year in 2025 was five times as big as the training market… This party is going to continue longer.” [24:59]
    • Favors small cap AI stocks for greater near-term upside due to likely higher earnings revision rates. [25:27]

• Policy Risk: With calls for Big Tech to pay for power grid expansion, Munster notes this could slightly favor small players over giants financially burdened by new costs. [26:07]

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4. California’s Billionaire Tax and Tech Founder Fears

[28:09 – 30:38]

• Robert Frank (CNBC): A provision in California's proposed wealth tax could—depending on interpretation—increase tax bills disproportionately for founders with “super-voting shares,” such as Google’s Larry Page and Sergey Brin.
  • Example: They could be taxed at $60 billion instead of $6 billion each if the law interprets these shares as non-public—though the law’s architects deny this interpretation, calling it “absolute nonsense.” [28:09–30:06]
  • Tax would hit official on Jan 1, 2026 if passed; many wealthy individuals are already considering moving to avoid it. [30:15]

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5. Emergency Power Auction: Tech Pays for Grid Expansion

[32:20 – 33:38]

• Pippa Stevens (CNBC): President Trump pushes for tech companies to fund new power plants to ensure enough electricity for data centers.
  • Emergency auction called by PJM (regional operator) to allocate long-term power agreements to tech firms.
  • Immediate stock reaction: Independent power producers like Constellation, Talon, and Vistra drop sharply, while suppliers like GE Vernova and Siemens Energy surge due to anticipated demand for turbines. [32:20]
  • Implementation remains unclear, but the auction is intended to clarify the real long-term cost of power for tech firms and the sector.

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6. Policy Volatility, Market Plays, and Political Jockeying

[34:28 – 38:54]

• James Lucier (Capital Alpha Partners):
  • Describes the administration’s frenetic pace of policy announcements as generating an “ice cream headache.” [34:28]
  • Trend: Investors try to preemptively position for policy moves (“follow Trump in these trades”)—whether it’s housing, drug prices, or energy. [35:28]
  • Both President Trump and Senator Elizabeth Warren embrace a populist focus on affordability; bipartisan alignment on pocketbook issues. [36:00]
  • Prediction: Democrats narrowly win upcoming midterms, largely due to structural districting, not a big swing in support; the next 6-8 months are crucial for the administration to push through policy. [37:18]

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7. AI Coding Inflection & Tech Disruption

[39:53 – 43:49]

• Deirdre Bosa (CNBC):
  • Demonstrates “vibe coding” via Claude Cowork—tools that let non-programmers rapidly build useful (and whimsical) software apps via AI prompts.
  • Argues these tools won’t immediately replace enterprise software like Salesforce, but could disrupt smaller point solutions and ultimately transform software creation.
    “This is the worst that it’s going to be. It’s only going to improve… big companies like Salesforce and Workday are safe for now, but upstarts or point solutions may be at risk.” [43:03]

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8. Earnings Preview: Netflix, Intel, Schlumberger

[44:40 – 47:14]

• Victoria Greene (G Squared Private Wealth):
  • Netflix: Hold rating—deal news (WBD acquisition) raises regulatory and execution questions.
  • Intel: Buy rating—compelling turnaround narrative, the focus is on execution and foundry progress.
  • Schlumberger (SLB): Positive outlook—offshore and international drilling boom counterbalances stagnation in US shale, particularly boosted by developments in Venezuela and Saudi Arabia.

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Notable Quotes & Time Stamps

• Steve Liesman on Warsh:
  “Warsh is seen as more hawkish than Hassett who has raised concern that he would be less independent from a President.” [03:05]
• Rick Santelli:
  “All of that is really fun water cooler talk. But what's going on is technical… in the end it does not matter. It's great stories give the finances matter.” [08:13]
• Drew Pettit:
  “How you offset higher rates in equities is better growth… That’s the kicker. It’s growth.” [12:46]
• Gene Munster:
  “I think this can be one of those rare cases when both companies (OpenAI and Google) can win. Both companies can have massive businesses, advertising businesses within AI agentic commerce.” [22:00]
• Robert Frank:
  “If their super-voting shares are considered non-public… these two could face a tax of $60 billion each.” [28:33]
• James Lucier:
  “The technical term is ice cream headache. There’s just too much fun, too many things coming out to really make sense of.” [34:28]
• Deirdre Bosa:
  “With zero technical experience, I was able to make a fully functional earnings analysis tool with just a few prompts. That indeed is a ChatGPT-like inflection moment for software investors.” [39:53]
• Victoria Greene:
  “Netflix is definitely betting on [regulatory approval]. They've got like a $5.8 billion breakup fee if they can't get approval… But it's going to be all about the Warner Brothers deal.” [44:40]

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Key Segment Timestamps

• Fed Chair/Market Reaction: 01:31–11:53
• Economic & Market Analysis (Pettit): 12:46–16:39
• OpenAI/AI Trade (Munster): 19:55–26:29
• California Billionaire Tax (Frank): 28:09–30:38
• Emergency Power Auction (Stevens): 32:20–33:38
• Policy Volatility (Lucier): 34:28–38:54
• AI Coding Demo (Bosa): 39:53–43:49
• Earnings Preview (Greene): 44:40–47:14

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Episode Tone & Style

• Language: Fast-paced, financial newsroom style peppered with energetic debate and the occasional dry humor or friendly banter.
• Highlights: Spirited (sometimes combative) exchanges between market veterans (Santelli vs Liesman), rapid-fire expert analysis, real-world immediacy (breaking news and live reactions), and hands-on demonstrations (AI coding).
• Accessibility: Offers both technical commentary and plain-English explanations for wide audience utility.

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In Summary

This episode spells out the intersection of politics, technology, and markets as policy uncertainty, AI-driven innovation, and populist challenges collide. Listeners receive real-time analysis, actionable insight, and a front-row seat to the ongoing tug-of-war between policy, innovation, and market reaction—all delivered in classic CNBC style.

Transcript

[Rick Santelli]

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[Kelly Evans]

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[Rick Santelli]

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[Kelly Evans]

Thank you very much Frank. We have one Kevin, three hawks and two hurdles passed for the tech trade. Welcome to the Exchange. I'm Kelly Evans and let's take a look at stocks which are in a cautious pattern today after the President this morning said Kevin Hassett may not be the next Fed chair that could put the major averages on track for a losing week. Now, although the smart small caps are carving out a win of about 2 1/2% since Monday and the 10 year treasury yield popp topping back above 4.2%. If we close there, it'll be the first time since September. The President meantime also ordering an emergency power auction for regional operator pjm and he wants the big tech companies to pay to add more power. Constellation, Vistra, Talon, all sharply lower as a result of that. But let's begin with the latest developments on the Fed front and the fallout for markets. Steve Liesman joins us with the headlines. Rick Santelli is keeping an eye on those bond moves. Steve, let's start with you.

[Steve Liesman]

Thanks Kelly. President Trump throwing a monkey wrench into the outlook for the next Fed chair, saying he wants to keep Kevin Hassett, the once presumed runaway favorite for the job in his current position at the White House.

[Rick Santelli]

I see Kevin's in the audience and I just want to thank you. You were fantastic on television today. I actually want to keep you where you are if you want to know the truth. Kevin Hassett is so good. I'm saying, wait a minute. If I move them, these Fed guys, certainly the one we have now, they don't talk much. I would lose you. It's a serious concern to me.

[Steve Liesman]

The comment had an effect on rates that Rick Santelli will tell you about in a second but also sent the odds soaring for former Fed Governor Kevin Warsh, the long running second choice. Warsh has openly praised the President's economic policies and been highly critical of the Fed. In a November Wall Street Journal op ed he said inflation is a choice in the Fed's track record under Chairman Jerome Powell and is one of unwise choices. The Fed should reexamine its great mistakes. It should abandon the dogma that inflation has caused when the economy grows too much and workers get paid too much. And most of significantly, Warsh is seen as more hawkish than Hassett who has raised concern that he would be less independent from a President who has insisted on much lower rates. While Warsh has said the Fed should gear its policies towards low inflation from the President's economic policies. And he's also called for a smaller Fed balance sheet and reining in the Fed's impact on the economy. Kelly, a very slight change in the Fed funds rate more reflecting down the road than near term.

[Kelly Evans]

Kelly and I want to zero in. This is why, Rick, we appreciate you being able to join us to do this. When and where do we see treasury yields move in response to this? I want to know what it's telling us about what the market thinks is going on with the economy. Rickster, go ahead.

[Rick Santelli]

Was that to me?

[Kelly Evans]

Well, yeah, go ahead, bud.

[Rick Santelli]

Yeah, in my opinion, in my opinion there's a couple of things we should talk about before we get to that. One of them is what the credit spreads are doing globally and domestically. Now, I don't have a chart of the investment grade, but investment grade is around three quarters of a percent, meaning that people and investors around the globe are happy with 3/4 of a point higher than a 10 year to take credit risk on a corporate security and on the high yield. We do have that. Let's show that that's hovering around 285 basis points. Basically both of those are the narrowest, the closest they've been in almost 20 years going back to 07. Why is that important? Because if investors are happy with hardly any add ons to the best credits in the world, sovereigns, that's a good thing at a time for where countries and companies, AI driven and debt driven are going to be issuing lots of paper in 2026. So that's good news. Okay, so in my opinion, if you look at the first chart I have, this is basically one week we're popping through the range. You pointed that out. We haven't closed above that 20 since September 3rd. Now if you look at the all time low From August of 2022, what you'll see is is that we basically have really been in a super super tight range all things considered and especially in the recent past. And I think that's a very good thing. I see interest rates moving up. I think the range for the first half of the year is going to be basically 408, 409 to 435 to 437. I think on this go around right now we're going to pause a bit at four and a quarter, maybe come back down and test the range. If I had to make a guess for the high yield of the year, I'd say if we close above 437 before we close below last year's low 395, I see a 462.

[Kelly Evans]

Okay.

[Rick Santelli]

But if we close under 395 before we close above 437, I see us basically just going sideways around 4%.

[Kelly Evans]

Let's put up the intraday chart of the 10 year and the 2 year. Steve Liesman, what reaction did you notice when the President talked about maybe keeping Hassett where he was and putting Wash in that chair?

[Steve Liesman]

Yeah, it's interesting to look at that chart Kelly, because if you do you see that there is a pop there in yields that's related to it. And it happened on both. I didn't check the spread but you saw it also a bit in the two year as well. And what that's reflecting I think is a little bit more hawkishness perceived, a little more perhaps independence on the part of Wash. It's not a huge move, it's a modest move and it's been probably the top of the range. In fact I just read a piece this morning that suggests that this is this 420 is the top of the range and wondering if we'd get a breakout from that range. So clearly the market reacted. What I didn't see, Kelly, is very much movement in the Fed's funds futures market a bit all the way down the road where there's not a lot of so then liquidity in that. If you look, I don't.

[Kelly Evans]

Yeah. Quickly, I just want to ask you both then in which get this narrative straight. So then why is the tenure at 421 today, first to Steve and then to Rick?

[Steve Liesman]

Well, again, I think it's the perceived hawkishness on the part of being more hawkish and certainly more independent. And that's really what the big knock has been against Hassett. I don't know if the president is reacting to that. What he's saying specifically is that he likes Hassett in this position where he can promote the administration's economic policies. But you can't divorce it, Kelly, from the idea that all of this is happening in the wake of that very controversial criminal investigation into the Federal Reserve, which has raised a lot of hackles, especially in the Senate that's going to have to approve the Fed chair's nominee for chair.

[Rick Santelli]

Rick, you notice I didn't mention any of the Hassett or the Warsh issues in any of my charts or my commentary because it's all a tempest in a teapot, in my opinion. I disagree with all of it. It's a Friday. We've been in a sideways range, knocking at 419, knocking at 413 for six weeks. Six weeks and all of a sudden on a Friday, which always usually has interesting technical moves, we've popped through the top of the range. Maybe the HACCP story got more eyeballs in the marketplace. But in my opinion all of that is really fun water cooler talk. But what's going on is technical and I really do think whether it's Warsh, whether it's Rick Reeder, that in the end it does not matter. It's great stories give the finances matter.

[Kelly Evans]

What matters is it that the economy is looking stronger Rick that the odds.

[Rick Santelli]

Of rate cuts only it's the economy and nobody's given the economy much credit. Rick Reeder and War do agree as most of the candidates did about one thing 2026 could be a robust year for the US economy and if politics would only get out of the equation here I think there's a clear, clear path. We talk about so many things have.

[Kelly Evans]

To higher rates or path to does a stronger economy mean we need higher rates?

[Rick Santelli]

Everything the economy in my opinion is going to get higher rates for exactly that reason. We're in get back to old school type trading. The Economy is going to do well and interest rates are going to go up a bit. The tight credit spreads tell us there's demand out there. And I think ultimately we're going to have to sweeten the offers a little bit as year goes on to keep such investor interest with so much issuance.

[Kelly Evans]

Yeah. Take note when you're talking 440 and 460. Steve, a quick last word.

[Steve Liesman]

I just look at the chart. The chart shows me that when the President made those comments, yields rose. You could ignore that if you like and superimpose your own personal views on what's happening in the market.

[Rick Santelli]

That's not my personal view. Look at the last 10 trading days. We get up to 1819. 1819. It pops two basis points and you're making that everything about what the Fed picks going to be.

[Kelly Evans]

Maybe it's jobless claims, Steve.

[Steve Liesman]

Well, jobless claims were yesterday. You know, I don't think trading today preservation. I'm not going to argue it, Kelly. It's Friday and you know, we'll go off into the sunset here and have a nice long weekend. And I think it's very interesting the way the market is trading in relation to the difference between Warsh and Hassett. And I think there's a substantial difference. I think the market perceives it. I know that. I have reported that Wall street, key Wall street official executives have expressed their concern to the President over the potential lack of independence of a Hassett chairmanship and it's all right, we'll leave it there. Come on, Rick. Are you saying my reporting, Rick, are you saying my reporting was not accurate? Because I heard your reporting.

[Kelly Evans]

I love you.

[Rick Santelli]

It's very accurate. It's super accurate for economists and analysts. If you're a market trader, you only look at what really moves markets, not what, you know, Financial Times is writing scary stories about, oh my God, no more Fed independence. I don't buy into it.

[Kelly Evans]

We will see come Tuesday. I think.

[Steve Liesman]

What don't you buy into the bond market open Monday, last night.

[Robert Frank]

Go ahead.

[Rick Santelli]

The Fed is the Fed. Nothing's going to change at the Fed. There's going to be more eyeballs and more reporting on every twitch of the Fed now than there ever has been in history.

[Steve Liesman]

All right, Rick. See, that's where I think you're really wrong. I mean, this is a subject for another day. But I think if you get a Kevin Warsh. Let me finish, Rick. If you get a Kevin, if you read what Kevin Wash has said and I'm going to report on this next.

[Rick Santelli]

Week, I'VE been watching this.

[Steve Liesman]

Kevin has said there's going to be changes at the Fed if Kevin Wash comes in, that's for sure.

[Kelly Evans]

That sounds like a topic for whatever yields do when everyone's back at their desk. If that's Monday or if that's Tuesday, with more liquidity, maybe we'll get a clearer tell. Gentlemen, really appreciate it. Didn't mean to cause such a fuss. Steve Leisman, Rick Santelli can the market make new highs if yields do keep climbing? And if this chatter about maybe no more rate cuts gets a little bit louder, let's ask Drew Pettit now. He's the US Equity strategist over at Citi. Drew, do you want to jump in here and cast a vote one way or the other on what you think is going on with yields today?

[Drew Pettit]

I'm going to keep it simple and stick to the economy on this one. Probably be a little bit less fiery than Stephen Rick there. But look, industrial production came out this morning. It was actually pretty good. You were looking at 110 month over month in the survey coming into it. You got 410 and that's still moving up into the right. I'm going to stay out of kind of the intraday moves and a little bit of the noise. But yeah, the economy's working. There's more stocks with positive earnings growth. How you offset higher rates and equities is better growth because it's not a fixed asset. So that's the kicker. It's growth. You get higher growth. You can deal with higher rates and I think that's why small caps responding so well today.

[Kelly Evans]

Yeah.

[Robert Frank]

Do you.

[Kelly Evans]

So the way that I try to think about this is I can't help but traditionally have thought of Warsh is more hawkish, but I understand he's, he's more dovish now. But is the market trying to figure out, you know, if that would mean even a too hot economy? Right. I mean, do you worry or sense that inflation at 3% or around that level is, is too high? Is, is the stock market telling us it's not a big deal, it's fine for equities.

[Drew Pettit]

That's not a problem. We've done a lot of this work historically. That actually means pretty decent pricing power. What's, what's actually interesting on the inflation side from an equity perspective, it's inflation differentials. That's actually been a really bad headwind for stocks over the past couple years. So price inflation moves top line. Okay, we get that. It's the cost input inflation that's actually been Much higher. So that in a sense, like it really does hurt margin trends. That's actually normalized quite a bit in the recent quarters. And we look, when we look ahead this year, it's about to normalize. Top line price inflation should be really similar to cost inflation.

[Deirdre Bosa]

Right?

[Drew Pettit]

So that's an abating headwind.

[Kelly Evans]

No, I take your point. It's less of a squeeze on companies and so they can pass it along, but consumers don't want them to pass it along. Drew, come on, another year at 3%. You don't have to weigh in on that. But that's my observation. I do think people are a little frustrated. Does it drive them, the investors into metals on the margin? You know, do you have a point of view of why that might be a play? Is that just a hedge fund chase? Is there something macro to say about that or.

[Drew Pettit]

No, now there was a bit of some kind of hedge fund and macro chasing and momentum trading even see it in the ETF flows on the, on like precious metals. But yeah, like honestly, when you're kind of concerned about runaway inflation and how central banks are going to react, gold just becomes a really easy inflation trade. So yeah, people have gone there. So I think that's something you want to watch when you're thinking about longer term inflation risks. It's probably not going to show up in the market, in the stock market anyways. Lots of things kind of moving interest rates here and there. But again, rate ball is still pretty low. It's a pretty good setup for equities still.

[Kelly Evans]

And I want to just mention your corners strategy here where you like small cap value but you still like large cap growth. You're talking about some of the regional banks and then some of the big guys sticking with an Nvidia, Microsoft CrowdStrike, Palantir, the health care names, Boston Scientific and Lilly. So you're saying ignore the middle.

[Drew Pettit]

Yeah, it's, it's funny when you're in this good growth environment, you got a secular driver in AI, you want risk and you don't really find risk in the middle. You find it at the corner in the size and style box. And look, growth revisions are still moving higher. For large cap growth companies, that's great earnings momentum. On the other side, in small cap value, you actually don't need revisions higher. You can actually cut estimates for 2026 and growth is still going to be good there. It's going to inflect higher. So buy growth, buy momentum in growth and by inflecting growth and you should have a pretty good portfolio to withstand. Well, a lot of the stuff that got Steve and Rick heated, I was.

[Kelly Evans]

Going to say a lot of the, what do we call it? A lot of the noise. It's not noise. It's more than that. But I take your point. Drew. Thank you. We'll leave it there. Move along. Drew Pettit over at Citigroup today and the tech trade certainly came roaring back this week and that was thanks in part to the chip makers. The semi ETF hitting another record high today. We'll ask Gene Munster if this trade keeps going next. Plus, power producers are lower as the president pushes for an emergency auction to make tech firms pay for more capacity. We'll tell you what it means for the build out and your utility bills ahead on the exchange.

[Rick Santelli]

This is the exchange on cnbc. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and [e-mail] Market Update podcast or find Schwab Market Update wherever you get your podcasts. What if you could monitor the health of your career?

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[Unknown Narrator/Voiceover]

Now from President Trump to that trade.

[Rick Santelli]

Deal that was struck overnight between.

[Unknown Narrator/Voiceover]

On.

[Rick Santelli]

His way to his weekend in Florida, stopping to talk to reporters.

[Unknown Narrator/Voiceover]

And he had this to say on the deal.

[Rick Santelli]

Well, it's okay. That's what he should be doing. I mean, it's a good thing for him to sign a trade deal. If you can get a deal with China, you should do that to that trade deal. Just looking at that deal hours or so suggesting that kind of like my.

[Kelly Evans]

Verizon connection the other day. Amen. We'll, we'll come back to you. But we did get the sound bite in so people could hear that. Thanks. Amen. Javors. We've also got some news on Open Air. Let's get out to Los Angeles with Julia Boorstin. Julia. Hey Kelly.

[Deirdre Bosa]

OpenAI is going to be starting testing ads on ChatGPT in the US on its free and go tiers. This is directly targeting its rival Google OpenAI saying this is so more people can benefit from from its tools with fewer usage limits. And its Plus Pro and enterprise subscriptions will be ad free. Now ads could be a key way for OpenAI to generate revenue to pay for its massive infrastructure commitments. And this move comes after back in December, the company said that it's doing it's called what a code red. It was pausing its advertising efforts as it worked to improve its chatbot to compete with its rivals. The question for Google now is how big of an ad business can chat GPT build around its 800 million weekly users with 95 million of them estimated in the U.S. wells Fargo projects OpenAI will hit $100 billion in search ad revenue with 30% market share by the year 2030. OpenAI's other news, it's announcing that its lower cost subscription tier called ChatGPT Go will launch in the US is already available outside the and that will bring expanded access to messaging, image creation, file uploads and memory for $8 a month. The dominant ad giant Google is seen as having an advantage in the AI ad space. Of course, it has all the ad infrastructure and Google currently controls about 50% of search market share. Now Google does already have ads and its AI overviews, but just this week it pushed back on reports that it's launching ads within Gemini.

[Kelly Evans]

Back over to you deal. I can't wait to see how it works. Julia, thanks very much. Julia Boorstin, Speaking of AI, that trade regaining its footing this week after strong results from Taiwan semi the SMH ETF hitting another all time high today. Our next guest says this week's action shows the trade has passed its first two hurdles of 2026. So what's the third? Let's bring in Gene Munster, managing partner at Deepwater Asset Management. First of all, Jean, any reaction to ChatGPT's ad advertisement plans here?

[Gene Munster]

Yeah, Kelly, I'm trying to always figure out who's the winner and who's the loser in this. And like, is this bad for Google? I think Google is going to do well in 2026, but my first reaction was around figuring out the winner and the loser. And I think that this can be one of those rare cases when both companies can win. Both companies can have massive businesses, advertising businesses within AI agentic commerce. And the reason why is that consumer behavior is changing. Essentially what we've seen from Google's results over the past six months is that people talk about those 800 million monthly active OpenAI users, 2.5 billion search users. These people are having a better understanding that it can find out more by using a chatbot or search. And so if you're going to put a matrix together in terms of time spent, I haven't done this. But if you look at just where we spend our time throughout the day, that piece where we're searching for information, whether through traditional Google search or through a bot, is increasing. And so I think this is a case where companies like OpenAI and Google are both winners. It's going to be a fun storyline and I'm sure creates some wonderful debate, but I think they're both going to win.

[Kelly Evans]

Look, your point intuitively makes sense because we're so early on just this morning I asked it what earrings I should wear with this dress. Actually, I took a picture of the dress and a picture of the jewelry box. I like it and I disagreed with its choice, but it made you should have seen the chaos of this, of this spread and it was able to identify. It said, oh, I think you should wear the gold hoops and not too boring. Anyway, so if that's all the case and you mentioned that the AI trade has passed two hurdles and that it seems to still this tide be lifting all boats here. I mean there are some firms like Yardeni Research which have underweighted certainly the Mag 7. What do you think is the third hurdle this year and are you sticking with tech broadly or more specifically?

[Gene Munster]

So I think that the third hurdle it gets more coming up more recently, of course we had the good news from tsmc, we had the good commentary from Nvidia at ces, but the third is going to be about Capex guidance. Just a quick view on that. It was 30% growth is what the hyperscalers analysts were expecting. Hyperscalers to grow in 22 and 2026, 30% growth that was the expectation a few weeks ago. That's now inched up to 34% and so that's moving higher. That's the next hurdle of course at the end of this month. But just a couple of quick thoughts first in terms of the kind of what's going on, the bigger picture, why I think that we'll get good news later this month. I think those capex numbers are going to be probably plus 40% is investors are making a fundamental mistake when they think about this infrastructure buildout. The conversation is wrapped around the idea of infrastructure for training and the reality is is that the inference market, Jensen talks about this but we have affiliate company Intelligent Alpha which uses a lot of these models. We see how long these models are thinking that inference market last year in 2025 was five times as big as the training market.

[Rick Santelli]

Right.

[Gene Munster]

Over time this could be hundreds, thousands, hundreds of thousands of times bigger. So this party is going to continue longer as far as kind of the small versus large cap piece. I made a prediction earlier standby it this back in December that small cap is going to outperform. We have an ETF L O up which focuses on those small cap. You saw it this week amd up 14% on that TSMC that.

[Kelly Evans]

Why is that? Just because the gains have kind of run their course for the big guys.

[Gene Munster]

That's one piece to it. But if you just look at, if you're a believer, ultimately it comes down to do you believe that this infrastructure piece that comes back to that inference, if you believe that that's the case just mathematically these smaller companies should have higher greater earnings revisions and so still a big believer. I think Apple is going to be a wonderful performer in the first half of the year. Google for the year. But I think this small cap trade, it happened last year, I think it's going to continue throughout this year.

[Kelly Evans]

One quick follow on to that Gene. This headline and this event at the White House where the president is evidently hoping big tech will pay for some of the build out. Would that be a reason to favor the smaller players here? I don't see him hauling AMD in there and saying, you know, you have to pay the bill.

[Gene Munster]

Yeah, I mean it's. You could. It is on the margin that does favor some of the small caps because you have to add that into the equation, the expense equation. This reminds of net neutrality and some of that conversation. But ultimately if the bigger companies are fitting some of that bill, even just that narrative alone should benefit some of the multiples of these smaller cap companies that are that are in that sweet spot.

[Kelly Evans]

All right. Really interesting. Gene, thanks so much. We appreciate it today.

[Gene Munster]

Thank you.

[Kelly Evans]

Jean Munster with Deepwater. Coming up, the billionaire tax battle in California. It is certainly heating up and tech founders could end up being the biggest losers. We'll have the latest details on that front next.

[Deirdre Bosa]

At Capella University, we believe accessible education can make a difference. That's why we offer scholarship opportunities to all eligible students. Un futuro diferente esta mas cerca de lo que cres. Kunkappela University. Learn more at capella. Edu what made you confident that you could do something that hadn't been done before?

[Kelly Evans]

I have no fear of failure.

[Deirdre Bosa]

Trailblazing women, changing the game.

[Kelly Evans]

One of my favorite pieces of advice, think about what your boss's boss needs. Leadership can look in many, many different forms.

[Deirdre Bosa]

It really does come down to just trusting yourself. Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday, wherever you get your podcasts.

[Kelly Evans]

Welcome back. Keeping an eye on the markets which are turning green across the board this hour, albeit in a small way. At its lows, the dow was down 200 points and we're up 37. The NASDAQ higher the S and P as well by a tenth of a percent. The small caps are leading the way again today, up 0.6% and they're the only of the major averages higher for the week now and they're up about 2 1/2% since Monday while everyone else is down fractionally. And they the biggies are on pace for their second negative week in three. Let's get over now to founders in Silicon Valley and the rest of California who are realizing there's a founders penalty hidden in the state's proposed billionaires tax. Robert Frank is here to explain.

[Robert Frank]

Robert Kelly, great to see. Well, a debate has erupted around a provision of that California billionaires tax that some say would hit the founders extra hard. So this tax, which could appear on the November ballot, would impose a 5% on the total wealth of people worth a billion dollars or more. But according to some tech founders and investors, those with super voting shares could face a super sized tax. So according to the bill, publicly traded shares will be valued at their public price, but non publicly traded assets could be valued based on the voting shares, which of course could be far higher. So as an example, let's take Larry Page and Sergey Brin. They each own around 3% of the total shares of Alphabet, but they hold super voting shares that carry 10 votes each, giving them the combined majority of the voting shares. Their shares are valued just on an economic basis at around $120 billion. That would imply a California billionaire tax of around $6 billion. But if their supervoting shares are considered non public, since they don't technically trade as separate shares, these two could face a tax of $60 billion each. At least that's according to what many people say. Now, Gary Tan, the Y Combinator CEO whose posts on the provision have gone viral, said this is proof that the wealth tax is poorly defined and designed to drive tech innovation out of California. Now, I spoke to the professors who actually wrote this tax. They said this is absolute nonsense. This is false as shown by a straightforward reading about the provision. Taxpayers with publicly traded stocks, they say, will be taxed based on the market value of their holdings and nothing else. For more on the California wealth tax and other tax planning strategies for the wealthy, you can sign up for the Inside wealth newsletter at cbc.com insidewealth com.

[Kelly Evans]

Kelly good time to dig in and explain this all because people are sort of people are already moving because of it. And this would be in the fall and November. Robert did they vote on it?

[Unknown Narrator/Voiceover]

Yeah.

[Robert Frank]

So the tax is would be voted on the fall, but it would take effect January 1, 2026. So unless you officially moved your tax residence as of January 1, 2026, you would still, according to this bill, if it passes, be subject to this tax. That's why there were a lot of people buying some big homes in Miami in December.

[Kelly Evans]

Right? I remember when Sam Lesson said the problem with going to Miami is there's no coffee shops open before 6am but maybe that will change. Robert thanks very much, Robert. Frank, let's get over to Christina Parts and Evolis now for the CNBC news update. Christina thanks, Kelly. A federal judge today ruled that Dominion Energy could resume work in its Virginia offshore wind project. Last month, the president froze five big offshore wind projects, citing national security concerns. States and developers then sued to block the order. And today's ruling is the third this week by a federal judge allowing projects to continue construction. Venezuelan opposition leader Maria Machado said Friday she's confident that what she called the, quote, criminal regime in Venezuela will eventually be be dismantled and free elections would be held.

[Deirdre Bosa]

Machado made the comments one day after.

[Kelly Evans]

Meeting with President Trump and presented her Nobel Peace Prize to him as well. And the nationwide redistricting battle arrived to Virginia. The state Senate passed a constitutional amendment today that would allow the legislature to redraw districts ahead of November's midterm elections. Voters still have to approve the amendment in a referendum this year spring, but.

[Deirdre Bosa]

The move could help Democrats gain four additional seats in the House.

[Kelly Evans]

Kelly, back over to you. All right, Christina, thank you very much. Coming up, the president's plan to get more power plants built for data centers and it's sending two trades in opposite directions. It's pressuring existing names like Constellation, but boosting a different group, including this name. Our mystery chart today. Message me. I promise I'll look this time. We have the details.

[Robert Frank]

Next.

[Kelly Evans]

The Trump administration making yet another affordability push, this time targeting electricity costs. Pippa Stevens has the details. Pippa.

[Deirdre Bosa]

Hey, Kelly. Well, the president calling on tech companies to pay for the power required to run their data centers as electricity prices rise and fears grow that consumers will ultimately foot the bill for big tech. The administration urging pjm, that's the regional grid operator, which includes Northern Virginia, known as Data Center Ali, to hold an emergency auction so that tech companies can bid on long term power agreements. The goal is to build more than $15 billion of new power generation with hyperscalers paying for that power whether or not they actually use it. We're seeing a sell off in independent power producers like Constellation, Talon and Vistra since more power could cut into the huge premium they've been paid by PJM to provide reliable power. On the flip side, gas turbine makers like ge, Vernova and Siemens Energy are rising, although they're facing a really large supply backlog. PGM reps were not at today's meeting and there's little clarity on how this could be enforced. But John Bartlett from Reeves Asset Management telling me an auction could provide needed clarity on what the real price of power for the next 15 years is going to cost. And Kelly, PG, I'm telling me just now that they're reviewing the principles set forth earlier by the White House.

[Kelly Evans]

I love that they're they're reviewing the principles set forth by the White House for their grid. Yeah, Pippa, thanks, Pippa Stevens. We'll have a lot more on this with Interior Secretary Doug Burgum coming up on power lunch at 2pm Eastern. Looking forward to that. Energy's far from the only domestic policy push the administration has made over this past week. Last Friday, the president said he'd order his representatives to buy $200 billion in mortgage bonds, remember to bring down rates. On Sunday, the Justice Department launched a probe into Fed Chair Powell. Overnight, the president outlined a new health care proposal and just this morning, NDC director Kevin Hassett said the president will announce more initiatives on 401ks and housing next week at Davos. To make sense of it all, let's bring in James Lucier. He's the co founder of Capital Alpha Partners. I suppose we can make sense of it, James. The question is how much of it should we expect will come to pass?

[Unknown Narrator/Voiceover]

Well, Kelly, the technical term is ice cream headache. There's just too much fun, too many things coming out to really make sense of. And I think that's one of the market's problems in assessing what's going to happen with the Fed chair, what's going to happen with tariffs, what's going to happen on the international situation. Trump has got so many plans, he's announcing, and yet, as is the case with the data centers, there's no real sense of how the plan will work.

[Kelly Evans]

That said, there's a lot of people on the street. I don't know what we'd call this. We need a pithy acronym. I won't mention Taco, but they would say you want to follow Trump in these trades. No one's fighting this, right? There are. They're saying if you can figure out what he might announce or if his goal is to lower housing prices, be in that trade. If his goal is to lower prescription drug prices, be careful in that trade. In other words, figure out what the president wants and then in a way jump in on the assumption that in one way or another he's going to get it or he's at least going to affect the trade for now.

[Unknown Narrator/Voiceover]

Well, he has the advantage of initiative on his side. He's always on the offensive. He's always attacking. And that means that for the, the initial period at least, he's got the momentum. People are trying to accommodate him. It's just like one of the great generals of the past, whether it was Napoleon or, you know, Admiral Wellington, the Duke of Wellington, you know, always stay on the offensive. You know, he's on the offensive somewhere else before he changes, before he finishes the other topic.

[Deirdre Bosa]

Right.

[Kelly Evans]

Which I suppose you have to do when you're trying to do multiple things at once. So Elizabeth Warren gave a speech earlier this week to Democrats about how they should try to win the midterms. And her message was, it's all about affordability. Keep it on the economy, keep it on the pocketbook. After the president heard that is when he called her and said he would partner with her to try to lower swipe fees. So they are both vying it Seems that sort of the political class in Washington, Republicans, Democrats, they all realize this is what really matters to the public. I don't know, though, what that implies when you have a Republican administration and a progressive Democrat who now seem to be aligned.

[Unknown Narrator/Voiceover]

Well, they're both taking the populist line. Trump is going after credit card companies for swipe fees. He's going after big tech companies for power costs. He's going after health care insurance companies for excessive costs of health care. He's going after drug manufacturers. He's consistently trying to be the most populous guy in the room. And sometimes that means having to compete with Elizabeth Warren for that title.

[Kelly Evans]

Hmm. Do you think it will work? What's your. And he says himself, if you guys don't win the midterms, I'm going to be impeached. So his approval rating is, I think, by historical standards, maybe a couple of points shy of where he'd want it to be for a little bit more momentum right now. And what's your expectation about how the midterms go?

[Unknown Narrator/Voiceover]

Well, right now, we would expect them to be a narrow win for Democrats. Not narrow because they don't have big support, but narrow because of districts and gerrymandering. There just aren't that many flippable seats for Democrats to win, but it would still be a decisive win. And this is a big change from where we were six months ago, where the Republicans were surprisingly competitive in their midterm outlook given, you know, given the normal disadvantages that come with being the president's party and in the majority.

[Kelly Evans]

And if that's the case, then what is the clock for him to get policy done in the months that remain between now and, I guess, January of next year?

[Unknown Narrator/Voiceover]

Well, most of the studies suggest it's late spring, early summer. So, you know, May, June, July is really when he needs to turn things around. The good news is that he does have time to turn things around. He's got the State of the Union. There is time to do a health care package. There may be time to do other things. So he's got the time, but he really needs to have a plan and a focus. Right now, the president acts as if chaos is his superpower. It seems that the more things he tries to do at once, in a way, the more he gets done, because it's difficult to anticipate his next move, and it's more difficult to resist him in any one place. But he really needs to pick a couple of winning strategies and focus on them and try to get some domestic policy done. Despite his global distractions, or he's going to have a very tough midterm.

[Kelly Evans]

And I imagine if affordability comes to a head with good stock market performance, it'll be interesting to see which path he chooses. James, thanks very much for now. Appreciate it.

[Unknown Narrator/Voiceover]

Always glad to do it.

[Kelly Evans]

James Luce here with Capital Alpha Partners. And a quick programming note. The President will sit down with Joe Kernan at Davos this Wednesday, January 21st. Really looking forward to that interview taking place next Wednesday in Davos. As mentioned coming up, a tough week for software. Salesforce is down about 12% percent as Anthropic's new Claude Cowork tool debuts. Could this be another chance of level inflection point for tech? Your Jobosa has put Claude to the test and she has some answers. Next. AI coding is having its breakout moment. Usage for Anthropic's Claude Opus is surging 85% this week. For today's tech check, Deirdre Bosa has been experimenting with the tools herself. Deirdre, you built an app and I love this app. I think we need to put Robinhood on note. I mean this CNBC needs to offer this app. It is, I agree with you, fireworks when we hit round numbers. The whole thing. Anyway, go ahead.

[Deirdre Bosa]

Well, I love that, Kelly. I need to ship it, right? Because I've created it and actually you can do. So let me get to that app. I'll explain it to our audience in a moment. But first, Kelly, just this idea that I, with zero technical experience, was able to even make a fully functional earnings analysis tool with just a few prompts. That indeed is a chatgpt like inflection moment for software investors. They should be paying attention. So my prompt for Claude Cowork, which is the new product, it was very simple. I asked it to make a prototype that demonstrates something called an Evade O Meter. It's an analysis tool designed to automate a gut check. It ingests raw earnings called transcripts, to quantify how direct or how evasive an executive is being on that call. So this, this is what I got. And this blew me away, too. It's an actual interactive dashboard ranking the last meg 7 earnings calls on evasiveness based on hedge words, deflections and other quantifiers. Meta and Zuckerberg, they got the highest score meaning most evasive. Microsoft the lowest meaning least evasive. Now in my mind, potentially just as or more useful than a professional market terminal. I mean, I will be using this throughout earnings earnings season. I spoke to Amjad Massad. He's CEO of Replit, which is a vive coding platform that is even more consumer friendly than cloud code. Here's how he sees it.

[Kelly Evans]

The companies that embrace agents and become platforms for agents and vibe coding apps.

[Drew Pettit]

Like Replit can build on top of and automate will survive and thrive. Companies that will close down, they will not create an MCP server or have.

[Kelly Evans]

APIs for people to build on top of.

[Rick Santelli]

Then I think those will go away for sure.

[Deirdre Bosa]

Kelly, I even spun up an app for you. It didn't take me very long. I mean, I did it before this segment came on. I'm calling it the Chow Jones. It's a real time dinner stock market that lets your kids buy or short the menu. So too much volatility, it sets off the emergency pizza protocol. I mean, I can ship this with just a button and you can start using it.

[Rick Santelli]

So.

[Kelly Evans]

So they press buy or short. And if I get too much volatility, we just, we just, we all give up and we order pizza. Yeah.

[Deirdre Bosa]

And then you could even. I mean, I spun this up very, very quickly. But you could even get them to like spend their allowance on a buy or short signal. Right. So they can't just press buttons. They have to actually think about it.

[Kelly Evans]

This is amazing.

[Deirdre Bosa]

Just an example.

[Kelly Evans]

I tried something on the vending machine the other day. I'm like, put it in the stock market that explain what the stock market was nevertheless there. So the larger argument, and I get feedback about this, even now people say there's no way this replaces like the likes of Salesforce. And to be honest, I'm sympathetic to that. I wonder if this whole thing about throwing software out because we have AI tools now, I don't know. I mean, what you and I are describing, this is just fun. This is just fun and it's interesting and it's creative.

[Deirdre Bosa]

I know it's fun and it's goofy. And you could argue that some of this is slop.

[Kelly Evans]

Right?

[Deirdre Bosa]

You could argue that some of this is kind of useless, though. I think that the earnings tool is actually really useful. But some of the other stuff can be quite goofy. Okay. Does it replace a Salesforce or workday? That's really like the huge question right now. The answer right now is no. Everyone will tell you that. What is the answer five years from now? That's a little harder. Because right now this is the worst that it's going to be. It's only going to improve. It is improving at such a rapid rate. I mean, I've been experimenting with vibe coding over the last year or so and I just had my sort of aha, eureka moment this week with Claude Code. There's going to be more smarter people than me to have that moment and create some really interesting stuff. I love someone who said that, you know, some of the other software companies will get displaced very, very soon by this. Not a salesforce, but maybe, you know, a Zendesk or something.

[Kelly Evans]

Yeah, exactly. And I think there's more digging because I don't use a lot of these software tools as it is, you know, is it replace I news? I don't know. Dear Joe, for now, thanks my stoplight friend today, Deirdre Bosa, you could send me the app. I'm going to use it put into Starlight those the the planner everyone's using. Anyway, coming up, earnings are revving up next week with Netflix, United Airlines and Intel just to name a few. We're going to get the trades ahead of those results with Victoria Green right after this. Welcome back. Netflix is down 15% since agreeing to acquire WBD in early December. December. Loop Capital says the dip is an attractive entry point and they expect him to remain a growth company for decades to come thanks to the deal. The streamer reports on Tuesday after the bell. Here with her trade on that and a few others ahead of their earnings is Victoria Greene, founding partner of G Squared Private wealth and a CNBC contributor. It's great to see you, Victoria. Pick up Netflix before the results.

[Victoria Greene]

I'm not, I'm a hold here. For me, there's a lot of show me in this. This deal has a lot of fraud, mostly. Is it going to get regulatory approval? Netflix is definitely betting on that. They've got like a $5.8 billion breakup fee if they can't get approval. But it's going to be all about the Warner Brothers deal. They had great organic growth. This is their first push into inorganic growth. It's a lot of debt to take on. So there's the reason that investors have punished the stock long term could be massively accretive. Some cultural differences maybe to work out to get those two $3 billion that it synergies for me it's a hold and see if they can execute and.

[Kelly Evans]

See if this deal goes through if.

[Victoria Greene]

It'S going to be really messy.

[Kelly Evans]

Right, Understood. Still curious how they did with the fourth quarter, get a huge fourth quarter last year. Let's move along to intel though. That's reporting on Thursday, I believe, or Wednesday afternoon. They're up about 3% this week. They've been flying over the past Year, let's be honest. Do you stick with it? Yeah, I do.

[Victoria Greene]

I think Intel's a buy here. I look at it and I say there's rotation out of an Nvidia. You want to own other chip stocks, intel, to me, the turnaround story is real. Now obviously they need to execute. There is going to be a hyper focus on execution, on margins, on their revenue growth, what their plan for 2026 is. You know, the Nvidia investment in the 5 billion, that's a great sign. But then there were rumors that hey, maybe Intel's 18A failed in the video chip. So we look at it and say, yes, we want updates on 18A, maybe on the 14 day, how the foundry business is going. We expect robust PC and server demand to help drive revenues. But this is a show me company now.

[Kelly Evans]

Okay?

[Victoria Greene]

We're no longer super cheap. The market is there now. They got to take it.

[Kelly Evans]

Yeah, that is Thursday, just to get clear on that. And then Friday comes along and usually quieter earnings day. But we are going to hear from SLB and with everything going on in Venezuela, the president of course, vowing to rebuild the country's oil industry. Is this a name that you buy because crude prices have been on an upswing and maybe there's going to be some involvement there or do you stay clear of this space till things settle down?

[Victoria Greene]

I like SLB or Summer Day as we old school people still call it. I think it's a buy here because I look at Venezuela, this is the premier oil services for international and offshore drilling and that's where the growth is coming from. And they are already in discussions maybe of entering Venezuela. They have a tech stack partnership with Chevron. They kind of do their digital platforms for Chevron. They've got a really great foothold in there. And so for me this is all about the international growth. There also have some significant deal wins in Saudi Arabia. So while growth and drilling activity in the Permian and the Balkans, you know, had Howard Ham coming out saying, hey, we're not going to have any rigs in North Dakota for the first time in 30 years, international drilling activity has been very strong. Schlumberger is the leader there and I think you really wanted to hold in the stock.

[Kelly Evans]

I always felt fancy saying Schlumberger, but we'll see.

[Victoria Greene]

Schlumberger.

[Kelly Evans]

Victoria, thanks. Merci. That's it for us. Thanks for watching the exchange. Power lunch with Brian Sullivan after the break. Early birds always rise to the occasion for summer vacation planning because early gets.

[Steve Liesman]

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[Kelly Evans]

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