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Mag 7 Magnificent Again?, Software's AI Agent Takeover and South Korean Stocks Slip 3/4/26
00:43:50
The Mag 7 underperforming recently, but Rosenblatt Securities sees better days ahead. Box CEO Aaron Levie says AI agents will be the biggest users of software in the future. Plus, the Korean Kospi was the best performing stock market in the world last year, but posted its worst day ever amid concerns over the Iran conflict.
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Thank you very much Scott Jensen Huang is about to speak. Tech execs are getting ready meet at the White House and is the Mag 7 back on top again? Welcome to the Exchange. I'm Kelly Evans. The market is certainly taking a breather after heavy selling following the US Attacks on Iran. The Nasdaq is leading the rebound today and it's now up nearly 1 1/2 percent. This all follows a decent ADP jobs report and a strong ISM services read this morning. Dows up 336. All of that said the 10 year yield is moving back up towards 4.1407 this hour. Private credit names are also bouncing back. Helps by Oppenheimer reiterating Blue Owl as a top pick. A rebound in software helping those stocks as well. But some bigger upward moves in the memory chip names today with Western Digital up 7%, Seagate up 8% to lead those gains. All of this helping South Korea's market where futures are higher after it booked a 12% overnight drop that was its worst one day loss in history amid soaring global oil prices and after it had more than doubled over the past year. Let's begin with this market rebound today as investors breathe a sigh of relief over the oil price situation helped by comments from Treasury Secretary Scott Besant this morning.
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We believe the market is very well supplied. We are in contact with the many of the countries around the world via the iea. There is a gigantic spider not only in the US but around the world now.
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Investors are still looking for more specifics on the safe passage for oil tankers through the Strait of Hormuz and insurance for crude carriers and cargo ships operating in the Persian Gulf. But as I mentioned here at home, the ISM Services Index jumped to 56.1 in February. Look at that chart, better than expected. Highest level since July of 2022. That said, is stronger data plus higher oil prices now going to cause more upward pressure on inflation and that let's bring in Larry Adam, he's the chief investment officer at Raymond James and Adam Posen is president of the Peterson Institute for International Economics. Welcome to you both, Larry. Larry, I'll just start with you and the market action which is telling you what exactly?
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Well, I think this is pretty much par for the course that when you have these geopolitical events you see some near term volatility driven by what's happening with the headlines. But as we've been saying, as long as it doesn't last more than like three or four weeks, it probably just remains headline risk. But if it does last more three or four weeks, then I think we're going to have to start to look at how it's going to change our ultimate economic and targets for the year for different asset classes.
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Larry, are you positioning right now for kind of continued outperformance that materials and industrials and energy and kind of the physical atoms that are going into this build out of AI and of capital spending more broadly?
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So when it comes to energy, we're actually a little bit more cautious on energy. Our target for the end of this year for the energy sector is $55 to $60. So as a lot of these events start to dissipate, I think you're going to see downward pressure. And that's a sector that you have to remember that has very little if any earnings growth this year. So I'm a little bit more cautious there. The areas I would prefer are going to be technology where you have attractive valuations and earnings growth of around 30%. And then the other area I continue to like is industrials because I do think, as you mentioned, we're going to have to see the replenishment and build out of military armaments around the world. And the industrials continue to pick up the benefit of, you know, building out AI and the power grid here in the United States.
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Yeah, it's a powerful triple tailwind there. Adam, let me turn to you. Prior to the Iran conflict breaking out, of course we had a couple of negatives. We had that PC report which had a lot of worries and a couple of worrisome data points in there. In some ways the consumer part of that is tracking for maybe 3.6% inflation growth now. So we've seen this shifting around even before the oil price spike where people were worried that we might not have any more rate cuts this year. Adam what do you see as the inflationary outlook right now?
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KELLY I'm quite worried. As you may recall, Peter Sag of Lazard and I had put out a forecast suggesting inflation could reach 4% on headline CPI by the calendar year. Some of the factors you mentioned, energy, consumer prices, lagged pass through of tariffs, lagged effects of the deportations of migrant workers, but also fiscal stimulus, continuing loose monetary policy and as we've seen with the latest services data, pretty active labor market. And so whether or not you buy that, we've got this new inflation data coming in, this new worries and pressures from the actions in the Middle east and I think that's just going to push further up on inflation. I want to be clear it's not because there's going to be direct hits in the US economy very much in terms of energy. India in particular, Europe, some other places, Japan are much more vulnerable to that. But there is going to be almost certainly additional military spending, almost certainly some kind of thing coming out of treasury or the White House to try to cushion energy blows for people. This comes against a background where gas prices are going to shoot up and that was one of the few visible prices in normal people's lives where they had moved down, not just stopped rising.
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You know, I read Dean Mackey over at point 72 and he is pointing not just to oil, Adam, but also to things like the fact that we haven't seen more of a slowdown in the rent or housing proxy. A lot of people have been expecting that to kind of be more supportive, to be more deflationary than it's showing. And it's weird because you look, do you follow the truflation index? You know, this kind of an alternative kind of real time data point that is way below where the reported inflation is. And so I think there's, I don't,
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I don't, yeah, sorry, I don't buy the tration index. I don't think it's well designed. I think it's much better to do as my Peter's colleague Jason Furman does, which is take a bunch of the government produced much more solid indices at different monthly frequencies, 3 month moving average, 6 months moving average, 12 month moving average, trim not trimmed and look for the common components. And what you see there is A much more solid inflation outlook in the sense of much less decline. And on some of them, we're moving upwards. We pass bottom. I would not bet money on the truflation index as opposed to the real one.
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More on this and then, Larry, I'll turn back to you. But Adam, can the White House look through this and say, okay, yes, goods prices are jumping. Yes, the ISM, the ISM, prices paid in manufacturing at 70 the other day, you probably saw that was a big number as well. So is this just because people are front loading ahead of whatever now might happen with tariffs, or do you think this is going to be a lasting move? How hard is it going to be to get inflation from three or maybe three and a half percent, if that's truly where we're headed back down to closer to 2?
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I think it's very hard absent a recession. Kelly and I said something I almost never say, which is I felt a little badly for President Trump during the State of the Union because there's nothing much he can do on affordability, especially if he wants to pressure the Fed to lower rates. It's going to be very hard to do anything about affordability in that environment. And this just makes it harder. I think he and the Fed, both the White House and the Fed, will take an attitude of, yes, we'll look through this. This is temporary. It won't necessarily undermine things. But I think from the Fed's point of view, that's the wrong play because there's so many other things in the background that you can't count on inflation expectations staying low.
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Larry, do you want to weigh in on that? Do you, do you share these concerns or do you have a little bit more sanguine view of things?
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Well, even before the war, we were expecting an uptick in inflation early in this year. And I think what's happening with oil prices only accentuates that. You're probably going to see an uptick in the early part of this year, but we think the path of inflation continues to be that it moves higher through the first half of this year. But by the time we get to the midpoint of this year to the end of the year, I think we once again get on a deceleration path for inflation going into next year. And I think as we go into 2027, I think that could be a year where you do start to see inflation approach that 2% target that the Fed's been talking about. A couple of the drivers, I do think that owner's equivalent rent will start to show up in the numbers. I think productivity gains continue to drive prices lower and I do think that goods prices will start to move lower as we go forward because I continue to see a little bit more pressure to the downside, especially during the most recent shopping season that we saw. So I'm pretty comfortable that inflation is still well contained. And that's why I think the Fed has more of a laser focus on employment conditions going forward.
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Yeah, fair enough. Although again, you know, if they're looking to cut, they're not getting a ton of help from that ADP report. Quickly, Adam, the Piper Sandler folks think that we could see CPI go up by about a point in the coming months, year on year. I mean that would be a real headline problem for the Fed.
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Yeah, it would. And, and I think the issue, Kelly, is how much persistence do you get? I mean how much does it build on itself? Not necessarily some huge wage price battle, but does it just shoot up and come back down? And the Fed is likely, particularly with the pressure from President Trump. But also because there are people like Governor Waller making the case that these are one off shocks and that there are pressures not to move in an aggressive way either way ahead of the midterm elections, I think the Fed is likely to just sit tight and I think that's going to ex post proved to be a mistake.
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All right, that gentleman, thank you. But Larry, by the way, you point out something that no ruse March 20, you know, we have some time to talk about it between now and then. But do you think that day, which is the Persian New Year, would you think that would carry significance in terms of us coming to some sort of positive development by then?
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Look, that's more of a hope. But I do think that it would be interesting that if you look back previously, President Trump has wished the Persian culture a happy New Year's through Nowruz. So if you think about it, if you think about that three week time horizon that we were talking about, that puts you pretty much right around that date. So I'm hopeful that that could be, you know, with numbers, it's spring with the new beginning type of mentality. So maybe it is a new beginning with our relationship with the Middle east, particularly Iran. That would be a wonderful thing.
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Like the food table. They always put out this quite as quite the spread. Gentlemen, thanks. We'll leave it there for now. Really appreciate your point of view, both of you. Larry, Adam and Adam Posen joining us to kick things off today. Let's turn our attention to tech now where the Mag 7 are up 1% this week while the broader markets are struggling a bit. My next guest says the AI giants are at peak negative data right now, but could ultimately be in for a better year. Let's bring in Barton Crockett, he's senior analyst at Rosenblatt Securities. Barton, we are not even talking about Apple. They did a three day launch event. You know, normally you give them a prime time and there's a new iPhone, there's a few things going on. But is that, is that fine? Do they, do they need all this oxygen or is it fine that these events kind of come and go and the stock, you know, can kind of perform and what do you make of them and the other Mag 7 names right now?
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Yeah, look, I mean if Apple can, you know, be steady as she goes in this environment with all of the memory cost surges, the supply chain issues, that's a flex. I mean that just speaks to their power. You know, I think the announcements that they're putting out this week are, you know, very consistent with their goal to be able to improve gross margin meaningful year over year in the June quarter and a decent harbinger for what they might be able to do for the balance of the year. They're executing well. They're out of the eye of the storm. They're not plowing capex into huge data centers like the hyperscalers. They're able to navigate the storm they have in front of them. They're in a comparatively decent place right now.
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How would you rank the Mag 7 favorite to least favorite? Or is it fair to still break them out into talk about whether this trade, broadly speaking, could have a reversal for a little while?
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Well look, you know where I'm most focused is really on kind of the Internet services companies and in terms of my specific coverage and I do think that there is an opportunity for the narrative to look better. When you mentioned the kind of the peak negativity, the peak negativity is that capex in aggregate for Amazon, Google, Meta, Microsoft is up like 2/3, 66% year over year, basically evaporating free cash flow at those companies. It's not going to get worse. They're not going to grow CAPEX 2/3 next year and have negative free cash flow. I think you're at peak concern about the spending, peak concern about their ability to convert that into profits. I think that as you look into next year, this idea of hardware wins everything. The services, software stocks kind of lag for the hyperscalers at least there could be a different perspective which is maybe their spending on hardware starts to level out a bit and they start to milk the revenue from the investments that they've made. And that could harbor for an interesting setup for these companies. In our coverage, we've been recommending Meta because they have great revenue growth and we think they'll get a return on their investments. You know, but we also think Amazon, if they're able to navigate some of the noise with anthropic, is interesting here as well.
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Yeah, you're a hold on Apple. You know, it's not a sell. It's kind of reflects the performance that we've seen there also on Netflix. I mean, this is one that's been getting some more negative attention lately for some of its, even its core viewership trends. Are you a hold or a sell on that one?
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So I'm a hold on Netflix. Look, I think that Netflix is a great company. You know, I never expected them to win this bidding war for Warner Brothers Discovery, but I think the stock trades at around 20 times EBITDA and I think their EBITDA is growing at about a 20% pace. So I don't think it's mispriced. You know, if the stock were to get disrupted, you know, I could see looking for opportunities. I think that, you know, their growth reflects a maturity arc, which is, yeah, the scripted kind of stuff that they've been investing in resonates. They do really well with that. But a lot of the next generation's kind of viewing habits are skewing towards user generated areas where they're less, well, kind of positioned. And you know, that's going to be a challenge for them, I think, longer term. And you see that reflected in viewership. They don't report subs anymore. They do give us some viewership data. And the growth over there has been, you know, not really rocket ship. So the grower of revenues really is coming from their ad push and their ability to kind of penetrate more of the world. But the amount of time that people are spending on Netflix viewing, you know, is really not terrifically exciting at this point. So, you know, it's a, it's a, it's a well managed company in a maturing environment.
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They are up against a big fight against YouTube, I think from here.
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Correct.
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But still a nice rebound in the share price up until now. Barton, thanks. Appreciate it. Barton Crockett joining us with Rosenblatt. Speaking of Netflix and what they perhaps aren't doing, don't miss a big interview tomorrow morning. Paramount Skydance CEO David Ellison is sitting down with Julia Boorstin to discuss their deal to buy Warner Brothers Discovery. That'll be around 10am Eastern on squawk on the Street. Looking forward to that. Coming up, the revenge of the software stocks outperforming semis by the widest margin in over a year. Was AI's threat to the industry exaggerated? We'll ask Box CEO Aaron Levy about that and the DoD AI clash ahead. But first, our next guest says Brent Oil could still hit 90 bucks a barrel. He'll join us to explore, explain and look at where we could go from here in the Iran conflict. The exchange is back after this.
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This is the exchange on cnbc.
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Oil prices turning positive and going higher again in the past hour after opening. Lower for the first time since the Iran war began. The White House says it's working on measures like military escorts for tankers through the Strait of Hormuz and a cap on risk insurance rates. My next guest thinks prices could go higher for now before reversing lower in the back half of the year. Let's bring in Citi's global head of commodities research, Max Layton. Max, a lot has transpired since we last spoke. Welcome back. And we mentioned your price target potentially of 90 near term on Brent. Where are you for WTI and how are you thinking through where the price could go?
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So the next week or so we think we will be trading at 80 to $90 on Brent and around 5 to $8 lower than that on WTI. I mean, I would just, you know, I'd really highlight that the risk is extremely high at the moment. And over the next few days, the, you know, a push, any continued push for regime change. And you really do really risk Iran using its missiles on regional energy infrastructure. And you know, that would then obviously lead to a response which may include Iranian energy infrastructure. And you can quite easily see how this becomes much more problematic for the oil market.
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Let me just dwell on this for a moment because it sounds like you're describing what I thought we already saw take place, but you're saying there's a whole layer of this that could potentially be still to come. And, and, and you know, I don't want to say worse, but more impactful from an energy point of view.
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Yeah, I think the assumption over the last few days is that the reduction in missile use and drone use by Iran means that there's, you know, while a reduced probability of a further escalation, you know, because of some kind of military dominance to the point where, you know, they've kind of, the US And Israel have kind of reduced the threat of Iran. And that look, that appears to be true, but that doesn't mean there's no threat at all. And the threat, I think still exists and, you know, can, as things progress in terms of the US and Israel being successful in their, in their goals, Iran may see that as increasingly likely leading to regime change. And this obviously then leads to them to respond in an asymmetric or in a, in an escalatory way. And that's, you know, you know, so I think, you know, we're certainly not out of the woods yet. That's, that's where, that's where my head's at.
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Yeah. And so what then gets us towards in Our first guest has kind of talked about, as many people have said this the last few days, that the energy stocks got a bit over their skis this year. Some of the moves that didn't really make sense even based on the oil price prior to all this. So, and you yourself have a much more modest view of where oil prices might be in the back half of the year. Just talk about that.
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Yeah, of course. I mean, I think the stocks benefited from the broader market strength, the potential for Goldilocks economic environment in the US and more broadly globally. As President Trump Was, you know, the idea was he was looking towards the midterms. You'd have a more dovish fed through the second half and you know, there was a broader kind of demand, positive inflation, negative outlook into the midterms which people were, you know, I think pricing in risk assets broadly and I think the oil longer duration assets benefited from that. We, we happen to have in terms of our kind of more bearish 612 month view on oil, we happen to have as a baseline view a de escalation with respect to Iran. So firstly we think this moves from an international conflict where you have 20 to 30 million barrels at risk to an Iran specific risk which is more like 2 to 3 million barrels of exports. And that transition leads to the first leg lower in prices perhaps around a month's time or so and then the next leg lower comes on the basis of peace deals with, you know, it's our base case. We have to take a view. It's a base case case of Russia, Ukraine peace deal happens towards the end of the summer and that takes you the next leg lower.
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Well, that would be a much better back half than what we've started off. And I should mention too, you know, it's not just oil that moves to the Strait of Hormuz, it's commodities as well, you know, fertilizer and a bunch of other things. So that something to consider. Maybe we'll talk more about that next time depending on how this plays out. Max, for now, thanks, appreciate your time today.
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Anytime.
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Citi's head of commodities Max Layton. Coming up, results from Broadcom are headed our way after the bell today. With the options market pricing a 9% move, the shares are down about 7% this year while the semi ETF is up 11%. Is a reversal due for this trillion and a half dollar name? We'll talk about that next. We optimize hydration, movement, supplements and sleep. But most people completely ignore the air they're breathing. And when your air is off, your body feels it first.
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welcome back as we're tracking this market rebound right now. NASDAQ still leading the way, up 300 points. Dow's up 262. President Trump met privately with Coinbase CEO Brian Armstrong yesterday before throwing his support behind crypto firms and their fight to get the Clarity act through Congress. That has bitcoin and crypto stocks soaring. Today. Coinbase is up nearly 16%. It's at 210 and it's leading the S and P. Of course, Bitcoin broadly is down more than 40% still from its record highs. Coinbase is down by more than half. Strategy and bullish are nearly 70% below the highs elsewhere. Ross stores hitting an all time high after reporting strong results including record EPS this morning. It's also raising its dividend and announcing a two and a half billion dollar share buyback over the next two years. Those shares are up seven and a half percent and on the flip side, GitLab hitting an all time low after the company gave disappointing full year guidance, overshadowing an earnings beat. That's an 8% slump for GTLB. Now to Broadcom, which has become one of the biggest companies in the world helped by demand for its customized chips for AI. But the shares have hit a soft patch lately, coming off their third straight month of losses, down 20% in that time. Let's bring in Christina Parts and Evil with more. Christina well Kelly, Broadcom set up heading into earnings, dare I say is tricky and it really comes down to this. The numbers aren't expected, are expected to be strong, no doubt, but there are structural questions. A beat alone won't answer. Start with customer concentration. So nearly 80% of Broadcom sales AI chip revenue is tied to one customer, Google. And Google is already diversifying, working with Taiwan's media tech on a more economical version of its AI chips, which could cause Broadcom market share. Also why we saw share price decline just over the last few months. Then there's the margin story. Broadcom's fastest growing business is AI Compute, but it carries structurally lower gross margins than AI networking and significant lower than software business is. So the faster AI Compute grows, the more pressure on the overall margin profile. Add to that, roughly about 40% of the business is still software. That means slower growth, different multiple, which helps explain why Broadcom right now trades at roughly 30 times forward earnings compared to Nvidia at just 22 times. So often you'll hear people say Broadcom's more expensive, so you're paying more for a company with more customer concentration and margin headwinds. And then there's the AI backlog. Last quarter it came in at roughly $73 billion, which sounds impressive, no doubt, until you realize it was right in line with what the street already expected tonight. That number, of course, needs to move much higher because if Nvidia couldn't rally on a 73% revenue growth and near perfect print just last week, Broadcom is definitely going to need more than just a beat. Kelly. All right, looking forward to those results later. Christina, thanks for that setup. Appreciate it, Christina. Parts and evils to Seema Modi now for the CNBC news update. Hi, Sima.
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H
Hi, Kelly. Elon Musk is in a San Francisco courtroom today defending himself over investor allegations that he committed civil securities fraud during his Twitter buyout in 2022. Twitter investors filing a class action suit against him alleging he engaged in a scheme to depress Twitter share value in order to pressure the board to sell for a lower price. Musk has denied the allegations. The Trump administration today is offering more than a million acres in Alaska, Alaska's Cook Inlet, for oil and gas drillers. It's a key test of the industry's interest in investing in the region and the first of six Alaska offshore oil and gas auctions that are mandated through 2032 as a result of the president's one big beautiful bill. And Republican Congressman Dan Crenshaw of Texas became the first member of Congress to lose renomination in this midterm election cycle. That's according to the Associated Press. Crenshaw was the only GOP House member running for re election who didn't have a Trump endorsement and lost a hardline conservative, state Rep. Steve Toth. Cream shot is Crenshaw, excuse me, was first elected to Congress in 2018. Kelly, back to you.
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D
A lot of moves there, Seema. Thank you very much. See you soon. Sima Modi. Coming up, software stocks on pace for their best week since December. We'll ask Box CEO Aaron Levy about that and about the Pentagon's clash with Anthropic. That's left. Welcome back. We've got some news out of Washington. Amen. Javers. What's happening?
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C
Kelly? We've got a new filing in International Trade Court which seems to indicate the Trump administration acknowledging that any refunds of tariffs paid by US Corporations last year under IPA would be paid if they are paid. Now, bear in mind, I'm doing this and I'm not a trade lawyer, but in this filing we're getting a declaration by Brandon Lord, who's the executive director of trade programs at the Office of trade at U.S. customs and Border Protection. And he's asked by the judge in this back and forth, what's the situation effectively with interest on all these tariffs the company's paid, what he says is in accordance with applicable law. Any validated refund of IIPA duties would include interest. Then he goes on to say, regardless of entry type and liquidation cycle, CBP still requires a review period to ensure no violation of other customs laws and no other duties, taxes or fees are owed. So a nuanced response here stipulating that, yes, if we have to pay these IPA tariffs back, we'll have to pay them with interest, but also saying that we're going to still require a review period to ensure that no other duties of any other kind are required here. So ultimately, I think what we're looking at, Kelly, and the trade lawyers are going to jump on me on social media on this. But I think what we're looking at here with this filing is the Trump administration saying, effectively, yeah, if we owe them, we will owe them with interest. But there's a long way to go between here and there. There's a whole long review period, a
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lot of bureaucratic process between now and whenever they might write a check.
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D
And a lot of companies are already selling to firms who of course are buying them up, you know, at cents on the dollar, hoping now potentially to get made whole, plus then some. So that money is already moving around. Amy, thanks very much. Appreciate it. Eamon Jabbers, the software stocks are rebounding again today with names like box up more than 8% 9 now, its best day in Nearly a year, the IGV is up about 2. Investors are weighing whether the sector sell off has seen a bottom. And Deirdre Bosa brings us box CEO Aaron Levy to discuss that. Welcome to both of you. Deirdre, thank you Kelly, so much. And Aaron, thanks for making time.
- [31:11]
B
Yeah, thanks. Good to, good to be here.
- [31:13]
D
We talk to you every few weeks.
- [31:14]
B
It's good to just have a pulse check of like what is going on. SaaS.
- [31:17]
D
I think I called you like the SaaS Apocalypse spokesman at one person.
- [31:20]
B
I really don't want that position spokesman. Remove that from whatever like label you guys have.
- [31:25]
D
Fair enough, fair enough. But your insight is extremely valuable and it feels like there's been maybe a little bit of a shift over the last few weeks. It was like indiscriminate selling to now a little more nuanced. Your stock is up some 8% today on the back of earnings some other companies that have pulled ahead.
- [31:41]
H
What do you think has actually changed?
- [31:43]
B
Well, I mean I think there certainly was probably your words of indiscriminate selling of just okay, there's a rotation of out of software into, into more of the, you know, kind of capex dependent parts of the infrastructure stack. And and then I think we are in a period where investors are starting to look at like, okay, what actually is happening? What are the contours of what will play out with agents inside of the enterprise. And so I think, you know, I'm judging off of some of the investor conversations I've had at this conference. I think things are settling a little bit where people can kind of open up and say, okay, what parts of the stack are disrupted in different ways? What use cases are agents going to fully be able to subsume? Which ones will they still need other software or infrastructure for? The position that we've had from the beginning is actually agents are going to be the biggest users of software in the future. That doesn't mean they're going to use all software. So you have to figure out what software actually is going to be core to agentic use cases versus which ones won't. And at Box, we're building a platform that helps agents actually leverage the unstructured data, the kind of critical context in your enterprise to be able to help you go and automate your workflow. So agents actually need a file system to be able to do their work and to be able to actually go and accelerate the knowledge work that everybody is looking to to bring AI into the enterprise for.
- [33:02]
D
Right. It feels like investors are getting more familiar with the technology and it's limits, what it can and can't do, what you need third parties for. We were talking, I know, about open cloud off camera.
- [33:10]
B
Yeah.
- [33:12]
D
But let me ask you about the different models. You just added cloud to box AI. So Studio Anthropic just got blacklisted essentially by the Pentagon. Does that give you any pause about who you partner with, how you use the technology?
- [33:24]
B
Actually, it probably does the opposite. It puts us even more focused in being a neutral, open layer for any AI model that is obviously, you know, kind of an improved strategic, you know, model. We think that the idea of kind of having all of your data get sucked into one model or another is, you know, puts you in a risky position. Instead, what you want to be able to do is have a data layer that then connects to any AI system that you want. The Pentagon issue is it was sort of an unanticipated example of that. But there's a lot of reasons why you want to be able to have choice in which AI agents and AI systems you want to be able to use without having to move all of your data between those systems. So I think it actually further reinforces the separation that you want to have between your agenda systems and the AI models from the places where you want to have work get done in the software layer that manages how those agents are leveraging that information.
- [34:17]
D
Right. And I guess even more broadly, how do you sort of look at, as a, as a CEO yourself, how do you look at the events of the last week or so? I mean, one thing for the Department of Defense, the Department of War to walk away from a contract, but that supply chain risk designation. But on to Anthropic.
- [34:33]
B
Yeah.
- [34:34]
D
How do you you think about that?
- [34:35]
B
I mean, I'm hopeful that there's going to be some, some recovery of that, that partnership and that relationship. It's hard when you're not in the room kind of seeing what the, where the actual kind of bright lines are being set. And, you know, we have a great partnership with both the US Government and Anthropic and Open Air and other providers. And we certainly hope for the industry's sake that things can, can get a little bit smoother on this front.
- [34:56]
D
Okay, back to open call. I feel like open call. Yes. It's a little bit nuanced. It's hard, I think, if you're not sort of right here like you and I are, I wonder if you could explain that to our audience what the use is, because Jensen Huang was just on stage behind us really saying that what did he say? Probably the single most important release of software probably ever. Well, what's your view?
- [35:18]
B
Yeah, I think what? Open Claw. So, so, so far, the paradigm of AI and AI agents has been this idea that you as a user will tell an agent to go do something and it will effectively do it on your behalf. I want the agent to write code for me, I want an agent to review documents, I want an agent to go and summarize my email, even text. Exactly, yeah. So that's so far what these AI systems have been. OpenClaw actually took it one step further and it basically said, what if this agent was actually its own effectively autonomous system that was always there at all times, but it almost has its own identity. It's not you, it's actually another thing that is running at all times and you give it tasks and it goes and does those tasks for maybe hours and hours. And it can act either, you know, in theory as you, or it could act in theory as what you maybe would have an assistant or another kind of person on your team actually go and do. And so what it opens up is a little bit of this new terrain of agentic systems, which is what if you have these sort of, you know, nearly fully autonomous systems that you're still in control of, but they're not acting as you, they're acting actually as their own identity. Now what's interesting is with the growth of things like openclaw, but this is true of even things like Claude, Cowork and other systems. These agents actually need many of the kind of critical primitives that we need as people inside of an organization. They need a computer, they need an identity, they might need an email account. And what they certainly need in our world is they need a file system. They need to be able to store off their work, they need to be able to load the information that some other user is trying to share with it. They need to be able to keep track of their memories. So they're going to need a persistent storage layer that is extremely secure, that is going to be able to let an enterprise govern the work that they're doing. That's going to let you actually have auditability of that work. And that's the platform that we're building,
- [37:04]
D
so new customer base almost as agents as well.
- [37:07]
B
Literally, like it might be 100x the size of our existing customer base.
- [37:10]
F
Right.
- [37:11]
D
And you're seeing that with other companies like databricks, to sort of who actually they're building the databases for. Last question, though. That seems really scary for a lot of software companies, this is still kind of a new idea, Open Claw and the idea of like a totally autonomous agent for Wall Street. But does that ultimately just like accelerate sort of the software sell off in certain sectors, especially if you're kind of a, if you're a ui, I do
- [37:34]
B
think that some elements of the UI change. I think as a company right now you have to be AI for sorry, API. Sorry. As a company right now, if you're in software, you have to be API first. So like fundamentally, if you do not have an API into your system that an agent can use just as easily as a human could have used the ui, you're basically, you know, dead in the water. So the future is going to be API forward and the companies that, that have strong APIs into their systems and manage the workflows or the data that those agents are using, those I think actually are going to see a tailwind due to agents because that's just another constituent that we never had before that's now using these technologies. So we actually think there's a lot of upside for many parts of the software stack, maybe not all, but at least the space that we're in. Agents love files. Files are really the kind of native work unit of an agent. That's how they actually keep track of what they're doing. And those files have to get stored somewhere and they have to be secured and governed somewhere.
- [38:26]
F
Right.
- [38:26]
D
So you got to have an API. Always great to get your insights. Eric, thank you so much.
- [38:30]
B
Good to be here Kelly.
- [38:31]
D
And back over to Aaron. Thank you. Spokesperson for the SAS apocalypse. I will make sure that goes up every time. He loves that title.
- [38:40]
B
Keep using it.
- [38:41]
D
Thank you both. Coming up, mortgage demand actually sprung back last last week as rates near a four year low. But the builders are down as the ten year has backed back up today. That includes of naming npr, Lennar, Katie Home. Little different story for the building material stocks though as you can see, Ethan Allen and Mohawk among the best gainers in the space. We'll have more on the housing situation right after this. Welcome back. Mortgage rates are back above 6% now, but last week's brief dip below that level touched off a flood of demand. Diana Olek is here with the numbers. Diana? Well Kelly, mortgage rates did jump higher as you said on Monday as the Iran attacks renewed concerns over inflation. Today they're slightly down to 6.07% according to mortgage News Daily. But last week mortgage rates hovered around a four year low with a few days at that 5.99% which is seen as that emotional tipping point and that had homeowners and potential home buyers calling their lenders applications to refinance a home loan jumped about 14% from the previous week and were 109% higher than the same week one year ago that according to the Mortgage Bankers association, applications for a mortgage to buy a home rose just over 6% for the week and were 10% higher than the same week a year ago. Now, despite some rough weather in the northeast last week, buyers are clearly getting ready for the all important spring housing market. The bigger issue though for buyers is it's less about the mortgage rates and more about supply. Supply is higher than it was a year ago slightly, but the annual comparison is actually shrinking week to week according to realtor.com when it really should be rising given today's lower interest rates. Supply is still well below where it was pre pandemic. Now rates could take another run in either direction when we do get that all important jobs report on Friday. But for now we're just hovering in this sort of short range right above 6%. Kelly yeah, perhaps it underscores how important it is to see that five handle for buyers at least, even if it's just a marginal savings. Diana, thanks. Appreciate it. Diana olek, Coming up, the South Korean Cosby was the best performing stock market in the world last year, but it's fallen more than 18% over the past two days for its biggest two day drop since 2008. So is it the perfect buying opportunity? Your next guest answer might surprise you, But if you owned the Kospi last year it soared 77% boosted by the AI trade. A lot of that as we've talked about, two major names like Samsung, SK Hynix. But major reversal this week amid concerns about the economic ripple effects of the Iran war. The Cosby is down 18% since Monday, though still up 21% this year. Sima Modi is at the New York Stock Exchange with a look at the sell off and the fallout. Seema Kelly, this historic move that we've
- [41:31]
H
seen in Korea's stock market is directly, directly linked to what's happening in Iran. As Goldman Sachs notes this morning, Korea is the most oil sensitive country in the region with a a high percentage of its imports coming from the Middle East. So that's pushing investors to sort of take some money off the table. It does follow a massive rally as you just alluded to. As valuations of companies in the US Started to get rich in the fall of last year, investors started to look for AI picks and Shovels names in Asia and Korea has been a favored destination destination housing two powerful memory chip makers, SK Hynix and Samsung. With this year's gains, these two companies now make up about 50% of the MSCI Korea ETF weighting. Now putting this big sell off into perspective, Kelly Korea is still up. South Korea is still up about 40% this year. That is the widest divergence with the NASDAQ in 17 years according to CNBC analysis. JP Morgan strategists still see this as a favored market to own, pointing to structural reforms and earnings revisions. But they also acknowledge that these stocks in Korea will remain sensitive to the developments in the Middle East.
- [42:35]
D
It was a wipeout. I think they of their 800 listed stocks only 10 finished higher yesterday, down 18% in two days. Sima, thanks. Appreciate it. SIMA Modi so is this sell off now the perfect opportunity to buy some of these high performing markets? Let's bring in Tim Seymour, the CEO of Seymour Asset Management and a CNBC contributor and you're are you buying Korea here? Tim, welcome.
- [42:56]
E
I don't think you have to buy it today but you know if levels on the EW, why which is the ETF we'd be referencing I think around 120 the issues in Korea simulate them out. Well we've talked about Korea, you and I multiple times in the last six months. It's a combination of the whole AI memory story. Korea I should say South Korea is always cheap. Samsung is particularly cheap if you can get exposure and even if it is foreign flows through the ETFs that's been a big part of the trade. The other dynamic is I think just the leverage in the local markets, the trading vehicles, the fact that you've got a president, a former day trader, I mean this is the financial press loves to talk about. This was a former day trader president my young, who is someone that also though is really focused on corporate reform, is focused on equity markets and depth and people that have been investing and emerging for years know that South Korea probably would be investment grade if not for the chaebols and some of the what seems like to outsiders the manipulation of that market. But I think it's really just the accessibility of the market and it speaks to the fact that we're talking about an ETF that a lot of US investors have used to get that exposure. So there's a lot of things that moved into this massive sell off. I do think if oil prices stay in a range here, this is a place to start looking. The question US Investors should also ask is with valuations at Scandisk and you know, Micron and some of the big memory players here because that, that certainly is part of the question. How bubbly has this been? Even if Korea is cheap, I want to buy Korea, I probably want to buy it lower. I certainly don't need to buy it today. I think if you have not been in this trade there's no reason to try to buy this move. I think we're all of the view. Any headline could send oil prices $10 higher and if you are a trader, I don't think you need to own it here. If you're an investor, I think you have an opportunity.
- [44:51]
D
So at 120 and worried about 134 and maybe friends in the back we can show like a five year chart here because reading the Greg over the weekend Tim, I was reminded that Berkshire's position is almost equal between its Japanese company ownership and US company ownership, which is a striking fact to think about. And there's the five year performance. The Kospi is only up actually 67% which is 8, 9, 10% a year. It's nothing that special. Maybe we can even guys show the cost over a 20 year basis and compare it with the Nikkei because I guess here's the point if, if Berkshire sees long term value and some of these shareholder friendly changes Japan's making and if Korea moves in the same direction, you know, more than I do, if they're kind of tiptoeing in that direction, Tim, then I could be more persuaded because otherwise after a parabolic move in like a 20% reset, you think no way should you get involved with this thing but maybe this is actually a way to draw attention to a bigger sort of seismic shift that could happen here.
- [45:47]
E
No, I like your comparison to Japan and Korea has been as an export market historically has often been compared to kind of the, the new Japan and corporate reform focus on governance. These are big issues in both these countries and Japanese equities are going higher for a lot of reasons but definitely because of corporate reform. I like Korea for this backdrop. I also just think from the MSCI weighting perspective, Korea has now moved up to be almost in line with Taiwan and China. It will pull back a little bit after this. I think it's gotten a little bit hot and again I think it is a case where I'm not sure South Korea should be weighted on a parent with, with Chinese equities. Even if all of this is a function of what you can own and how you can get at it.
- [46:26]
D
I wish we had more time, Tim. I just want us one more on this and it is the North Korea question as more are wondering. Look, you know the President's done something on Venezuela sensing on Iran. What if things heat up in North Korea?
- [46:38]
E
I tell you what, I don't think that's in South Korean stocks, but I'm not sure that's what I'm counting on.
- [46:44]
D
Yeah, exactly. I know it's impossible. One of the things as as Steve Sussex.
- [46:48]
G
Think about it.
- [46:49]
E
Interesting.
- [46:50]
D
Sometimes equities can't discount everything. It's just the events sit over to the side until we know what to do about them. Tim, thanks for now. Appreciate it. Tim Seymour. That's it for the exchange. I will join Brian Sullivan for power lunch right after this quick break.
- [47:06]
F
Martha listens to her favorite band all the time.
- [47:08]
A
In the car, gym, even sleeping.
- [47:14]
F
So when they finally went on, Martha bundled her flight and hotel on Expedia to see them live. She saved so much, she got a seat close enough to actually see and hear them. Sort of. You were made to scream from the front row. We were made to quietly save you more Expedia made to travel savings vary and subject to availability.
- [47:34]
D
Flight inclusive packages are atoll protected.