CJ Muse (2:55)

Yeah, no, I mean, I do believe that this cycle is different. You know, from a NAND perspective where Sanders plays, we've been in essentially a seven year down cycle. And so there's no urgency from any of the NAND players to add capacity. And when you layer in the incremental growth from AI, you know, I think we're going to be undersupplied for all of 26 and 27. And so what does that mean? Tremendous earnings power. SanDisk will report next week and we've been writing in our notes who will be first to $50 of annualized earnings, SanDisk or Micron? And, and quite frankly, it's a toss up. But you know, sandisk is right there. And if you look at the March quarter street's modeling about $4 of earnings and you know, if you put in some of the crazy pricing that we've been hearing for Q1, they could earn as much as $10 or $12. And when you think about that seismic beat in the world of semiconductors, you know, I hearken back to Micron in December and you know, in video three years ago for that kind of, you know, material beat the numbers. And you know, in that world it's hard not to want to be there. So, you know, we've got buys across Seagate, W.D. sanders, Micron, we think the group continues to move higher.

Host/Anchor (4:08)

Are we going to have shortages that affect the everyday consumer? And look at those price surges that we've seen in the last couple of months. Are we going to get in a situation where, you know, you walk in to buy a laptop and they say, you know, we have one, or the price doubles 100%?

CJ Muse (4:22)

I would tell, really our working assumption right now is that PC unit volumes will decline 10% this year and that smartphone unit volumes will decline at least 5% because there's not enough chips, not enough memory. And so what you're going to see is at the high end, higher prices and at the low end, you'll see de spacking of memory.

Host/Anchor (4:43)

Wow. I mean, do you think this partly explains why an Apple, for instance, has been underperforming in the model, which is all about selling iPhones? Are they going to be memory constrained or no?

CJ Muse (4:54)

You know, it's hard to say whether they got in line. You know, we hosted a dinner with Micron a week ago and they talked about for certain customers unable to provide 30 to 50% of what those customers want. And so it's unclear exactly who it is. But if, you know, what is clear is if you didn't get in line in the last three months, you're going to have a problem this year. So I think, you know, this earnings season, particularly for the PC and smartphone supply chains, that's going to be a major theme and you're going to see real weakness on unit volumes.

Host/Anchor (5:29)

That is fascinating. I don't know if there's a big trade there. I mean, investors probably suss this out already. You know, would that be like a. I mean, I don't know if people are trading literally PC volumes, What else is going through your mind in terms of who might suffer from the constraints that you're talking about?

CJ Muse (5:45)

So I think, I think the PC constraints are well known and so many of my clients are long memory and short. The PC supply chain. What I think is less well known is, is the pain that's coming to the handset market. And so, you know, we, you know, have less constructive view on the smartphone names. And, you know, in that world, we cover Qualcomm. You know, I think that's one that we'll see customers, you know, pushing lower down in their, in their Snapdragon, which will weigh on pricing and also I think unit volumes will be weaker. So clearly I do think that is a place where, you know, we're going to see incremental weakness.

Host/Anchor (6:25)

It'll be fine when this gets into the midterm, you know, like something's going to happen where the midterms and political, like something is going to happen here with everything that you're describing. So I'm very curious to see how that plays out. I mean, we have the $100 billion opening of the Micron factory in upstate New York, I think last week. That's not going to come online soon enough to cure this shortage that you're talking about. But what are the data points you're watching to know that this famously cyclical business is close to another top as opposed to still seeing a lot of kind of upside ahead?

CJ Muse (6:55)

Sure. You know, I think it's key to remember it takes two plus years to build a new greenfield fabric. So nothing can solve this problem overnight. I will tell you that Samsung and Hynix are adding 175,000 wafer starts per month this year. That's about 8% capacity add. They're pulling that in by three months. However, you know, that won't alleviate shortages until bringing on some supply in early 27. But again, you know, when you think about the added demand from AI, particularly high bandwidth memory as well as agentic LED AI servers, you know, I don't see, you know, this shortage being alleviated into 2028. And so, you know, this is definitely a cycle unlike any other cycle I've seen. And so I do think that peak multiples will be higher this time. And I think peak earnings will not be 26, but 27. And that means there's still upside.

Host/Anchor (7:52)

That is fascinating. Appreciate you laying it out very clearly. Cj thanks for the time today. Thank you, cj. Muse with Cantor Fitzgerald. Now, there are two bigger potential icebergs for this whole AI trade. One is that the willingness to spend at all costs for AI is going to fade. The other is that the fight continues even unto the death. Here's what Open Air chair Brett Taylor said on Squawk Box this morning at Davos.

Kelly Evans (8:13)

It probably is a bubble, you know, when everyone knows that AI is going to have a huge impact on the economy across a huge range of industries and workflows. Money is plentiful. And what you end up with, smart money, dumb money, you end up with too many competitors at every layer of the stack.

CJ Muse (8:31)

But I think that's good.

Kelly Evans (8:32)

Competition's good. It ends up with this culling effect where the free market determines who has the best products and where the most value is. And I think over the next few years you'll see correction. You also see consolidation. But I don't think you can get innovation without that kind of messy competition.

Host/Anchor (8:48)

Too many competitors at every level. What does this mean for the AI trade going forward? Let's ask Alex Kandrowitz, founder of Big Technology and a CNBC contributor. It's appropriate that we heard from OpenAI. Alex, as the number of people writing their obituary is quickly increasing, what would you say about that and how significant Gemini's arrival has been on the scene?

Alex Kandrowitz (9:09)

Yeah, I don't get the obituaries for OpenAI. I mean, the company only has 800 million weekly active users, the leading model or one of the leading models in this AI race, and a proven Ability to show that it can get ahead of everybody else on product. Whether that's being the first to release the large language model, power chat bot, leading in image generation, doing great stuff in video generation, and of course working on an AI device. I don't think this is anywhere close to being over. Yes, Google has a good model, others will have good models as well. I think a lot of this is about how you productize it. And from my money, OpenAI has been the best at that to this point.

Host/Anchor (9:47)

This is what convinced me OpenAI will run out of money. That's a piece by Sebastian Halaby in the New York Times. That's what I mean about how bad sentiment it's gotten. But the argument seems, Alex, quite clear. Google doesn't have to monetize Gemini. Right? OpenAI meanwhile has committed to billions of spend, is now pivoting to an ad supported business model they said they wouldn't do except as a last resort. You know, where is their financial wherewithal going to come from? How are they going to fight Google in this race?

Alex Kandrowitz (10:16)

Yeah, it's funny, I was speaking with Demis Hassabis who's the CEO of Google DeepMind, the company's AI effort this week here at Davos and what Dennis said was basically it's a tell from OpenAI. The fact that they have to go into advertising is maybe a indication that they don't believe AGI or the super powerful artificial intelligence is right around the corner. Look, I think that is certainly a concern. On the other hand, they are a business, they do have to make money. They have all these users. It's like at a certain point why would you leave the money on the table? And I do think that, you know, if they continue to build on their lead and have this product lead, you know, it doesn't really matter. At a certain point they're going to figure out a way to make that money. And certainly they have an IPO that's probably going to come in 2027. That's my best guess. Yeah, but they're leaving some business momentum.

Host/Anchor (11:05)

You know I haven't seen the latest weekly data but it's clear that from the market share data this was posted by a third party firm this morning. The Gemini's rapidly gaining share. It's open eyes edge is, you know, that's coming at their expense and the expense of some others.

Alex Kandrowitz (11:22)

Well look, it's certainly a legitimate concern. Here's the thing. Google has this distribution advantage. They have all these products, they have Gmail, they have Google search and they can push their generative AI through those products and build users so their user numbers are going to look very healthy and OpenAI has to fight for every user. I think the argument that OpenAI would make, and I think this is a good argument, is if you're going to bolt AI on to existing products, you're not going to have the same thing as if you imagine what a tech product looks like from the ground up. OpenAI is imagining what tech products look like from the ground up. They don't have any legacy business to carry and they can deliver it. That's why they've been able to build the fastest growing tech product in history. Are they for sure going to win? No. This is going to be a very, very fierce fight. But do they have a really good chance to do it? Are they definitely going to run out of money? I don't think so. I think they do have a good chance, yeah.

Host/Anchor (12:12)

That's where I appreciate, you know, kind of understanding this framework shift, which is this is going to be an intense fight. You know, it's, it's the malevolent seven there. They're going at each other with the knives. It's gunslingers, whatever you want to call it. And you can see how Google's rise has cost hundreds of billions in market cap from Microsoft and Oracle and the rest. So if Nvidia can keep its leadership, all the more impressive with that, with the TPU performance. Alex, we'll leave it there for now, but much more to come. We appreciate it today.

Alex Kandrowitz (12:38)

Thank you so much, Alex.

Host/Anchor (12:39)

Alex, Cantuit's big technology, it's been a weak start to the year for the crypto trade. Meantime, with Bitcoin falling below some key levels and trading below 90k. But that's not stopping the crypto infrastructure firm Bitgo from going public today seeing a nice pop. It's the first big test for the industry this year. It priced at 18 last night, opened at 23, 243, about a 23% gain and we're just below that level now. Here for a first on CBC interview is Mike Belshee. He is BitGo's CEO. Mike, welcome to you.

Mike Belshee (13:08)

Hey, thanks for having me here. Good to see you.

Host/Anchor (13:10)

I understand you have some background at Google as well, is that right?

Mike Belshee (13:13)

It is. I'm a veteran from Silicon Valley, the technical industry, I guess, Yeah. I was at Google in 2010 or so. I was one of the first 10 guys on the Chrome team there. While I was there, I invented this protocol called SPDY, which is now known as HTTP 2.0, by the way. I think Bitgo has its name on the standard for that spec. So I think we might be the only crypto company that has its name on a Internet standard.

Host/Anchor (13:39)

Wow. So I'm talking to one of the OGs here, and we appreciate you making the time, so enlighten those of us who trying to follow up. What is Bitgo, Mike? What do they do?

Kelly Evans (13:49)

Sure.

Mike Belshee (13:49)

We're an infrastructure provider. So it's a brand you might not have heard of, because we power institutions and brands that you have heard of. So we're very much a B2B type of company. Our clients are B2B2C. We've grown tremendously over the last 13 years. We have, I think, the largest collection of institutional clients in the world. And then we start with a highly regulated, highly protected security layer around everything that we do. And we build trading, we build staking, we build a number of services on top of that for our clients to use.

Host/Anchor (14:19)

Now, do you own Bitcoin? I mean, you know, the more people talk, and I'm sure you saw the comments from Jamie Dimon about how, you know, this is a better technology, you know, kind of run, everything's on the token or crypto layer. That's great. The more it becomes mainstream, though, the less impressive Bitcoin's performance does. I'm just curious if you have any comments about that.

Mike Belshee (14:38)

I think there's many use cases on top of the digital technology that we have. So Bitcoin deserves full credit for having pioneered this space. As the first token that we had initially, it was designed to be potentially a payment system. On the payment side, it hasn't gotten a lot of traction there, but it's certainly very clearly a great store of value. I think all the cryptocurrencies are going to continue to see strength over the long arc of time. But then on top of that, we now have new use cases. So stablecoins you're very familiar with may turn out to be an easier payment system for most people because it's one to one tied to the price of the dollar. On top of that, we've got defi. We've got tokenized equities, you know, and rather than take it from me, I mean, you can ask Larry Fink from blackrock. I mean, he says every asset, every tote, every stock, every bond can be tokenized. So I think there's a lot of excitement, not just from the early players, the technology side, but also from traditional finance, which is really why it makes it so exciting to be here. New York Stock Exchange today.

Host/Anchor (15:32)

Sure. No, I imagine. Do you what do you have some thoughts, Mike, at all on the AI trade? I don't know if you kind of watch it just out of curiosity or if you've played around with it a lot yourselves, if it has anything to do with the company and if you have any point of view on, on whose kind of chat bot is superior and what that means for the valuations of a lot of these names.

Mike Belshee (15:52)

Well, look, on AI when you think about AI progressing and suddenly being able to do negotiations and contracts for us to be able to pay for services on our behalf, AI is definitely not going to be touching physical currency. It's going to be using something like a digital currency. So these two worlds absolutely intersect once we have the API driven types of money, which by the way, offers up a whole bunch of opportunities that didn't exist before. You simply can't use your your stocks and your bonds and all of your portfolio until you digitize it. So now that that happens, it's not only available to us in all kinds of new use cases, which is what we're seeing in the industry already. But on top of that, of course, this is going to be the money of the AI.

Host/Anchor (16:31)

All right. Well, Mike, again, the leading edge of so many of these technological innovations. Congrats today and we appreciate you making.

Mike Belshee (16:38)

Thank you. Thanks for having me.

Host/Anchor (16:39)

Mike Belshee from BITGO. Coming up, GE Aerospace down more than 5% after posting a solid earnings beat. Strong full year guidance could be a bit of profit taking with shares up 60% in the past year. CEO Larry Culp joins us exclusively about the quarter, his outlook on defense spending and more. That's coming up ahead. And the Russell 2000 are hitting another record high today, outperforming the s and P10 to one to start the year. But our market guest is souring on the small cap rally warning it's a bad sign for stocks. We'll have all those details ahead on the Exchange.

Kelly Evans (17:14)

This is the Exchange on cnbc. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts. Before we had ATT business wireless coverage, our delivery GPS wasn't the most reliable. Once our driver had to do a 14 point turn to get back on route.

CJ Muse (17:58)

A 14 point turn.

Kelly Evans (18:00)

An influencer even livestream the whole thing. Not good for business. Now with AT&T business Wireless routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though.

Alex Kandrowitz (18:13)

AT&T business Wireless connecting changes everything.

Host/Anchor (18:18)

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Philippeau (19:23)

Thank you, Kelly. Larry, you heard Kelly. Set the table there a little bit. Strong fourth quarter beating on the top and bottom line. Me, what you're seeing in terms of demand and the outlook for Tor 2026.

Larry Culp (19:33)

Well, Phil, thanks first of all for coming to Evendale. I think we feel very good about the numbers we put out today. We talked about the fourth quarter ending very strongly. Orders were up, if you can believe it's 74%. Revenue up 20%, operating profit up 14. We saw a 19% improvement year over year in the quarter in earnings per share and cash flow was up 15%. So just a wonderful way to capture what was an exceptionally strong 2025 for us where we saw revenues up 38%. Excuse me, 21. We saw earnings per share up 38 and we saw cash up 24. So just a very strong environment. And it's all about supply because when you look at those order books, demand is strong. I know you had Delta and United out Here in the last week, airlines around the world feel very good about the environment and we're working very hard to support them.

Philippeau (20:28)

And yet you have the stock selling off today. Look, one day does not make a trend and you've had a heck of a run over the last three years. But the stock selling off today. And you know that there are some on Wall street as well as investors who are skeptical that you'll be able to grow your margins and grow your free cash flow as you are projecting for 2026. What do you say to those people?

Larry Culp (20:47)

Well, time will prove out that the guide we put out today is a realistic guide and perhaps one will be. But we said this morning that we see revenues up in the low double digit range. That'll be led by our commercial services business yet again. We think we've got another billion dollars of operating profit growth ahead of us at the midpoint of the range. And we know that we'll see both earnings and cash grow at a healthy mid teens rate as well. In, in, in 25, you know, get off to a good start too. I think there was some confusion this morning around what to expect in the first quarter. We think both our commercial and our defense segments will be better than their full year guide in terms of the top line. And we should see a sequential improvement in our operating margins. And from a dollar's perspective, both businesses and the corporation will be up double digits.

Philippeau (21:37)

You know that some airlines believe there's a constraint with your ability a to manufacture as many engines as are required and the service times the time on wing needs to be better. Are you confident that you can lick both of those issues as concerns that may be out there?

Larry Culp (21:53)

So Phil, I think you're putting your finger on it. It's more a supply and fulfillment challenge than it is one of demand. Right. I think when we look at the work we did last year where our priority suppliers were up 40% in terms of their inputs to us, that's what enabled us to improve deliveries of new make engines by 26% and in the aftermarket revenues another 26%. So we'll continue to work in that form. That's why our flight deck, our proprietary lean operating model is so critical to what we do. And as we look through 26, we think we'll continue to get better. That'll drive the top line as well as the on time performance for the airlines.

Philippeau (22:31)

Quickly, you're a defense contractor and you know the president's comments regarding defense contractors in terms of stock buybacks and compensation. Do you Know what those, those rules are yet? Have they been spelled out by, by the White House for you guys yet?

Larry Culp (22:46)

I think the folks at the Pentagon are still working through the details with respect to implementation, but from an intentions and objectives perspective, we're fully aligned. Right. We want to get leading edge innovations to the war fighters as fast as we possibly can. It's why our engine deliveries to our defense customers was up 30% last year. And we're investing not only in our existing platforms, but in next generation and disruptive partnerships make sure we do more of that going forward.

Philippeau (23:14)

Boeing and Airbus are pretty much back to pre pandemic levels in terms of production and delivery of aircraft. What do you see over the next couple of years? Are you confident they'll be able to expand their production, especially when it comes to engines?

Larry Culp (23:29)

When I talk to both our friends in Seattle and our friends in Toulouse, they are committed to fulfilling the backlogs that they have that we share with them. Right. Both in the narrow body and in the wide body spaces. So we're going to be working very hard together for the rest of this decade to step up in rate to make sure that the airlines that want to modernize and expand their fleets are able to do so with GE aerospace technology underway.

Philippeau (23:52)

And one last question. AI, you and I have talked about this in the past. So many people sit there and they say, well, where's the physical manifestation of AI? It's right behind you in terms of how you believe AI is utilized to make yourself, your company, more efficient, correct?

Larry Culp (24:07)

Phil? I'm not sure we're on the leading edge, but there's no question AI is going to help us be better at design, manufacture, selling and supporting the 80,000 engines that we have in the field today. And the install base we expect to grow going forward.

Philippeau (24:20)

And just by simply driving greater efficiency.

Larry Culp (24:23)

We'Re going to have greater insights. And greater insights is going to will allow us to be smarter, quicker to certain decisions, more accurate in certain forecasts, and eliminate a good bit of unproductive time, or muda as our Japanese friends call it.

Philippeau (24:38)

Larry Cole, the chairman and CEO of GE Aerospace, joining us from here at their engine facility just outside Cincinnati. Kelly, we'll send it back to you again.

Host/Anchor (24:46)

That split off one of the great financial performances lately. Gentlemen, thank you both, really appreciate it. Coming up, natural gas prices are on track for their best week on record and hitting their highest level in more than three years. Ahead of this weekend's massive winter storm. We'll look at the impact across the energy complex next. And as we head to break, here are some of the names hitting new all time highs today. You've got Charles Schwab up there, but a host of different industries represented Amgen Interactive, Brokers Johnson and Johnson and caterpillar. More than 60 names in the S&P are at 52 high week highs and we'll have more of the biggest movers.

Deirdre Bosa (25:18)

When we come back.

Kelly Evans (25:24)

Hi, I'm Lewis Howes, New York Times bestselling author and host of the School of Greatness podcast. And if you haven't checked out the School of Greatness yet, you are are missing out because each week we bring you an inspiring person and message to help you on your journey towards inner greatness. You're going to hear from the world's top experts around relationships, health, mindset, money and more. If you're ready to join me, you can find the School of Greatness on Sirius xm, Pandora, or wherever you get your podcasts. Make sure to hit the Follow button so you never miss an episode. Thank you so much for your support.

Host/Anchor (25:54)

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

Alex Kandrowitz (26:18)

Sometimes AT&T business Wireless connecting changes everything.

Philippeau (26:24)

Imagine relying on a dozen different software.

Kelly Evans (26:26)

Programs to run your business, none of which are connected, and each one more expensive and more complicated than the last. It can be pretty stressful.

Philippeau (26:35)

Now imagine Odoo.

Kelly Evans (26:36)

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Philippeau (26:41)

Doesn't Odoo sound amazing?

Kelly Evans (26:44)

Let Odoo harmonize your business with simple, efficient software that can handle everything for a fraction of the price. Sign up today@odoo.com that's odoo.com.

Host/Anchor (26:56)

Welcome back to the Exchange. Here's a quick check on markets after that big day yesterday. We're holding on to the rally here for the most part. Dow at 427. We're off session highs by about 100 points. Points or so. Russell's leading the way. Although look at the Nasdaq making a sudden comeback here. They're right neck and neck with a gain of 1.1%. And let's talk about one specific story that you might all remember From COVID when McCormick the spice maker was doing incredibly well Well a bit of an unwind here. It's hitting its lowest level in more than two years now after disappointing Q4 results. They gave weak profit guidance after forecasting higher costs due to tariffs and commodity prices. MKC shares are down 8% and Sphere Entertainment, we talked about it yesterday with Charlie Bobrinskoy up 7% today after an upgrade at BTIG to buy firm gave a 110 price target saying their momentum continues to accelerate. Remember we heard those plans that they announced to build smaller versions of the Vegas sphere near Washington D.C. bTIG forecasting 30 to $50 million a year of high margin revenue. For more on that story, cnbc.com/pro nat gas prices meantime spiking ahead of this weekend's massive winter storm. Pippa Stevens is here with a check on and Pippa, what are people saying about it?

Pippa Stevens (28:05)

Well Kelly, even by natural gas standards it has been a pretty crazy few days and nat gas is now up some 60% on the week and pacing for its best week on record. Now this coming Arctic blast really caught the market off guard. You can see that prices were trading in a pretty tight range here and then started to drift higher on Tuesday before jumping as those weather forecasts really did start to shift. Now there are three primary drivers. The first is covering winter had been pretty mild up until now and short interest was at a 14 month, I should say high and so traders are closing out those positions. The second is demand. Freezing temperatures means people are cranking up the heat and heating degree days which is a proxy for natural gas. Demand jumped from 8% above the 10 year average last week to now 35% above the 10 year average for this week and that is a lot more power burn. And third is the fear of production freeze offs. Now key gas producing regions including the Marcellus and Utica shales in the Appalachian Basin are forecast to get some negative temps according to forecasts from AccuWeather. That can lead to pipes freezing and reduced supply down south especially equipment isn't always weatherized and Citi estimates the production loss could be 80 BCF. Now not all drillers have direct exceptions exposure to the jump in NAT gas. One metric to look at when we do see this type of price spike is hedges, Equity Range Resources and Kotara are the most unhedged. That's according to Mizuho, meaning that they could potentially capture some of the upside from these prices.

Host/Anchor (29:39)

So hedges are good or bad or it depends on what's going on with the price action.

Pippa Stevens (29:42)

So it depends on what's going on with the price action and is very hard to tell because they can be for the month, for the week, for the year. But right now, EQT does have the lowest amount of production hedged for Q1. So that means that they could capture some of that upside from this spike. However, one thing to note here is that you also, if you are a supplier, you don't want to be caught off guard if your own equipment freezes. So sometimes we do see producers are reluctant to sell ahead of something like this. And so that can also make that market more tight and lead to the kind of price things that we're seeing right now makes that.

Host/Anchor (30:14)

How do you, Pippa, what do you walk all over Manhattan? Does this girl look like she had a baby two days ago? Is fantastic.

Pippa Stevens (30:21)

Right back at you. And we'll be in the snow with those babies next week.

Host/Anchor (30:24)

I just get some shoveling calories burnt. Pippa. Thanks very much, Pippa Stevens. Let's get over to Christina Parts and evil list now for the CNBC news update. Christina, thanks, Kelly. Davos today, Jared Kushner, President Trump's son in law, presented a, quote, master plan for what he deemed a new Gaza. Kushner unveiled the plan during a press conference of the Davos signing of Trump's peace board. The images Kushner showed depicted CGI generated images of luxury apartments, data center at data centers and coastal tourism, as well as plans to build more than 100,000 housing units and 75 medical facilities. Tesla CEO Elon Musk said at Davos today that his company will have a quote, widespread network of driverless robo taxis in the United States by the end of 2026. Yes, this year. He then posted on X that Tesla began robo taxi trips in Austin, Texas, with no human safety monitor in the car. Robo taxis first began driving in Austin just this past June, I should say last June. And the French navy intercepted a Russian tanker in the Mediterranean today, suspected to be part of the shadow fleet that enables Russia to export oil despite sanctions. The interception was carried out between the southern coast of Spain and the northern coast of Morocco and the United Kingdom provided intelligence. Kelly. Wow. All right, Christina, thank you very much. Christina. Parts and evolis Coming up. We're counting down to next week's Fed meeting where the FOMC is expected to keep interest rates steady. But we got some big data this morning. Did the PC do anything to move the needle for this meeting or beyond? We will dive into that next. Welcome back. Stocks are rallying for a second straight day here after the president its Pivot on Greenland. The Dow S and P and NASDAQ holding on to some nice gains while the Russell 2000 hit yet another intraday high. It's ninth so far in 2026. But my next guest says it's a worrisome sign when the junkiest of all the indices is outperforming the S and P. Joining me now is David Rosenberg, the founder and president of Rosenberg Research. David, it's great to see you. I can't look. Everyone's celebrating the small caps. They're finally participating. It's not just the big guys anymore, the little white. This should be a David and Goliath happy story, right?

Kelly Evans (32:35)

Well, I sort of chuckle when everybody's talking with the Russell 2000. I'd probably rather talk about the S&P 600 which at least are quality companies. I mean there's not a, there is not a junkier index out there than the Russell 2000. And you know when you look at what the stock market's done since Liberation Day, the companies, the companies that make no money or lose money, their stocks in aggregate have outperformed companies that make money by 2000 basis points. So yeah, I guess that this is going to the casino. This is what the stock market's become. Basically everything that you just talked about in the intro just tells you how speculative and to a large extent how junky this rally is.

Host/Anchor (33:32)

I suppose I would want to look at it and say, you know, finally the Mag 7 are cooling off. Sure they make money but people are concerned about how much going forward. And finally the rally is broadening and going to other. Even if we just focus on the s and P500. I take your point about the Russell's and you could put that to the side. I'm curious Dave, while you're here, your larger thoughts because underpinning the broadening of the rally has been falling in interest rates. Right? Like that's kind of the real story of this rally the past couple of years. Does that get called into question at all now what do you make of the PC data? Are we at 3% and headed there? That's what the market's worried about I think for the December figures. And does that stall out kind of the, the deep, the disinflation if I may, that has helped the market do so nicely.

Kelly Evans (34:17)

Right. Well look, let's just say that back to your first point. I'll get to the second point. You know, the first point on general they and the technology dominance has spread its tentacles through so many other aspects of the Stock market, you know, investors are buying, you know, energy infrastructure and even buying utilities and pipelines and financials because financials of course are going to make a lot of money from, you know, the M and A boom and the IPO boom. It's all coming from AI. So you know, with the broadening of the market, it's a bit funny because it's all basically connected to AI. It's just these are various derivatives of what's been going on. In answer to the question, I mean, I think just what's happening in the stock market is not about interest rates, it's about bullions and incredible investor confidence over the future. And there's no doubt that we've had a massive shift in the innovation curve. But there's still lots of question marks in front of what the total addressable market is ultimately going to be for AI. But investors right now have laid down their money like they did with the Internet back in the late 1990s. It's just really about investor confidence. That's the bottom line. Is it about interest rates? Not so much because the Fed's cut interest rates by what, 175 basis points, but yet the interest rate that should matter the most for a long duration asset, which is the 10 year or 30 year bond yield, they have that much at all. Do I think the Fed will be cutting interest rates? Yes, I do, but I think for now they're on hold. They're sounding very hawkish. I thought the inflation numbers today were great across the board, especially the core numbers. And I think there is valid reasons to believe that inflation will be a downside surprise through 2026.

Host/Anchor (36:13)

Really? Why is that?

Kelly Evans (36:16)

Well, I'll tell you why. Firstly the tariff impact as Jay Powell told us in December, that's the irony of ironies is that the biggest dove on the FOMC is Powell, but he's a bit of a lame duck chairman. I don't know why Trump picks on Powell so much. They almost have the same view on interest rates. It's a committee, it's not one person. He's got a powerful vote but it's still one vote. The committee is more hawkish than he is and I don't can't say I really know why, but maybe they just don't want to do anything until we get a new chairman coming in in May. So it could be just the timing issue on the inflation. A couple of things. First is that as Powell had said, Powell said some interesting things that the December at the podium after the meeting he Said that when you strip out the tariff impact, which has been lighter than people have thought, right. Foreign is running in the low tubes. We're almost at target. All these people talking about we're too above them. Too much above target. Too much above target. You're almost a target once you strip the tariffs out. And then Powell tells us that the tariff impact peaks out this quarter. So what are you complaining about? We're almost at target as is. And on top of that, and Powell once again, I mean, I was there thinking to Powell, I want to go up there and give you a hug. He was talking about the shelter disinflation because we haven't seen the rents have been deflating for 18 months in real time. But because of the distributive lags and the CPI numbers, it takes a long time to filter through, but that's going to be a dominant theme. And that's 30% of the CPI. Then on top of that, you know, we talked so long about cp, we're talking a lot about food prices, right? But food inflation has come way down. In fact, no, remember that I said that, you know, rents and OCR are 30% of the CPI is like almost 14%. And food prices in the wholesale market and in the commodity pits, you know, the Goldman Sachs agriculture commodity index is down 12 and a half percent year over year. And that hasn't shown up yet through into the PPI and cpi. We, we're still talking about food price inflation. Food prices are extremely high, but I think that inflation is not a level. It's a rate of change.

Host/Anchor (38:36)

You know, I say, Dave, I, I haven't seen your name on Kelsey yet, but you keep talking like this, I think you have a shot. I'm just saying. I think, I think you've got a shot. If the President's listening, we have to leave it there for now. But I take your point and that you think there, you know, speculation should be divorced from kind of the, the broader kind of the way things are playing out.

Kelly Evans (38:57)

Anyway, remember Animal Spirits? That's a big part of the stock market and we've had that on our hands for a while and it's continuing.

Host/Anchor (39:05)

That is true. Which do you use?

Melissa Repko (39:06)

The chat bots.

Host/Anchor (39:07)

What's your favorite? What do you use?

Kelly Evans (39:10)

I, you know what? I only, I don't use any of that stuff. All I do is I got to use my YouTube TV channel, Gemini.

Host/Anchor (39:20)

You've got a Google account.

Kelly Evans (39:21)

I'm telling you, I still have a horse and buggy delivering my milk in the morning. So, you know, I'm an old, I'm an old curmudgeon and a Luddite.

Host/Anchor (39:31)

So there's a lot of productivity. No, you're, you're pent up productivity. I'm telling you. I'm going to, I'm going to send you some stuff. You're going to love it. Dave, thank you very much.

Kelly Evans (39:40)

You too.

Host/Anchor (39:41)

David Rosenberg with Rosenberg Research. Coming up, Anthropic CEO Dario Amode. Amode, how do you say it? Playing down China's AI development developments from Davos, saying the country is behind the US but our own Deirdre Bosa is seeing something very different. We'll dive into that next on the Exchange. A top ranking Chinese AI startup has just announced new limits on its coding product after overwhelming demand from users in China and from the United States. As China's AI tools gain traction globally, Deirdre Bosa has more in today's Tech check. Deirdre.

Deirdre Bosa (40:14)

Hey, Kelly. So coding is really the key battleground in AI. It's the first place where models turn into daily tools and we're aiding agents do real work. So a Chinese model having a viral coding moment, that's a big deal. Even more striking, it's happening right here in the U.S. so Jeep, who is the company, Jeep, who just went public in Hong Kong, tells us that following the release of its latest model called GLM 4.7, online traffic has jumped fivefold and the user base for its coding plan is primarily concentrated in the US And China. Now, that was very surprising to me. So I checked in with a few sources who confirmed the model's presence here in the US One telling me the model is very good on agents and coding. Another says that because it's open source, it's able to be fine tuned and that'll make it good at specific tasks over time. Jasmine, tech check producer and I tried the coding assistant ourselves, asking it to make an app that tracks the top public companies in Hong Kong by market cap notifications. When the list changes, you're looking at it. Right now. This is what we got from Jeep, who after just one prompt, suggesting Kelly, that coding agents, they're becoming commoditized just, just as chat bots have. And China's edge here is open source. Jeep, who like Deep Seek, is using open models as a distribution strategy. They're cheaper to run, they're easier to customize, and they're harder to be cut off from. You mentioned Dario Amadi, the Anthropic CEO before the break at Davos. He's really playing them down. But if you look at the leaderboards of models, especially open source, the Chinese ones are right at the top.

Host/Anchor (41:41)

It's fascinating. Are there any warnings from, you know, from a national security point of view about people engaging with them?

Deirdre Bosa (41:47)

Yeah, good question. It's open source, meaning that you can actually download it onto your own server. And primarily, you know, startups would do this because they would want something that's cheaper and more able to fine tune. So no, once you download it onto your own server, you're hosting it, so you don't have those same kind of security risks. However, if you're using the chatbot on a browser like Jasmine and I did. Yes, technically your information, if it's it's sensitive, is going back to potentially a Chinese server or the Chinese will be able to have access. Same argument as deep seek. Right. If you actually use the chat bot, that's a national security risk. If you're using the API, the model itself, there isn't a risk. And that is why adoption is surprisingly large, even here in the US what.

Host/Anchor (42:30)

Power are these kind of Nvidia's lower powered chips? Are they Chinese competitors like Huawei? Do you know, I'm so glad you.

Deirdre Bosa (42:38)

Asked me because Jeep, who made headlines about a week ago for building the first advanced model entirely on Huawei chips. I don't think it's this model but they, it was a multimodal sort of image model that they say they built entirely on Huawei chips. And that is a really, really important point. It means that they're doing more with their own homegrown chips, which is the topic and a theme that we've really been hitting on that we're going to see more of. This year is last year it was really about Chinese software and open source models. This year I think you're going to see more advancements in hardware, chips and infrastructure.

Host/Anchor (43:09)

It's really interesting, Deirdre, thank you, we appreciate it. Our amateur coder. Everyone's an amateur software developer these days. Deirdre Bosa. Coming up, free lollipops, exclusive product drops and a Mr. Beast partnership. It's not a Gen Z pop up shop, it's Lowe's. We're going to go inside the home improvement giant strategy to attract new and younger shoppers. Next on the the Exchange. Welcome back to the exchange. 40 is now the average age of a first time homebuyer. It's an all time high according to the national association of Realtors as record low affordability prices, younger people out of the market. That's had A big impact on home improvement stores, on Lowe's in particular. But the company has a plan to lure Gen Z and Millennials into its its stores regardless of homeownership, as both Lowe's and Home Depot have been underperforming. Retail and consumer reporter Melissa Repco is here on set with that story and a little taste of what these new initiatives might look like.

Melissa Repko (44:11)

Yes, Kelly, it might sound surprising, but some of them are as simple as handing out free lollipops in stores. They started doing that this month and they also relaunched their Lowe's Kids Club, which is a free workshop. They do think like DIY projects for little kids.

Host/Anchor (44:24)

Home Depot has been doing that for a long time. Yeah.

Melissa Repko (44:26)

Yes, they have. And so these are really projects to. Or they're part of a broader push to get people who are aspiring homeowners into the store. Some of those are younger parents, but they're also Gen Z and Millennials that are looking to influencers for ideas about how to fix up their space. That may be a rental, but of course, those could be, you know, future customers for Lowe's. And Lowe's wants to find a way to make themselves relevant even today as they wait for the backdrop to improve for housing.

Host/Anchor (44:52)

I mean, is it a. Since Home Depot has been doing this, is this a story about kind of these national trends, or is it just that they need to catch up to Home Depot? Or to the earlier point, are they both underperforming because people are not. There's not a lot of housing activity right now.

Melissa Repko (45:05)

It's really a combination. But Lowe's is more exposed to DIY in particular, which is why it's felt more of a pullback and maybe has more of an opportunity this year as people potentially dip their toe back into diy. The reason why it's more exposed is because. Because about 70% of its sales come from DIY shoppers, and that's about half at Home Depot. So it's more exposure to that customer who's not the pro, who comes more steadily for electrical equipment or things like that.

Host/Anchor (45:31)

Right, right, exactly. It might be a little bit more of a discretionary thing. What would you say about kind of shopping trends more broadly? Is the housing market being quiet, a big hangover on other stores as well? I think about a home goods, you know, there's a lot of that usually dry drives people into. Into stores. So is it. Is it felt beyond them?

Melissa Repko (45:47)

I spoke to analysts for this story, and one thing they said that's looking more hopeful as we go into the year is that furniture is picking up and decor. And so that could be an early indication that people are willing to spend a little bit more discretionary on their homes. But of course, the biggest problem here is really twofold for home improvement, which is not just pressure on discretionary, which we hear about from all retailers, but the fact that mortgage rates are still really high and very sticky. And while they're starting to edge down, the question is, will people embrace this potential new normal of higher rates? One promising thing is Gordon Haskett does a survey, and they found in their survey that in the most recent quarter that about 35% of consumers said they'd be willing to buy a home at rates between 5 and a half percent and 6%, and that was 25% last quarter. So potentially people are starting to adjust that rates may not come down to where they used to be and they may still have to get off the sidelines.

Host/Anchor (46:42)

Yeah, well, it'd be if we can get the 10 year. I mean, there's the mortgage rate, 6.2% today.

Melissa Repko (46:46)

So, yes, it's getting closer. It's getting closer to maybe that tipping point for people.

Host/Anchor (46:51)

Yeah. So furniture is an area where you.

Melissa Repko (46:53)

Think there's some indication that's picking up. And again, could that be a leading indicator for home improvement? Lowe's and Home Depot certainly hope so.

Host/Anchor (47:00)

All right, Melissa, thanks. Appreciate it. Melissa Repko. That's it for us here on the Exchange. I'll join Brian Sullivan for power lunch, though, and we'll be talking to baseball hall of Famer Derek Jeter if you can guess his next big investment. It's sports related, but it's not baseball. And that's next after this quick break.

Kelly Evans (47:22)

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