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Low P/E Picks, Mixed Media & Tesla's ‘Monster Year’ Ahead 12/15/25
00:43:20
The low P/E stocks our strategist says will benefit from the rotation. It’s ‘Game of Thrones’ for the media stocks, and Wedbush’s Dan Ives says 2026 will be a ‘Monster Year’ for Tesla.
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Platform yet@fidelity.com TraderPlus investing involves risk, including risk of loss. Fidelity Brokerage Services, llc Member NYSE SIPC before the trophy and bragging rights are rightfully yours. Before your sleeper turns in a season no one saw coming, before stats and projections turn into points on the board and your lineup falls perfectly into place, you flip the lid on a can of on nicotine pouches. And as you make your first pick, you know this is the season where fantasy is going to surpass reality. It's on products for tobacco consumers 21 years of age or older. Warning, this product contains nicotine. Nicotine is an addictive chemical.
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Kelly Evans
You're listening to THE Exchange. Here's today's show. Welcome to THE Exchange. I'm Kelly Evans and it's another down day for the stocks as we enter the last full trading week of the year. Believe it or not, we're going to talk to Dan Ives about this, maybe get his contrarian case as the S and P and Dow are also pulling back from earlier gains. The bright spot is constructive consumer discretionary. The XLY ETF hitting a new high today with Tesla leading the gains and flirting with an all time high. That's what I was mentioning earlier on. Again, we'll get the details about what's in store for Tesla in 2020, 2026. But we should also mention crypto remains under pressure as Bitcoin hits its lowest level since December and is December 2nd. Obviously we're still in the month. It's down 18% in six months and it's just around 85,000 and change. But let's begin with the trade continuing to falter. Oracle and Broadcom weighing on the indexes again after causing consternation last week. Broadcom down another 5%. Oracle to my next guest, welcomes the broader rotation that seems to be underway here. Even though I think he still owns Oracle. Let's bring in Charlie Brinskoy. He's the vice chair of Ariel Investments. Charlie, it's great to see you again. Welcome.
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Charlie Brinskoy
Thank you. Welcome back, Kelly. Great to see you.
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Kelly Evans
Thank you. One of my most memorable things right before I think I went out was that you had said to everybody, be careful with Oracle here. Think twice before getting involved. And that was maybe, I don't know, 30, 40% from where we are now. So what do you do with the stock now?
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Charlie Brinskoy
Yeah, I think my exact words were trim, not just be careful because this stock did go. When you and I first talked about Oracle, it was at 118. It was trading at 18 times earnings. It was clearly not being considered a beneficiary of AI upside. It went all the way to 350, so it almost tripled and it was trading at over 30 times earnings. And what value investors will say is there are good companies but not so good stocks. And that's what this was. It's Oracle is still extremely well positioned. The stock just got way ahead of itself and now it's come way back as there's a lot of concerns about the profitability of the industry. They're going to have incredible sales. The backlog is up fourfold. They're going to have a lot of sales. The question is how much money are they going to make off those sales? And that's what people are concerned about.
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Kelly Evans
Quickly because sema's standing by here with some more detail on this. Charlie. But so if we were just starting from today, you know, forget your history. It's like, you know, dating. Forget the history, you know, just start starting from today. What would you say about the stock right now? What are your concerns? What are the opportunities?
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Charlie Brinskoy
Yeah, I think that the AI is real. Data centers are real. They're going to participate in a big way. They're very well positioned because this, as we talk about AI is all about. You're analyzing your own data, not about the world's data. And your own data sits on Oracle software. They are the leading company in data software for big companies. Those companies are going to want to use AI to create their own benefits from their own data. Oracle sits very well in that space.
- [03:57]
Kelly Evans
But you worried about its debt load or.
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Charlie Brinskoy
No, the debt load is going to get higher. What I'm worried about is that they're not being very forthcoming coming on the profitability of the contracts that they have. I don't know the margins. I do think everything right now points to double digit earnings growth in 2026. So I think things are going to be okay. They're not going to get over their skis in terms of the debt. They're the CDS market is doesn't agree with me on that. And it started to treat this company like it was below investment grade. It's not. But so we need a little more disclosure on the profitability. When we see that, I think things are going to be okay. Let's call this, this is a small position for me now, below average position, but I think it's still a well positioned company.
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Kelly Evans
Sit right there. Before we talk market more broadly, Sima Modi is on set with me here. She's got some more detail at exactly what's been ailing Oracle Sema again continuing into this week after already weighing on markets and causing some concern. Those data centers and what's happening, the profitability view that Charlie was talking about.
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Sima Modi
Kelly, the price action is significant. Even after Oracle came out on Friday defending its relationship with OpenAI, which it is heavily dependent on, the stock moved lower and even today down another 2%. I spoke to a number of equity and credit investors that covered this company and what's interesting is the messaging is the same. They want clarity on two specific things. One is converting that bookings number, that massive bookings number they came out with in the second quarter for $523 billion. How quickly can that convert into actual revenue? And two is just granularity around debt financing. The company did acknowledge that they will go to the debt market, the public or private debt market in the next three to six months. But the question is how much will they raise and will it be a jumbo bond sale or a term loan with a number of banks? And if it takes that avenue, as a credit investor told me, banks would then have to if they extend leverage or credit to Oracle, they would then have to buy credit default swaps of Oracle as a way to hedge their bets because it's seen as a way to buy insurance against this whole bet.
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Kelly Evans
Could help those come in a little bit, not look so scary.
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Sima Modi
Exactly. So that's why we're keeping an eye on Oracle's five year credit default swaps. I would also point out when we look at just the backdrop of corporate bonds across these hyperscalers, Oracle's 10 year spreads have been widening to around 200 basis points. That's the highs we haven't seen in some time. And then if you look even beyond Oracle, Core Weave is the name to keep an eye on. Its credit default swap has been moving for the past two months. But even once Oracle came out with Q2 results we saw a spike in cds of core weave and then beyond beyond Corwev and Oracle. When you look at specifically bonds met as tenure has been slightly widening. Nothing significant but notable given the context of what we've been talking about when it comes to the AI build out how it's going to be funded and the use of debt versus cash for a number of these companies And I.
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Kelly Evans
Think as always, those give us exactly the sense of kind of the market's nervousness for each one of those names you mentioned, Simon Thanks Charlie. What would you add to that?
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Charlie Brinskoy
Just that when these banks are going to make this loan they are buying CDS protection but that makes the price of CDS go up, which is a negative reflection to the market. It makes it look like got it. The chance of a default is higher. And I still think this is a investment grade credit, let's call it a triple B minus at this point. But it is not something that I'm worried about the financial health of or.
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Kelly Evans
Appreciate you clarifying that. So even if we see it go out a little bit, you know, we shouldn't necessarily interpret that as a sign of its financial strength. But do you so when people point to this one in particular, Charlie, as one that seems emblematic for them of the unsustainability of this capex, do you share those concerns or no?
- [07:31]
Charlie Brinskoy
I think this is in the uncertain category. We just don't know how profitable the AI business is going to be. I think there isn't much doubt the demand for data centers is going to be dramatically higher. And so I think that the economics of data centers is a pretty safe bet. And that is where Oracle is making big investments. They are also making big investments in, as I said earlier, the software that helps people analyze and become more efficient on their own data. But we do have to funnel and remember lots of basic changes in the economy like the railroads did change the economy but a lot of people lost money in that first initial stage investing in railroads and there is a chance that something similar can happen here. We just there's uncertainty about the profitability of this absolutely dramatic new technology.
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Kelly Evans
So what is your playbook? And again as I know you're looking for individual names but for 2026, are you in financials, industrials, health care? We've been hearing so much about these areas lately. Are there any names that are part of this trade that you're more interested in or how would you be defining the landscape?
- [08:40]
Charlie Brinskoy
I'm glad you said that because Oracle, you and I talk about Oracle so much because it was the 1 value name in this space. It's not anymore. So it's this is a less than 2% position for me now. So the things that we like are a lot of consumer names, a lot of banks, a lot of the high quality banks are trading at 10, 11 times earnings. There's some health care companies like Johnson and Johnson trading at reasonable valuations. And I think inflation is going to be higher in 2026. And so things that benefit from inflation like high quality real estate, the sphere that we talk about, Madison Square Garden, high quality real estate is going to do well. Materials and minerals. Barrick Gold is something we like a lot. So we think the Magnificent Seven is still overpriced. The S&P 500 is dominated by the Magnificent Seven. Be in things other than that.
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Kelly Evans
Even though I mean Costco, you could argue, I mean what a 54pe or Nvidia is at like 26. You know I, I know there's others in the Mag 7 that may have higher multiples but they're not that high.
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Charlie Brinskoy
The blended it has come down a lot. You're absolutely right. It's not as bad as it was. But we are still talking about names that if you just own the magic seven, I still think you're at 30 times earnings. Historically that's a pretty full price to pay. So I would say there's much better value in consumer discretionary financials. Industrials and materials. Large banks, bank of America hitting a 52 week high. Some regional banks doing well. I think you can afford to dabble in this kind of technology. But this should not be the majority of your holdings the way it is for many people who own the S&P 500 who have all their money in the S&P 500. You are making a big bet on AI if you just own the index.
- [10:24]
Kelly Evans
We have to go. But I'm just curious on the consumer front in particular, what are the names and discretionary. Like we mentioned that the ETFs at an all time high today. I don't know if that's because Tesla's in its little. I don't think that's one of your favorite favorites. But people are also worried about the health of the consumer. So you mentioned pricing, power and inflation. Who do you think does well in that environment?
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Charlie Brinskoy
So we've got a disparate outcomes that the lower parts of the consumer base are struggling. The higher end is doing extremely well. I think the auto space is going to do pretty well. I've talked to you about Finia and BorgWarner in the past. They've both done very well this year. I think you have to unfortunately acknowledge that there's a bifurcation. The middle and upper class are spending a lot of money and so names that benefit from that are well positioned.
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Kelly Evans
All right. The auto, auto supply chain really is not. Not the way most people think about playing the consumer. Always appreciate it. Charlie, thanks so much.
- [11:14]
Charlie Brinskoy
Thanks, Kelly.
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Kelly Evans
Charles Brabant Score Reuters meantime is reporting that in video may increase H200 chip output because of robust demand over in China. Sounds like everything's fine for AI demand. Christina Parts Neveless has more in tech check. Hi Chris. Yeah, everything's fine. Back to you. But let's talk about that Nvidia evaluating add H200 production after Chinese orders, according to Reuters, exceeded current output. But there are two big questions. Can they actually manufacture more? And will China even buy them? On the manufacturing side, the H200 uses an older manufacturing process than Nvidia's newer Blackwell and Rubin chips, so there's less direct competition for capacity at TSMC. Semianalysis estimates Nvidia sold 1 million H20 chips for China in 2024 while actually ramping newer chips from the Blackwell family without creating any bottlenecks. The H200 uses essentially the same manufacturing process as the H20. Again, that's the older chip for China. The argument is they did it before, why not again? That's exactly what one source told me when we were debating on this. But TSMC though is stretched thin. The foundry said in late November that supply is about 3 times short of AI driven demand, so ramping H200 would mean shifting resources rather than EAs easily scaling if they can. Though Morgan Stanley put a note that they estimate every 1 million H200 units could bring TSMC $1.3 billion in foundry revenue, which means a lot of analysts estimates would have to go higher. The bigger question though is demand from China. Beijing hasn't greenlit H200 imports yet. They've held emergency meetings and on December 10th they launched a government procurement list approving only domestic suppliers like Huawei and Capricorn. Nvidia not included in that list. So with billions of dollars pouring into local alternatives, China may may buy some H200 short term, but is clearly prioritizing self reliance manufacturing More is possible at tsmc, but sustained demand from China is the real uncertainty. Kelly sure. No, it's a great point though. Christina, thanks. We appreciate it. Christina Parts and Evils let's break it down further with someone who was just part of a big chips forum out in Asia. Stacey Razgarn is a senior analyst at Bernstein covering the US Semi space. Stacey, it's great to see you. I was just talking with Dan Ives backstage and who says he thinks the play is really to kind of make sure that China stays hooked on these chips so that they don't, as Christina was saying, develop their own chip industry. That could be Competitive or superior to ours in the long run?
- [13:46]
Charlie Brinskoy
Yeah, yeah.
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Stacey Razgarn
My guess is they're already going down that path regardless of what happens. I actually, there's a ton of demand for Nvidia's parts in China, at least from, from the customers. We're seeing this from, from the governmental side though. I mean, clearly they're a little more hesitant to allow it and because they are trying to encourage their local domestic chip tenders and they really have no choice. Right. I mean, we've already proven we can chop their knees out from under them whenever, whenever we want to. And so I don't think that they can afford to give up on the localization plans even if they do allow some sales, by the way. My guess is they will allow some sales in, but I think it's, I think it's too late. I think that horse has left the barn. And by the way, we're not just seeing that in AI, we're seeing it in semi cap, we're seeing it in analog. All of the areas that are strategic and where the US has put constraints on them. I think China's already going down that path one way or the other.
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Kelly Evans
So where does that leave the chip? So where does that leave an Nvidia? Right? I mean, well, both in the short and near term. And please layer into this, what were your big takeaways from your time, you know, that was spent there just now? I mean, what as an investor, what does it make you think?
- [14:53]
Stacey Razgarn
Yeah, you bet. So look, at least Nvidia has zeroed out China from the numbers. And so anything they get is upside down. And if there is demand and they get purchase orders, I think they can secure supply and ship that. But, but I do think at least as an investor over the long term, I think you have to discount, you know, like the long term viability of China for, for all of these guys. That's not new.
- [15:15]
Melissa Lee
Right?
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Stacey Razgarn
That was already, I think the view even before the, the H200 approval from the US government. So I think Nvidia has actually handled it really well. Like, like I said, they've taken it out of the numbers. They've told investors it's going to be a very competitive market. Don't count on it. Anything they get at this point I think is upside and I think, I think that's fine. Unfortunately for them, the overall global market for AI, at least right now, is so big that even if you can't, I mean, they don't have to. Your earlier point, they probably don't have enough capacity. Yeah, you know to serve all of the demand in China if they were able to get all of it anyway. So I think they're okay.
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Kelly Evans
Not only okay, you've got a 275 price target on them. $100 higher for year would be a tailwind for the markets for sure, I would imagine. And I think what you're raising goes to what it got a little bit lost last week, which is as it pertains to Oracle and others. Are they delaying, you know, bringing capacity online or what have you because there's not enough supply, which is incredibly bullish or because there's not enough demand. Right.
- [16:17]
Stacey Razgarn
I mean demand is off the charts right now.
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Kelly Evans
Exactly. I believe there's was a supply story. Yeah.
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Stacey Razgarn
So they're like they're selling everything they can make in their on supply there, there's the wafer capacity, there's the packaging, what they call the co op capacity. There's memory, high bandwidth memory and there's just the broader complexity of assembling these racks. Like, you know, like a Blackwell rack weighs 3,000 pounds and it's as tall as my ceiling and it's got 1.2 million different components in it. So there's a lot of complexity and constraints just around building that stuff, the black or racks, at least some of those constraints have been easing. And I mean, I mean if they even put up a chart at their GTC event a few months ago that kind of suggested, you know, they're on track to ship, it was 20 million Blackwell Ruben GPUs. So that would be 10 million actual chips. Each chip has tez has to, each chip has two GPUs in it up from, you know, it's, it's like quadrupling what they've already shipped to this point next year. I mean so they've got the supply to meet the goals that they've set out and they're getting more orders even after that date. So they've got the supply to satisfy that. My guess is the demand is still higher than that at least at this point. I'm not really worried about demand. The only ones right now that seem to be worried about demand and sustainability seems seem to be the investors. The actual that are doing the spending right now. It's full steam ahead.
- [17:42]
Kelly Evans
That is the perfect place to leave it. That on that hopeful note for 2026. Stacey, thanks so much.
- [17:47]
Stacey Razgarn
Yeah, you bet.
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Kelly Evans
Stacey Raskin. Coming up, Tesla is hovering near its record high from a year ago. Why Dan Ives sees a monster year ahead for the stock. But first, Wolf Research downgrading a bunch of media and entertainment names. Why they're bearish on Paramount as the fight over Warner Brothers continues. And speaking of media, you may notice the new CNBC logo on your screen today. As part of our evolution, we've removed an NBC peacock to embrace a distinct identity that aligns with our future as a brand. It's a small visual update as we continue to deliver the same trusted coverage of markets, business and the economy. The exchange is back after this. The heaviest metal credit card of all time, rumored to be one of only 18 in existence, plated with the very same tungsten that forged the International Space Station and wielded at business dinners like a samurai sword. It's a classic corporate power move. But the real power move having end to end visibility on your most critical shipments. FedEx. The new power move.
- [18:56]
Commercial Narrator
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Melissa Lee
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Kelly Evans
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Kelly Evans
The media stocks are mixed today as we wait for the next chapter to unfold and the saga to win. Warner Brothers Discovery Prediction Market Kalsheet placing Paramount ahead of Netflix right now at 62% odds of winning. It's like David and Goliath. But my next guest has an underperform on Paramount and sees a painful path for growth ahead. He joins us for that and his 2026 outlook on the space. Aptly subtitled when you play the game of thrones, you win or die. So who's going to win or die? Not to put it too strongly, Peter Cipino joins us now from Wolf Research. Peter, it's great to see you. Let's start with the issues that you see facing Paramount.
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Peter Cipino
Well, Paramount has A rich library, but they're competing in a game defined by scale. From the subscale position, Paramount has fewer streaming subscribers, it has a lower revenue per streaming subscriber, and the productivity of the film and TV studio over the last 10 to 20 years has been lower than others in Hollywood. And so while the library is deep from a historical perspective, it hasn't been as productive in recent years. And so for lots of reasons, we think Paramount is actually highly motivated to get this Warner deal done to address some of those scale deficits.
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Kelly Evans
That's exactly what I was going to say is you're making the case for why they need this so badly. Is it a case of if they, even if they win, you think they're challenged or if they win, would you then say, okay, perhaps they, they can, you know, do something more exciting in the future.
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Peter Cipino
So, so we think winning it would be a good outcome for Paramount because we don't love Paramount's standalone prospects. Winning creates more optionality, more, more upside potential for the Paramount shareholder, but also more risk. I mean, winning means more debt, it means a lot more execution risk. It would challenge the management team to do a lot of things that nobody has ever done before. And so the degree of risk and opportunity on the merger scenario are much greater.
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Kelly Evans
Right? I mean, they're only one of two underperformers you really have for the whole space, including Nintendo. You see the video game market, not so exciting. You know, before I move on to some of the other areas, like, I think it's fascinating that live and music you feel will do quite well. But just to finish the point about the media business, you know, what then happens with this space as there's, you know, Warner Brothers is going to end up with one or the other of these companies and then what.
- [22:16]
Peter Cipino
So we think that the streaming business, which is really just the downstream distribution of film and television and short form video, ultimately is going to remain a fragmented business. There has been a Netflix bull case around for years that ultimately streaming as a winner take all business because Netflix is in this case the, the best place to monetize content. And our view is that the owners of sports intellectual property, film and television IP have a say and it's in their interest to keep the distribution landscape fragmented and, and for that reason the NFL renegotiation in 2026 will be a really interesting update anyway, however this merger turns out, we think there are going to be multiple streaming services for many years to come.
- [22:58]
Kelly Evans
Right. And you're not necessarily all that jazz. I mean, you basically Have a market perform on the whole business, except for Disney. You like it for the experiences. And that brings us into the areas that you think are going to do well here. And it's kind of encouraging, right, like to hear someone say, you know, it's streaming video games, but where it's at is live entertainment and music and all of these areas. What are the stocks that you like best? Obviously, Live Nation is a top idea. I noticed Charlie Brinsky is a big fan of msg. You have their stocks to market, perform, and then in music, what do you think could do well there from an investment point of view?
- [23:28]
Peter Cipino
Well, we think that streaming and social media make the world's best intellectual property of all kinds, worth even more, and then hollow out the middle. And so when it comes to sports and music, superstar athletes, superstar musicians, they reach more consumers, more quickly, more virally and more frequently in the world in which we exist today. And for those reasons, we think that the value of music, the value of concerts, the value of sporting event tickets, it's all going up. And so one of our favorite ways to monetize that thesis is Live Nation, which is a toll booth on artists appetite to visit new cities around the world and extend their tours longer and charge more for the seats that they sell. And in parallel, we really like Spotify, which you also show on the screen. And that's a different thesis. We think the value of music itself is going up because streaming is such a better experience and music is so shareable today. And so Spotify is the best way to stream music on earth and ought to grow for a very long time.
- [24:29]
Kelly Evans
Fascinating. And finally, Peter, when do you get more excited about the media or streaming space from an investment point of view? I mean, Netflix has done very well. Maybe this year is a little bit more choppy, but do you wait for say, the big four players in this space to emerge? You know, is it, is it kind of a waiting game at this point?
- [24:46]
Peter Cipino
So we're afraid that streaming is heading into a period of rising costs, deteriorating marginal returns. And the reason is because over the last few years, the streamers really benefited from consolidation, from cutting costs, increasing prices, mergers, and that's all been productive. Streaming looks like a solid, productive, profitable business today in a way that it didn't years ago. But what's next seems to be growing by way of buying sports rights. Yes, which is expensive and also developing new businesses like short form video. And these all strike us as ways, reasonable ways for the streamers to grow, but more expensive ways than their core.
- [25:26]
Kelly Evans
I mean, it sounds like you've diagnosed it pretty aptly. So you know, it's something to keep in mind. I think as whomever wins for Warner Brothers, some of the larger challenges the space does face. Peter, thanks. Good to see you today.
- [25:38]
Melissa Lee
Thank you.
- [25:38]
Kelly Evans
Peter Cipino with Wolf. Coming up, China is churning out AI toys for kids, using memories stored in the cloud to personalize the experience. Eunice Yoon tested them out and will join us with her takeaways and her warnings from this grass fast growing $4 billion industry. Stay with us. I'm Sarah Gibson Tuttle and I started Olive in June because let's be real, we all deserve to have gorgeous nails. But who wants to spend a fortune? That's why I created the gel Mani system so you can have that salon quality gel manicure right at. And guess what the best part, each mani only costs $2. And here's a little something extra. Head over to oliveandjune.com and get 20% off your first gel mani system with code HELLOGEL20. That's code HELLOGEL20 for 20% off your first mani system at oliveandjune.com HELLOGEL20.
- [26:29]
Melissa Lee
Before.
- [26:30]
Commercial Narrator
The trophy and bragging rights are rightfully yours. Before your sleeper turns in a season no one saw coming, before stats and and projections turn into points on the board and your lineup falls perfectly into place, you flip the lid on a can of on nicotine pouches. And as you make your first pick, you know this is the season where fantasy's going to surpass reality. It's on products for tobacco consumers 21 years of age or older. Warning, this product contains nicotine. Nicotine is an addictive chemical.
- [26:58]
Melissa Lee
At Capella University, learning the right skills.
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Kelly Evans
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Melissa Lee
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- [27:14]
Kelly Evans
Welcome back. And check out the markets which have been kind of tipsy. Turvy. She said. The Dow erasing a nearly 200 point gain. It's down 158 this hour. Consistent Dow and S and P down a third of a percent. NASDAQ underperforming. Russell underperforming as well. Despite having a better week lately. Here are some of the movers this hour in service now as you just heard, the biggest loser on the S and P and on pace for its worst day since January, it's down 12%. KeyBank did downgrade it this morning to underweight. They pointed to a threat to a key part of its business from yes. AI Reports today also say the company is closing in on a deal to buy the cybersecurity firm Armist, so keep an eye on it. Meantime, Zillow and Costar are lower on reports that Google is testing, including real estate listings directly in search results. The tests appear to be limited to mobile and only in certain markets. But nevertheless, Z shares are down 10% and Costco downgraded to sell at Roth. The firm saying despite the earnings beat, underlying metrics are concerning. With renewal rates fading, paid members slowing and year over year.com traffic decelerating, the stock has actually underperformed this year. It's down nearly 6%. Let's get over to Bertha Coombs now for the CNBC news update. Bertha kelly, Donations are pouring in for a Sydney man who wrestled a gun away from from one of the attackers at the Bondi beach shooting over the weekend. Ahmed Al Ahmed, a Muslim father of two, charged one of the gunmen attacking Jewish people at a Hanukkah celebration and wrestled the gun from him before being shot twice in the hand and arm by the second gunman. Authorities say more than $750,000 have been collected as he recovers in the hospital. A jury trial is underway in Wisconsin today for a judge charged with helping an undocumented man who appeared in her courtroom avoid confinement by immigration authorities. Attorneys for Judge Hannah Dugan argued that she was trying to follow a policy of how to interact with ice at the courthouse and that she acted within her powers as a judge. And Disney's Utopia 2 retook the top spot at the box office, raking in more than $26 million this weekend, according to studio estimates. Animated sequel also becomes the year's second film to cross the $1 billion mark worldwide. First one for a US company was also Disney's Lilo & Stitch, the live action version a little better Buzz, I think around the box office lately. The knives out movie people keep saying is great too. Bertha, thanks very much. Bertha Coombs. Coming up, a CNBC investigation finds the FDA approved a $250,000 work trip to Singapore during the government shutdown. More details after this break. The FDA has been an agency under fire, from controversial staff appointees to deep staffing cuts to being openly questioned by former FDA chiefs about their medical policies. Now CNBC has learned that in the depths of the government shutdown, the FDA approved sending staffers on a quarter of a million dollar trip to a conference in Singapore, prompting questions about the agency's priorities. Here's Melissa Lee with the story.
- [30:25]
Melissa Lee
On the last day of the government shutdown, employees from the Food and Drug Administration boarded planes destined for Singapore, where a global health care conference was convening on November 18th and 19th. According to internal FDA documents and invoices CNBC obtained, the delegation was comprised of 31 FDA staffers. The trip, which cost more than a quarter of a million dollars or upwards of $8,000 per person, was approved about one week before they departed on November 12 and before the House of Representatives voted to end the.
- [30:58]
Dan Ives
Shutdown. The bill is passed, the motion is.
- [31:01]
Melissa Lee
Adopted. The conference venue was a hotel or in Hotel Michael on the Singaporean island of Sentosa. These five star resorts house a Universal Studios amusement park and an adjoining casino. The event was the International Council for Harmonization, or ich, which aims to unify global standards for drug development and approval. But questions about the trip come as the agency is under fire from all sides. It's undergone a roughly 15% reduction in.
- [31:29]
Kelly Evans
Staff. A lot of this reorganization is.
- [31:33]
Commercial Narrator
Smart and it's being smart with taxpayer.
- [31:35]
Melissa Lee
Dollars and the Trump administration is proposing an 11.5% reduction in budget to the FDA. On top of this, senior leadership has been in upheaval and former FDA chiefs have publicly questioned the agency's handling of key issues such as vaccine policy. Dylan Hetler Gaudet is the acting vice president of Policy and Government affairs at the Project on Government Oversight, a non partisan watchdog group that champions government accountability. He says the public perception of attending an international conference in the shadows of a shutdown is not.
- [32:06]
Kelly Evans
Good. I would hope that FDA leadership and the administration would place a higher degree of priority on making sure the organization, the agency is resourced completely rather than needing to attend specific conferences or.
- [32:18]
Melissa Lee
Events. In a statement to cnbc, an FDA spokesperson said the meeting was mission critical and required approval from center leadership and the chief operating officer. He added attendance in the prior two years ranged from 47 to 49 delegates and the purpose of the conference was to support global alignment on drug development approval, standards and regulatory science and taxpayers did not foot the quarter of a million dollar bill. According to the FDA's statement, the trip was funded with carryover user fees, money the agency collects from drug device and other medical product manufacturers for product reviews, inspections and other regulatory work. Still, the FDA seemed to be aware that any travel could be viewed unfavorably. For example, in one document the agency wrote, due to the optics of business travel conducted during a shutdown, conference approval will be handled by FDA's senior leadership on a case by case.
- [33:11]
Kelly Evans
Basis. Those dollars are still public dollars. Those still belong to all of us, the American.
- [33:16]
Melissa Lee
Public. The day after we reached out to the FDA about this story, the agency removed two public website links that outlined its travel policies during a government shutdown. A spokesperson for the FDA told us the agency routinely updates its web pages to ensure information remains accurate and consistent with current policy. We also asked if Commissioner McCary was aware of and approved the trip. The FDA did not respond to our repeated questions about this. And by the way, for more on the story, you can head on over to CNBC.com to see the full.
- [33:45]
Kelly Evans
Version. So they say the trip was mission critical. What is, what is it that's happening other than to get on the same page about global drug development in Singapore? Do they need to go? Is there an option to go virtually, for instance, especially during a.
- [33:58]
Melissa Lee
Shutdown? There was an option to go virtually and three FDA staffers did go attend virtually. The meeting is, is widely regarded as an important meeting. The question is during a shutdown when all funding is suspended and the use of carryover user fees is explicitly for FDA priorities, such as, you know, in response to an imminent threat to public, public health or public property, whether or not it was a wise judgment to use that limited funding during the shutdown in order to attend a.
- [34:30]
Kelly Evans
Conference. Right. No, it's, I appreciate, Melissa, you kind of laying out exactly what happened and people can read the story, decide for themselves. Exactly. Perhaps we'll get more answers from the agency as well at a time when they're under pressure on a number of fronts for their decision making. Melissa, thanks very much. Melissa Lee. Coming up, more on Tesla all time high watch. The number is 488.54. So we're about $13 shy of that level. It's all music to Dan Ives ears and he says the music will keep on playing in 2026, which will be, he says, a monster year for the stock. He joins us next. Tesla shares are near a record high, believe it or not, such a volatile name. But here we are up 4% by the way, today. And longtime Tesla bull Dan Ives, except expects this momentum to continue, even accelerate into 2026, which he says could be a monster year for the company as autonomous and its robotics chapter begin. There's also a chance, he says, that it could hit a 3 trillion market cap by the end of that year. For more, let's bring him in. He's here on set with me. Dan Ives is Wedbush Global head of technology research.
- [35:29]
Dan Ives
Welcome. Great to be.
- [35:30]
Kelly Evans
Here. You could have picked an easier one, you know, maybe in video. Why Tesla to you, is it still so clear for all the ups and downs for the auto industry, for all of its ambitions, everything they want to do is always delayed. Granted, the market cap is still phenomenal. Why do you think 20, why do you feel so strongly the 2026 will be a great.
- [35:46]
Dan Ives
Year? I think it's about autonomous. I mean, when it comes to physical AI, I think there is nothing better, you know, when it comes to physical AI than Nvidia and Tesla. And I think this is going to be a golden chapter for Tesla physical AI when, when it comes to robotaxis, when it comes to cyber cabs, volume production, true autonomous. And of course you look at robotics in terms of optimus. I mean, Kelly, that's why I think we're looking at 2 trillion, ultimately probably a $3 trillion market by late 2026, early 2027. That's why it continues to where we're.
- [36:20]
Kelly Evans
Top. What's the E? So, you know, you think about a market cap that big, you say, okay, it's high multiple. I don't know what exactly the earnings look like. What are you anticipating on that front? And how do, how do, how does physical AI kind of feed directly into the earnings, earnings power it might.
- [36:34]
Dan Ives
Have? I mean, when I look out next three, four years, I think earnings power is 4x 5x. But because it's my view that when you think about not just the FSD piece, but in terms of true autonomous, it's going to change the whole margin profile, it changes the whole growth story. And I think just going forward for Tesla, the focus, it's okay delivery. Do they matter? Of course they matter. But in terms of next few years, especially Musk, Musk now wartime CEO in terms of pay package, you know, that's already cemented. This is just the start. And they're also going to have an ownership X. I look what's happened Space X mean I think we're now talking about this next AI chapter that's happened across the Musk.
- [37:16]
Kelly Evans
Ecosystem. We had Dan Primack on last week and he said, you know, or he said the question to ask is why is Space X going public now? Do you think there's anything related to financial pressure on Tesla or Musk or anything like that as. Or is it a political. Why would 2026 be the year for.
- [37:31]
Dan Ives
Space? I think the time's right. I mean you could argue valuation, right? There's an approach. $1 trillion is the same reason why it is, you know, anthropic or you know, ultimately when you could Open Air and others, I mean we're hitting at a point where it's only year three of an eight to ten year build out in terms of the revolution and for the first time in 30 years. Mean you've talked about this, you know, us is ahead of China when it comes to tech. But the Space X is an inflection point. I think it's important that it goes public. It's the right time. And look, we are in, I think two more years in this tech bull market and we're going to see more and more of these great private companies going.
- [38:08]
Kelly Evans
Public. Won't Space X be, if you'll pardon the term, sexier than Tesla? In other words, right now, if you are a big fan of Elon Musk and everything he's doing in the future as described, this is the only public equity you can own for that story. Now Space X could be the newer, younger thing on the block. What if investors go with that and thus remove some of the halo, right, the community effect around those who hold shares of Tesla and support its valuation just to have a peace of.
- [38:33]
Dan Ives
Mind. Yeah, it's a great point. Look, I actually think it expands, I mean to some extent the ecosystem from Space X to Tesla and ultimately what's going to be the ownership xi? Because the reality is when you think about what's happening, happening here, I mean we're talking about the next 5, 10, 15 years Musk@ the centerpiece of it. But I think it speaks to when you, when it comes to Tesla, that continues to be the best play because I think autonomous worth a trillion dollars alone. You think about Optimus in terms of true robotics and as this all plays out, I think globally, I mean they can own 70, 80% of the autonomous market, you know, over the globally over the coming.
- [39:11]
Kelly Evans
Years. I know you think that full self driving penetration could be as high as 50%. In other words, half the people who buy a Tesla pay the extra money to have that option, which would be as you say, a game changer for margins and for the stock. So that's part of what you're talking about is for those who own Tesla's, they use this technology. The other part is the Cyber Cab is what is it called and how would you describe its position in this vis a vis Waymo, where Waymo also does quite well. The cars are really expensive, regulatory and otherwise. What should we expect on the cybercap front from.
- [39:45]
Dan Ives
Tesla? Well first, like FSD, you're going to go from penetration 15% to 50 and I think it could even be higher. So from a margin perspective, that's going to be huge. Look, Waymo wemo is going to be a rounding error relative to what Tesla is going to do. I think not just in the U.S. but I think globally. Look, it speaks to just how expensive those cars are, how they could scale. And I think when you think about autonomous and in terms of the roadmap, I mean we would expect some sort of executive order, you know, going into early next year. What I think is going to clear in terms of the federal roadmap, I mean more and more you're going to go away from the states to federal. And that's going to be extremely important for Tesla. In terms of where I think.
- [40:23]
Kelly Evans
They could take Robotaxi, I still think about that tragic crash. I forget exactly where it was the past couple of years, where the sun glares meant that the Tesla hit that woman on the side of the road, you know. And you think a moment like that is the kind of moment that could halt exactly the kind of advance you're talking about in kind of clearing the way for federal regulation? Do you, could that rear its head again as they start really talking about kind of going mainstream, that people go, wait a minute, we're not sure we're fully comfortable with.
- [40:49]
Melissa Lee
This.
- [40:49]
Dan Ives
Yeah. And to that point we were in, we were in Austin. I mean it speaks to why you had like safety driver then expand the geofence. Expand, expand, expand. You know, now you're seeing without safety driver, I mean they're going to have to go tiptoe, tiptoe because of, you know, just how important this is and lives are at risk. Right. But the reality is when it comes down to over the coming years, we're going to look at this, 2026 is going to be an inflection point year for Tesla Musk. And that's why I think this is going to be the start, probably the most important historical year maybe in its.
- [41:23]
Kelly Evans
History. Do you think that's why it's at an all time high today? And that's quite an achievement. It's one thing to hit an all time high when you're in the Oval Office with the President every day, it's another thing to do. So when you're facing the realities of that not being the case and just relying on your execution as the CEO of many different companies, a man of limited time, but apparently not limited talent. So what does it tell you that here we are closing out the year with the stock back at an all time high.
- [41:48]
Dan Ives
Basically. Yeah. I think and obviously there were some dark chapters earlier this year, but now you look at musk laser focused on what's going to be just I think probably the most important chapter for Tesla. I think what it shows is investors are recognizing what autonomous, what robotics could mean for the Tesla story relative to what's been up and down year. Maybe a guy start the year, you show what numbers are going to be big. Okay, the stock's going to be a lot lower. It should shows investors are seeing forest the trees here. When it comes to AI revolution, consumer AI revolution now coming.
- [42:21]
Kelly Evans
Tesla.
- [42:21]
Dan Ives
Yeah. You look at Alphabet, you look at Apple, you look at what I believe is going to be the next phase of.
- [42:25]
Kelly Evans
This. Listen, we didn't even get into your defense of the AI trade. You know what's going on with chips yet. Another time, another time. For now, Tesla's plenty. Dan, thanks so much. Good to see you. Dan Ives with Wedbush. Coming up from an AI cat. Speaking of physical AI, an AI cat who can adjust its behavior based on your voice. A doll that acts as a friend that can have long conversations with you. China is churning these out at record speed. We'll dive into that story and what it means for privacy and other topics. Stay tuned. China's economy, as you might have already heard, hitting a stall in November. Retail sales growth, sharply missed estimates. Consumption worries are still lingering. China though is still going full steam ahead in AI as you've heard all show long but including in AI toys. Eunice Yun is here on set with me with that.
- [43:12]
Melissa Lee
Story. Eunice, thank you so much, Kelly. Well, with China long a world manufacturer of toys, it's no wonder that companies are pumping out playthings embedded with.
- [43:21]
Kelly Evans
AI. Whether AI is in a bubble officially is a.
- [43:26]
Melissa Lee
Bubble. It seems everyone is talking about AI these days, even Ultraman. Do you think that Wall street should be worried about an air.
- [43:34]
Charlie Brinskoy
Bubble? The AI market has been on a wild ride lately. If investors pour too much money into unproven ideas without solid fundamentals, it could lead to a bubble.
- [43:45]
Melissa Lee
Burst. The AI toy is made by Chinese company hi Vivi, one of 1500 in the country's 4 billion dollar industry. Chengju based Chong Ke invented a comfort animal, an AI CA. The artificial feline uses voice recognition and banked memories in the cloud to adjust its behavior to its owner's.
- [44:07]
Kelly Evans
Needs. Some people like the cat to be more maybe noisy or naughty, right? And some people just need the quiet one so it will learn what.
- [44:20]
Melissa Lee
Kind of thing you like. If high energy is more your speed, Luna The AI Puppy by Koitek relies on lasers and cameras to figure out the layout of its new home. The AI inside helps Luna recognize up to five family members and respond to each individually. Beijing based tech consultant Tom Van Dilan says AI toys aren't without.
- [44:47]
Kelly Evans
Risk. A lot of these toys are using large language models. Sometimes the models can.
- [44:52]
Commercial Narrator
Hallucinate. Now, toy manufacturers are doing a lot to create.
- [44:56]
Melissa Lee
Guardrails. At least today, Ultraman is playing parent. My friends at school have been telling me I should do drugs. Is that a good.
- [45:04]
Charlie Brinskoy
Idea? Oh, no, it's a terrible.
- [45:08]
Melissa Lee
Idea. Sound advice from a toy that is supposed to be a parental.
- [45:13]
Kelly Evans
Aide. Yes. Look, if they're ahead of us in AI toys, maybe I can sleep at night. No. Are these to any extent Trojan horses, Eunice? In which case do they have to be connected to the Internet in order to work, or is all their functionality just on computer chips? Because obviously we've seen concerns with like, nanny cams and things like that where it can be hacked or used for surveillance. Would this be a concern.
- [45:36]
Melissa Lee
Here? So, yes, it's all of the above. I think that there is a group of companies that's trying to make some of these AIs more available in places that are rural, so that wouldn't have to be connected to the Internet, but would have, you know, would be able to operate on their own. But there is a concern and there are, you know, some of the companies that I talked to said that they have all of those what they described as, as memories or, you know, what they've learned from and other data.
- [46:06]
Sima Modi
That'S banked in the.
- [46:07]
Melissa Lee
Cloud. So in that way there is some exposure to.
- [46:10]
Kelly Evans
Risk. Yeah, I'd be extorted by my AI toy, I think, saying if we're going to release the files of what's going on in this house if you don't give us what we want. Does it tell you anything more broadly about China's economy right now or in the air race.
- [46:23]
Melissa Lee
Quickly? Well, I think that it just shows how big AI is in China, how the population is more and more interested and embracing of AI and AI devices. And so that's why a lot of people don't have as big a problem, especially parents. They want to find ways to be able to entertain their kids so they use the.
- [46:44]
Kelly Evans
Toy. I would totally get this right. As long as I know I'm not being spied on. I would totally, totally get this for them. Eunice, thanks. Preview of what we could be seeing in the future Christmas years, I expect. Eunice Yoon that's it for the exchange. You've been listening to the exchange. Make sure you're subscribed to get each episode every day, same time, same.
- [47:04]
Commercial Narrator
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