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Musk's Mega Merger, Disney's New CEO, and Walmart's New Milestone 2/3/26
00:43:53
Elon Musk's SpaceX-xAI merger could be the biggest in history, but where does that leave Tesla? Disney names Josh D'Amaro as CEO Bob Iger's successor. Plus, Walmart joins the $1 trillion club.
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Kelly Evans
ABC's David Muir, the most trusted anchor in America, the most watched anchor in America. Thank you for making World News Tonight with David Muir the number one newscast in America. Most trusted, most watched. David Muir on abc. You're listening to the Exchange. Here's today's show. Thank you very much, Scott. The Dow drops after hitting an all time high. Wal Mart hits the trillion dollar milestone and Musk hopes to hit at least that with his IPO this year. Welcome to the Exchange. I'm Kelly Evans. Stocks are under increasing pressure this afternoon after the Dow hit an all time high this morning. The worst performer is the Nasdaq now down 1.8%. What's dragging it down? Software names and the open air plays in video. Down another three. And Jensen Huang, by the way, just addressed those open air deal concerns in a conversation with Jim Cramer. That was a few moments ago. We'll bring it to you shortly. You can see the software ETF down 5%. Nvidia down 3.6% and the semi ETF also down 3.3. Crypto and fintech are also a bit of a mess. Bitcoin trying to stabilize, but it's back below 75,000 once again. Keep an eye on strategy here. PayPal dropping 20% now for one of its worst days ever, even as Venmo remains a bright spot. Robinhood lower again, affirm down 2.6% despite an upgrade today. But let's begin with the merger that could be the biggest in history, which is between Space X and X, raising a lot of questions for Tesla shareholders as well. We've got all angles in all aspects here. Deirdre Bosa is looking at the why. Phil LeBeau has more about Tesla's next steps. And for more on Musk's grand strategy here, who better than the man who wrote the book on Elon, literally. Walter Isaacson. Welcome to all of you. Deirdre, to kick things off.
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Deirdre Bosa
Hey, Kelly. So for the Silicon Valley crowd, VCs and founders, the vertical integration story that Musk sold in that letter, it's an easy one to buy. You bundle rockets, satellites, data compute and models. You got a closed loop system that no one else can touch. This is the Musk Playbook. Control the stack, move faster than regulators, worry about economics later. However, for the Wall street crowd, this is more complicated in an IPO which is still expected this year. Musk is no longer asking public markets to underwrite Space X which is a cash flow positive company with billions of dollars in revenue but underwrites space x x AI which is a far less mature business that reportedly lost some $10 billion last year with only a fraction of the revenue. It blurs scrutiny across Musk's company which may be the point. Xi who's grok chat bot is facing investigations in multiple countries Announced it's next to a government contractor with national security sensitivity on its own. Xi's cash burn it looks like weak unit economics but inside of Space X is it spun as long dated Capex sitting beside rockets so less pressure to show near term efficiency. If the bet works, Space X keeps the upside. If it doesn't, losses are absorbed by the rest of the business. This is a strategy that we have seen from Musk before. Anchor a money losing bet to a capital heavy government backed business and then sell a future facing story that buys time and buys new investors. Kelly kind of has worked in the past so it's not surprising that he's trying to run that again. Although this is a very very different story, different set of circumstance. If you're going public, you're competing, remember with the open eyes and the anthropics, the pure airplays.
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Kelly Evans
No, and I think you're right to highlight how much better the financials are for Space X than for for X I Deirdre, for now, thanks. Let's get more to what this merger could mean for Tesla both now and down the road. Phillipe has that angle for us and the shares filled today are fractionally lower.
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Phil LeBeau
I don't think they're going to move much until we have a better understanding of what the future is for Tesla and that may be several weeks down the road, maybe even a couple of months down the road. Kelly, when we talk about Tesla, I want to talk about the two parts that are making money for Tesla right now. Let's start first off with the automotive side of the business. Although sales are slowing down globally, when you look at what they're doing here, keep in mind that they are now number two in global EV sales behind BYD and they are essentially a two vehicle platform. Their sales last year 1.59 million were Model Y and Model 3. The S& the X which are being eliminated, only totaled 30,000 in sales. A little over 30,000 Cybertruck. Remember when it was going to sell a quarter million a year? They sold a little over 20,000 cybertrucks last year. That's the auto side of Tesla. The energy storage and deployment side, a much different picture. Take a look at how energy storage and deployment is in terms of gigawatt hours is just exploding. It continues to grow. We know that they want to build the capacity to build even more energy storage and deployment systems. Their revenue year over year in the fourth quarter up 25%. And yet when you look at shares of Tesla, the automotive revenue in the fourth quarter was down 11%. So those are the two sides of the coin with Tesla and one other reason why the stock's not reacting a whole lot here. Kelly, this is essentially a play on three things. First of all, do you believe in autonomous vehicle technology, the cyber cab that they're developing? What about humanoid robots and robotics, which will be now going into the plant in Fremont, California? And then finally there is Musk himself. And I know from people who I'm associated with, friends, neighbors, they believe in Tesla. They believe in Musk. So even those shareholders who at times will scratch their head and say, yeah, that seems a little wacky that he suggested that they will buy into it because of his track record.
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Kelly Evans
Now, Jeff Kilberg later this hour is going to say he thinks the stock should be worth $500 as a result of this. While some are more concerned, he's more positive. Phil, for now, thanks. Appreciate it. Philippeau. And for more on Musk's strategy behind this merger, maybe what could come next, let's bring in the man who wrote the book on him. Joining us now is Walter Isaacson, an advisory partner at Perella Weinberg, professor at Tulane and a CNBC contributor. He's also the author of Elon Musk, the authorized biography of the Tesla and Space X founder. Walter, it's really great to have you here. And what's your reaction to the deal?
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Walter Isaacson
It's amazing how Elon loves to blur the distinctions between his different companies. People move back and forth between them. And now it's good he's eliminating some of the distinctions, especially the distinction between Space X, which has an enormous business, especially in recreating the Internet in outer space. But also he wants to use his new starship, well, which will Launch again, Flight 12 will be in mid March to make a million satellites in low earth orbit and that will be able to create the type of data centers and energy that you need. So it makes a lot of sense for him to have that vertically integrated. Secondly, which nobody's really commented on, he now has two types of AI companies. The first is a company like Space X and Xi and Xai, by the way, is very good now as a chat bot and PD is good, but it's a digital AI company. On the other side you have with Tesla and other things, Optimus, real world AI, cars that can drive, robots that can move. And that type of thing is a way to keep those two companies connected but yet distinct.
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Kelly Evans
So you're a fan. I mean, not like I'm trying to turn you into a, you know, give me a thumbs up or a thumbs down, but, but you think there is a, there's a strategy. Because the criticism Walter is he is taking Xai, stuffing it into SpaceX. And it's a little strange because just I think last week we were told that SpaceX was going to be worth a trillion and a half dollars when it ipo. Now we're told that the combined company is going to be worth 1.25 trillion, so, so less so. You know, I'm not quite sure if these trial balloons are telling us that there's more pressure behind the scenes than maybe we're picking up, but I'm fine with the grand vision. But it sounds maybe a little bit more complicated behind the scenes.
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Walter Isaacson
But look at all these AI companies, you know, whether it's open or Gemini, Google spending huge amounts of money, right, Doing data centers and everything else. Well, the best way for Musk to sustain that is to have it tied to a company like Space X that really is generating money like crazy and will do more so when everybody is using, you know, Starlink and other Internet services to connect. So I think this is his only way to grow an AI company. And I know you're talking about a IPO you think is going to happen and be, you know, one and a quarter trillion. I wouldn't be surprised if he delays that a little bit because I'm not sure he's favor of going public. He likes staying private.
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Kelly Evans
Well, I was going to say, I mean, why take X? Why, why do it at all? You know, I mean, exactly.
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Walter Isaacson
I mean what this does is it gives them the option of not doing an ipo.
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Kelly Evans
Hmm, interesting. These companies would, would thus remain private. And perhaps you're saying Xi can do so in a more sustainable way, drawing on Space Will.
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Walter Isaacson
Remember when he promised to take Tesla private?
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Kelly Evans
Yeah, he will, he will. I think we do. This is sort of jogging our minds in that sense, I guess. All I would say is if there's a chance that the SpaceX cash flows are reinvested in Xai instead of in Space X, is that a good Outcome.
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Walter Isaacson
Well, I think what you're going to have, if you can get over the next five, ten years, a million satellites in orbit, you will have the best energy generating and the best data centers there are. And yeah, I mean I, you know, it's maybe a problem if you have shareholders in one company who didn't like another, but this is pretty much private for him. He's always been able to look 10, 20 years down the road, have some audacious plan like I'm going to go to Mars, but then backfill it with a business model that helps fund the way there.
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Kelly Evans
I don't know why he doesn't just create musk, you know, ticker musk and put it all under one hold.
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Walter Isaacson
I mean that's the worst idea.
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Kelly Evans
Doesn't it remind you of Alphabet a little bit? I mean they have, they have a car unit, they have Waymo, they have, you know, a cloud piece. That's why they have the chat, they have Gemini, I mean they're starting to remind me of one another in other ways. You could say maybe it's kind of the new world version of what, you know, a Berkshire Hathaway was for the old economy.
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Walter Isaacson
Well, no, I think you're right. That is more a bit like, you know, Gemini, Google, Waymo or whatever than Berkshire Hathaway, which Berkshire Hathaway was just, you know, putting all sorts of things into a big old bag because, you know, they were good investments, not because there were synergies, you know, you set up. Pretty interesting. Which is, I'm sure in his dreams. That notion of just everything from Optimus, a robot to Neuralink, the chip that connects us to our computers, to Tesla, to full self driving and the autonomy, the AI for that all is in one big company and you know, $3 trillion company.
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Kelly Evans
Right. Do you think that's the end game here for Tesla shareholders? That some, that they'll kind of, you know, be drawn into this Ultimately, yeah.
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Walter Isaacson
I mean, I don't know when it's going to happen, but I suspect he's going to be thinking about a lot. And even in this current deal, I'm sure he's thinking about, well, what's the role of Tesla? It's already put how much? 2 billion into this new entity. I mean this, this XI entity. So he's already thinking about the finances go both ways.
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Kelly Evans
What's the opposite of Zeta? No, Omega, that's what he should call it.
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Walter Isaacson
Alpha and Omega, I think you'll call it X. Yeah, you know what, probably he has a true love for the letter X.
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Kelly Evans
And that's maybe the best way to end it. Walter, thanks very much for your time today. I appreciate it. Walter Isaac said, isn't it like US Steel has the ticker? Just buy it from them anyway. Groundhog Day is over, but Disney today announced a successor to Bob Iger once again. The Park's boss, Josh D', Amaro, will take over as CEO on March 18. Six years ago, then park boss Bob Chapek found himself in a similar spot, which ended with a corporate governance spectacle and Iger reclaiming the CEO role. Iger will stay on as a senior advisor now and a board member until he retires at the end of the year. Disney shares are down fractionally after a down day yesterday. We're also keeping an eye on shares of Netflix in the meantime, which are taking a leg lower right now. Down two and a half percent comes as Netflix CEO Ted Sarandos is getting ready to appear in court. And we'll talk more about what they're talking about testifying in the Senate on the plan merger with Warner Brothers. For more on all the twists and turns in media, let's bring in Chris Marenghi, the co CIO of value at Gabelli Funds. Chris, the more you looked at those Disney results yesterday, the worse they looked. Is that what's really going on here?
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Chris Marenghi
Well, listen, I think Disney had a nice run into earnings, taking a little breather here. Investors worried about the shape of fiscal 2026, with a little bit of emphasis on the back half of the year. But I'm as optimistic now on Disney as I was on Friday last week.
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Kelly Evans
So when you. I was kind of looking through the results. There's negative free cash flow. I think the expectation was positive. The streaming business made money, but its margins are tiny compared with the old pay TV model. They had that outage issue with their. I think it was YouTube last year that put pressure on the sports piece of this. You know, there were a lot of problems, not to mention the international tourism and the parks issue. So, you know, 7% drop yesterday means that the market wasn't just a little frustrated, it seemed to be a lot frustrated.
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Chris Marenghi
Well, none of those real surprises given, given the expectations. But I think what the earnings underscored yesterday and what Josh tomorrow's elevation to CEO really underscores is that Disney is an experiences company now, 2/3 of their profits, probably more than that of the value of the company. And that's a good thing, especially when against the backdrop of what we're seeing today in AI.
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Julie Beal
Right.
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Kelly Evans
So you're saying they should just double down, lean into that and then what happens to the media piece? Well, they still have a lot of.
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Chris Marenghi
Challenges, as does every media company, obviously. They have still a very big linear business, cable network business that they are navigating through, through bundles, through investment in new content, etc. But they already have scale and I think a lot of other companies, including perhaps Netflix and certainly Peace Guy, are looking for that scale as to what, what to do next.
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Kelly Evans
Yeah. So Netflix then, if we turn our attention there, he's like you said, you're going to stick with Disney throughout this transition. Netflix has been under pressure ever since the WBD acquisition was announced or intended.
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Chris Marenghi
That's right. And you know, grab your popcorn. We have the pre show today in the Senate with Ted Sarandos and Bruce Campbell appearing. You know, the Senate of course doesn't have direct jurisdiction over mergers. That will come later with the ftc, DOJ and certainly the EU and uk. But the Senate is specifically looking at this issue of whether this is a killer non acquisition, which is the idea. By going through this process, Netflix is tying up a competitor and WBD and preventing Peace Guy from getting a hold of a deal that would give them scale. I think that may be true, but I'm very skeptical that was the intent given the $5.8 billion break fee. And what's happened to Netflix stock?
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Kelly Evans
Right. It's down. Maybe we can show a longer term chart. It's down 30% in six months. Why is this such a big deal?
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Chris Marenghi
Well, I think certainly was a surprise. Their willingness to bid on Warner's was a bit of a surprise to those of us who follow Netflix for a long time. They always grew themselves organically and I think there was a worry that this was more of a defensive than offensive deal. I think it's some of both, but increasingly looks like it was a little bit defensive as they tried to reinvigorate engagement amongst their subscribers.
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Kelly Evans
Yeah, it's ironic at a moment when the other mag7 are kind of at each other's throats with AI. Netflix could have been immune from on that, maybe unscathed. But instead they're. They're going after this target of their own and inflicting some damage there. Chris, appreciate it for now. Chris Marinji with Gabelli funds coming up. PayPal is also an underperformer today in fact having its second worst day on record after dismal results and a huge miss on guidance. The shares are down 20%. They also did announce a C suite shuffle. We'll look at what it could take to turn things around as they barrel toward an eighth straight day of losses, its worst streak in more than three years. Plus, the Russell 2000 small caps are coming off back to back weekly losses for the first time since November. Was that streak of outperformance another head fake from the small caps? That's ahead. Stocks are right near session lows with the Dow down more than 400 points this hour. The NASDAQ now down nearly 2%. We're back with more after this.
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Walter Isaacson
This is the exchange on cnbc.
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Kelly Evans
ABC's David Muir, the Most Trusted Anchor in America the most watched anchor in America. Thank you for making World News Tonight with David Muir, the new number one newscast in America. Most trusted, most watched David Muir on abc.
- [18:09]
Expedia Announcer
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 Market Update podcast or find Schwab Market Update wherever you get your podcasts.
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Kelly Evans
PayPal is on pace for one of its worst days ever. The Venmo owner missed Q4 results and is forecasting week 2026 profit. They'll also replace CEO Alex Kriss. As they said, quote, the pace of change and execution was not in line. HP's Enrique Laurez is set to take the reins now on March 1. The shares are down 86% from their record high in 2021. Also, the global FinTech ETF is off 5% today, having its worst session since November. It's actually down almost 7% right now. For more on PayPal and a few other things going on here, let's bring in Dan Dala. He's a senior analyst at Mizuho. Welcome. There is a lot happening. I mean PayPal is not why that fintech ETF is lower today, is it?
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Expedia Announcer
It's just a bad, you know, coincidence, right?
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Kelly Evans
But, but I mean I'm sure it's part of it. But is this pressure on fintech, which some of these, let's be clear, are just software plays. Is it being wrapped up in this broader sell off of software? Of software, yeah.
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Expedia Announcer
And I think, I think there is like a leading indicator, a potential for a leading indicator thing in payments. Right. We've always thought that Bitcoin was a little bit of a, like a VIX on the Nasdaq and, and you know, I think what's happening here, and I don't know exactly, but it could be sort of something that's a leading indicator for things to come because right now the macro is fine. So I'm trying to interpret, same year, I'm trying to interpret it.
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Kelly Evans
Just like you heard Santoli last hour saying. Visa and MasterCard have not been acting that great. Of course, take those as much bigger barometers of consumer spend. If we were just to focus on what happened at PayPal. What happened.
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Expedia Announcer
So what happened is like the management and I'm a big fan of Alex, but he was just swimming in too many different lanes. And you know, you've got to whack a mole there of like Venmo PayPal branded. Everything's going at the same time. I think that just. And they probably didn't give him enough time to turn it around. So I still think the value of this network is huge. It's the only two sided, massive 300 million user, you know, P2P network in the world.
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Kelly Evans
It's crazy that it's. The Venmo itself should not be powering this company for it to be down 85% when they have this successful app. Although I will say I'm using Chase, you know, Zelle, whatever all the time now. So perhaps it's facing those pressures. There's still the Cash app, but Venmo is doing okay. They just, they're doing really well.
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Expedia Announcer
They were growing like double digits.
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Kelly Evans
It's crazy. And yet the stock reaction is still like this.
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Expedia Announcer
Yeah. And it's just because I really think that there's enormous value here. It's obviously sort of a buy the dip moment. It'll take time to sort of extract that value, but it's huge.
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Kelly Evans
It's a big dip. Down 85%. Okay, so you're sticking with it. What's going on with Robinhood?
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Expedia Announcer
Robinhood. I think there's just crypto related stuff. You're seeing that across the space. If you think about this thing that they just did this week and we wrote about this in the uk, they open up an ISA account which is basically like, think of it as like a 401k ish thing where you can deposit up to 20,000 pounds per person. This could be the beginning of the inflection of users in Europe. And so this is part of our thesis. They didn't have it until now and I think that's what we've been waiting for. So it's another catalyst that could be like a really, really big thing for them down the road.
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Kelly Evans
I'm surprised, although maybe I shouldn't be, that they are reacting one to one with the fall in crypto, as they tried to say. And look, they did the IRA thing here in the us. Big rewards for onboarding those to the platform. They have prediction markets, they have, they have a lot of different things going on. So what does this drop tell you? That there is the business overly reliant.
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Expedia Announcer
On crypto right now. It's just so correlated with crypto and I think because it's very heavy retail, it's very heavy crypto. So with everything that's happening with crypto, the stock is getting a Dragon. It's been a monster stock in 2025. So I think it's part of that rotation and I still think it's very temporary and it's obviously the best name or one of the two best names in fintech. We'll talk about the next one in a second.
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Kelly Evans
Well, I'm just going to say it's not all bad news for the space. I mean, look at what's going on with the firm which got an upgrade today. Although the shares I think were still under some pressure this afternoon. A firm is one of those that a lot of people thought this is just going to be a high beta, sort of low quality name. It's buy now, pay later. It's the worst end of the consumer segment. And yet what is going on with this company?
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Expedia Announcer
So the one bet I'm willing to make is they're going to report, they're going to hit it so far out of the park, they're going to hit someone in the parking lot. It's going to be so good. They have like unlimited TAM, $8 trillion dollars of TAM, which is all of credit and no one's doing a better job at execution.
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Kelly Evans
But they have rivals, they have Klarna. There's other buy now, pay later names out there.
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Expedia Announcer
I wouldn't even compare them. It's apples and oranges.
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Kelly Evans
Everyone says this. Why is a firm so much better?
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Expedia Announcer
A because of the underwriting, 75% of the book is underwriting. It's they take risk is sort of the primary kind of measure that they look at like Max Levchin. They just look at, you know, they look at risk first and then everything else. And they can underwrite Amazon and I don't think that their competitors like Klarna can underwrite those large merchants as well. And that's where the difference lies between the two.
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Kelly Evans
So you're telling me on the one hand that we have pressure on fintech names that might be a read through for the broader consumer space and on the other hand a firm is doing amazingly. Would the naysayers say the fact that a firm is doing amazingly tells you that, that it's kind of a trade down consumer environment or is that too simplistic? And the truth is they're just executing very well.
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Expedia Announcer
They're executing very well. The TAM is unlimited and they're basically taking share from like the Legacy Credit Bank. So they're even in a downward environment. I don't think we're there. I mean you look at Visa, MasterCard results, everything's fine. But even if it's like a downward environment, they can let more people get access to credit. I don't think it's totally countercyclical, but it's something to think about.
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Kelly Evans
Absolutely, absolutely. Well, Dan will leave it there. And a tough session, I know, for the whole space, but with possibly some green shoots. Dan Dalle with Mizuho Speaking of C suite shuffles, it's the third day on the job for Walmart's new CEO and the retailer just topped $1 trillion in market cap for the first time. It is trading more and more like a tech stock at 44 times forward earnings. Nearly double Nvidia's valuation, by the way. And now it's the NASDAQ name. So what's next for the country's largest private employer? Employer More when we come right back. ABC's David Muir, the most trusted anchor in America. The most watched anchor in America. Thank you for making World News Tonight with David Muir the number one newscast in America. Most trusted, most watched David Muir on abc.
- [24:32]
Expedia Announcer
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 Market Update podcast or find Schwab Market Update wherever you get your podcasts Mic check.
- [25:02]
Kelly Evans
One two Are we recording?
- [25:06]
Courtney Reagan
Hi, I'm Michelle Bernstein, an award winning.
- [25:09]
Kelly Evans
Chef, restaurateur and mom. I have a lot on my plate, including my psoriatic arthritis symptoms. That's why I was prescribed Cosentyx. It helps me move better. Cosentyx Secukenumab is prescribed for people 2 years of age and older with active psoriatic arthritis. Don't use if you're allergic to Cosentyx before starting, get checked for tuberculosis. An increased risk of infections and lowered ability to fight them may occur like tuberculosis or other serious bacterial, fungal or viral infections. Some were fatal. Tell your doctor if you have an infection or symptoms like fevers, sweats, chills, muscle aches or cough, had a vaccine or planned to, or if inflammatory bowel disease symptoms develop or worsen, serious allergic reactions and severe eczema like skin reactions may occur. Learn more at 1-844-cosentix or cosentix.com Ask your rheumatologist about Cosentyx. Welcome back. We're watching this market sell off as we're sitting just off session lows. Nasdaq's down 2%. That's really the epicenter of the pressure today across the software space and the OpenAI names. Just saying. Meantime, the metals rally is back on with gold prices having their best day in percentage terms since 2009. Silver is spiking as well. Earlier it was up 15%, now up about 8. Platinum copper also higher by about 4%. Elsewhere corporate news, Novo Nordisk is falling sharply after saying they expect sales and profit growth to decline this year. The company putting out its forecast ahead of its results tomorrow. The shares down 13%. It's their worst day since July when they slashed then full year guidance for the second time in 2025. And Cisco is hitting its first all time high since the dot com bubble. Really since the turn of the century. You might have seen John Ford sat down with CEO Chuck Robbins at the Cisco AI Summit. Here's what he said about investor concerns over the rapid rise of AI. Is it a bubble? Yes. Is it a bubble?
- [26:57]
Walter Isaacson
No.
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Kelly Evans
There's going to be misplaced capital. There are going to be companies that are going to, they're going to cease to exist and then the winners will emerge just like what happened in 2000. And look at the, look at what we have today. Remember Cisco went public in 1990. Robbins joined the company seven years later. So he's lived through this meteoric rise and fall of Cisco firsthand. Still pretty nice return since the ipo, if you just hung on for the long run. Speaking of which, Walmart hanging on for the long run. It's topping a trillion dollars in market cap today. First time ever. 3 month win streak for the first time in over a year. Shares are up 24% since announcing longtime company veteran John Furner is taking over for Doug McMillan as CEO. And his day, third day today, Courtney Reagan is here to look at could this be worse for John Furner? Could this be worse is up 24%. $1 trillion for the.
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Courtney Reagan
I know, it's like with the curse of the front of the COVID of one of the video games or whatever. It's like Maggie looks so good.
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Julie Beal
Yes.
- [27:53]
Courtney Reagan
Yeah, I mean you've got some, some good points. And Wal Mart also has gained about 30% in the last six months. That's double the XRT in that same amount of time. So today joining the $1 trillion market cap club, quite a way to mark day three as Kelly points out for CEO John Furner. Remember Wal Mart moved its stock to trade on the NASDAQ from the New York stock exchange on January 20th. And many suggest that was to sort of better reflect its move towards this tech enabled retailer. Mike Santoli points out that Walmart's relative heft carries far more weight in the NASDAQ 100 at 3.3% weighting much more so than in the Dow which is about one and a half percent or the S&P 500 because the S and P weights stocks according to their float adjusted market cap. And remember, only about 55% of this $1 trillion market cap is reflected in the S&P 500 because the founding Walton family still holds 45% of the shares. And Kelly, your point about Wal Mart stock rise since the announcement that Furner would take over is a good one. I've made some calls to learn a little bit more about Furner from those directly familiar with his work in leadership. I know him, but obviously I haven't worked with him. And like his predecessor Doug McMillan, he's also described as a servant leader, but the next vintage with perhaps more of a penchant to take risks. I'm told he has insatiable curiosity. And McMillan really counted on Furner to execute the strategy. Technology, initiation, Fulfillment Robotics, the recent Google AI partnership. He announced that with Google he also served three years as the NRF chairman. So he's got these deep connections throughout retail from Main street to lawmakers, which is important right now. Right? They know who Furner is. They've interfaced with him in advance of this official appointment as CEO.
- [29:28]
Kelly Evans
As you describe him, the tech piece of and how he was a trusted aide, it reminds me a little bit of the Tim Cook Steve Jobs dynamic. And so if he's going to be a Tim Cook, I mean McMillan just, he has capped one of the best retail 10 years ever.
- [29:39]
Courtney Reagan
I know. And I talked to people and they said if there was such a thing as a perfect candidate, John Furniture actually might be it like what Doug McMillan did. People believe John Furner has the ability, he has all of the characteristics to be able to continue that and potentially more. His father actually worked directly with Sam Walton at Walmart. I mean so not only is he a lifer, but his entire family is sort of connected to this. So he really, it matters, right? He's really sort of one of the Walmart people. He wants this company to succeed and he's a really down to earth guy. And he's already hired sort of his own people before he took over this put them into elevated positions around him. So I think he's got kind of a, kind of a lead start in this and a lot of people that know him and watch the company well think he's set up for success.
- [30:24]
Kelly Evans
It's incredible to watch how. Well I hate to just be saying yeah to all of that, but it's true. They've just done so well. So. And today they get the earned plot at a trillion in market cap. Courtney. Thanks Courtney Reagan. Let's get to Pippa Stevens now for the CNBC news update. Pippa.
- [30:38]
Courtney Reagan
Hey Kelly. US Central Command says a Navy fighter jet shot down an Iranian drone today that was approaching the aircraft carrier USS Abraham Lincoln in the Arabian Sea. Central Command says the drone was shot down after it aggressively approached the car carrier with unclear intent and continue to fly towards the ship despite de escalatory measures. Lawyers for Democratic Senator Mark Kelly asking a federal judge today to block Pentagon proceedings to demote him from the rank of retired Navy captain over a video he participated in urging troops not to follow unlawful orders. The hearing is scheduled for 4pm Eastern today and US homebuilders are reportedly working working on a plan to develop as many as 1 million so called Trump homes to address the housing affordability crisis. Bloomberg reports that the program under consideration would sell entry level homes as part of a pathway to ownership program that would allow billions in private capital funding. Shares of several homebuilders including Lennar and Dr. Horton all gained on their report. Kelly, back to you.
- [31:41]
Kelly Evans
I'm looking at that under construction house Right. That looks pretty nice, Pippa, thanks very much. Coming up, we are near session lows with the Nasdaq, the biggest laggard in the session today. 70% of the NASDAQ 100 is in the red, as you can see on that heat map. The small caps meantime, are outperforming the S and P slightly. We'll talk about whether the Russell can regain its footing right after. As the sell off in the market continues. Keep an eye on the price of bitcoin, which is now below $74,000 for the first time since election day of 2024. That's a 5% drop just today. I don't know, guys, if we can show shares of strategy in the back. But of course, we're also a couple thousand dollars below the point at which I believe they're in the red to some extent on their bitcoin exposure. That name reports on Fox Thursday, their strategy down almost 8% today. And we will be speaking with the CEO Fong Li on power lunch on Friday. So a really tough stretch here for the crypto space. Meantime, the Dow is hitting a record high just earlier in the session before stocks reverse course. All three major averages are now lower with the S and P and Nasdaq having their worst day in about two weeks. But my next guest says it's hard to be a bear right now. Well, maybe it's a little easier this afternoon. Let's bring in Julie Beal. She's the chief market strategist and portfolio manager at Key, Kane Anderson Rudnick. But you don't have to be a bear, right, Julie? You can just buy small caps, I guess. But I think the larger point is it's fascinating to watch the ESM yesterday, which was so strong, to see the industrials, which have been at all time highs yesterday. Yes. This morning again. And it's in its cyclicals. You know, it's, we talk about hardware is the new software. It's a Capex boom. That seems to be where all the action is right now.
- [33:33]
Julie Beal
Yeah, it's funny because we've really kind of transitioned into this analog world where the nuts and bolts of how we're going to build this next transition into this next technology seems to be really pretty critical. And I think that that gives everyone a little bit of relief that if we have a broader market, it feels like it becomes a healthier market and that we're less vulnerable to major changes because we're reliant on five boards of directors to just keep seeing spending the way that they've been spending. And I think broadly speaking, if you look at earnings expectations, they're stronger for small cap than they are for large cap. That makes sense. They have easy year over year comparisons. I would love to have such easy year over year comparisons personally.
- [34:12]
Kelly Evans
Yes.
- [34:12]
Julie Beal
But I think that's the real balance for them is seeing that earnings breadth is what's going to continue to support the market.
- [34:19]
Kelly Evans
So what are. You know, a lot of people are hesitant or don't really want to have to play the game of picking up the Russell 2000 broadly. Although maybe that's a fine game to play. What do you think about the broad exposure? Which names do you think are most attractive to own right here?
- [34:34]
Julie Beal
I think if you're in small cap, right. You have to think about the Russell as having some 40% that isn't yet profitable. And so while that's been the part of the market that's actually been the strongest performance wise over the last two or three months. Right. It's been like quantum computing and biotech. No earnings to show for them. Right. I think if you're moving more into the industrials and analogs and health care to health care expectations for next year are very strong. I think you want to try to stay away from pharma given all of the price pressures that we're already hearing about. I like these smaller, quirkier companies like a La Met or an Erada Med where they don't have the same kind of regulatory pressure. Or you can look at a health equity where we're looking at health savings accounts, which I think are even more relevant as we see insurance companies pare back their coverage levels.
- [35:22]
Kelly Evans
Oh yeah. I mean any play in that space would make a whole lot of sense. So as you mentioned, you kind of think there could be a case for owning either, is that right? These, these individual names you just mentioned? What about the small caps writ large?
- [35:34]
Julie Beal
I think small caps writ large. It's a very idiosyncratic group of stocks and companies. Right. And so you have a whole host of them that are very interest rate stuff sensitive. You have a whole host of them that are very cyclical. You have a whole host that are just not yet profitable. And so to me it's not a great space to be invested passively. And I think even if you look at the delta between the performance of the Russell 2000 and then the S&P 600, which is small caps, but companies that have earnings is a big delta in terms of the performance going towards that low quality group, I think this is a nice Time to kind of rebalance towards a higher quality index if you have to invest passively like the triple cues.
- [36:14]
Deirdre Bosa
No.
- [36:15]
Kelly Evans
Right. But do you. Is that what you think, that this would be an entry point? I mean, within tech there's a lot of frustration now because Nvidia just goes trades down every day. There's fights about the Gemini complex versus OpenAI. But from where you sit, does it look like more obvious to actually go with kind of something like the triple cues at a juncture like this?
- [36:34]
Julie Beal
I think you can. Right, because there's an opportunity for you. But I think within technology there has to be be some resolution of where does software fit into this AI build out. And I think our view is that not all software is created equal. If you are the type of software where you are just automating a function. Right. Or you're just digitizing a function that I think is really ripe for disruption from AI. But I think if you have really proprietary data and if you have really strong and deep customer relationships, you're actually well positioned to be able to see sell good software AI solutions more so than necessarily a tech upstart. If we're talking about enterprise software.
- [37:14]
Deirdre Bosa
Yeah.
- [37:14]
Kelly Evans
And look, you're not, you know, a Salesforce analyst and I've never used it, but I go, how have the shares done? You know, they're down 20% in five years and it's, it's ubiquitous, it would seem like. I just, I can't quite connect the dots between, you know, gen AI, meaning that Salesforce is doing this poorly.
- [37:31]
Julie Beal
It is really hard to kind of wrap your head around it. I think part of it is that there's been a lot of promise. There was a lot, especially with Salesforce specifically, where there was a lot of promise. That agent was going to do all of the heavy lifting and be really meaningful. And I think it will be eventually, but we're not quite there yet. Right. And the thing that's really difficult is replacing workflows and getting people to use generative AI is trickier than I think a lot of CEOs. Imagine we keep getting these surveys where CEOs are saying this agent AI, this generative AI is saving me all kinds of money. And you're hearing from employees that, ah, maybe 15 minutes a day, maybe. So that disconnect is creating a lot of friction and a lot of tension. And I think that's going to be the gating factor on adoption. It's not actually the limits of the technology, it's the limits of ourselves and our willingness to Adopt it.
- [38:21]
Kelly Evans
Very well said. And look, software was due for a reset, but this feels like it's gone, I don't know, maybe a little too far. We'll see. Julie, thanks so much. Appreciate it. Today, Julie Beal with Kane Anderson rednick. Speaking of AI, Nvidia shares are down 6% in the past two days after these reports about their $100 billion investment into open Air. Are there concerns about it? What is it really? The relationship between these two companies is far from over, but we'll have some fresh details from Jensen Huang, who just talked to our own Jim Cramer when the exchange comes right back. Nvidia shares are extending yesterday's loss. It's down almost 4% today to around 178. This amid doubts concerns about its $100 billion investment in OpenAI. Its exposure there more broadly, perhaps. Reuters is reporting OpenAI is unsatisfied with some of Nvidia's latest chips and has been seeking other options since last year, which would certainly hurt. Let's bring in Christina Parts and Evilis for more details on this whole back and forth. Christina, amid the rise of Gemini and Claude and some fresh comments from the Nvidia CEO. Right.
- [39:24]
Christina Parts
Yeah, it's just being displayed out in the open for all of us to hear the back and forth. But Nvidia CEO Jensen Huang is really pushing back hard on reports of tension with OpenAI. Telling Jim Cramer just today the controversy is, quote, complete nonsense.
- [39:38]
Kelly Evans
Listen, no, there's no controversy at all. It's complete nonsense. We love working with OpenAI. We are incredibly honored and delighted to be able to invest in their next round. And so they were privileged that they're inviting us to invest for each one of their rounds. There's, of course, an IPO in the future and we'd love to be participating in that as well. And so this is, this is a fantastic company.
- [40:08]
Christina Parts
For more on that interview, check out Mad Money tonight. But the clarification really comes after several reports suggested Nvidia and OpenAI were at odds. But what's actually happening is to two separate deals are playing out on different timelines. First, Nvidia's up to, and I use up to, because that's what they said. $100 billion in a phased infrastructure investment which was announced in September on our airways. The deal calls for deploying 10 gigawatts of data center capacity, with the first gigawatt targeted for the second half of 2026. The Wall Street Journal reported the deal has stalled, but the original timeline, according to the press releases, hasn't actually passed and you can see it's still on OpenAI's website. Separately, Nvidia is participating in OpenAI's current funding round, a straightforward equity investment that's actually moving forward. Nvidia's CEO confirmed that even in that interview with Jim Cramer. Reuters to your point. Kelly reported on Monday that OpenAI has been shopping for chip alternatives for inference workloads. But OpenAI already uses other chip alternatives AMD, Broadcrom, Cerebras for even AWS for specific use cases alongside Nvidia. But OpenAI's head of infrastructure Sachin Katie posted that Nvidia quote is our most important partner for both training and inference and our entire compute fleet runs on Nvidia GPUs which sounds like the relationship is still ongoing. So OpenAI is diversifying its chip suppliers but Nvidia remains the platform.
- [41:38]
Kelly Evans
Just to back up for the 30,000 foot view here is all a bit ironic that we're focusing on the fight between them. The whole point is they're like tied to each other and the ship is going down, not going. I don't mean to dramatic but like here comes Gemini. Gemini does not use Nvidia chips. Google uses Nvidia chips in the cloud, that's fine. Gemini does not. Gemini uses Broadcom use a different ecosystem. So the other two. Now if OpenAI is going to ditch Nvidia and try to use, you know, tpu, that's fine. You know Nvidia. I mean I don't know but I find that we're making a lot of the back and forth between them and really the whole story is that they together have to figure out what to do about this. The rise of Gemini.
- [42:18]
Christina Parts
Right. And so you can already see that happening in the markets. Those that names that are exposed to open air, let's say core weave in video etc. And then those that are exposed to Gemini. There's quite a divergence and why you've seen Nvidia actually trend lower over the last eight months since its all time high just in October, $212. So yeah, I would definitely agree with you Kelly. We're talking about these headlines. Does he like me? Does he not like me? No, you should really just be talking about which large language models are going to be moving forward with which chips. Who's going to benefit? Is it going to be an ASIC versus or custom chip story versus a GPU and video story or is it just, you know all about competition changing? And I do believe you know competition is only going to wrap up in the future. We're already seeing that in the memory market so these headlines are going to go away.
- [43:03]
Kelly Evans
Just doing a quick check and maybe we can show it. I mean Google is down 1 1/2% today. I'm just looking at the whole Google complex. Earlier the differences were a bit more Stark. While Broadcom's down 6%, they're triply seen as a Google partner.
- [43:14]
Christina Parts
So Broadcom gets lumped in with Nvidia.
- [43:18]
Kelly Evans
Just over the last little while there.
- [43:19]
Christina Parts
The compute trades with the exception of amd that has actually been doing well over the last little while we've really seen this. A rotation outside of the compute AI names that did well last year and more into the peripheral parts of the AI infrastructure build out like memory storage, even optical like Lumentum for example. That name's been soaring.
- [43:37]
Kelly Evans
Yeah, absolutely right. Christina, for now thanks. Really appreciate it. And thanks for bringing us that sound as well from Jensen. You can catch Jim's full interview with Jensen Wong tonight on Mad Money. Don't want to miss a second of it, not on a moment like this. 6:00pm Eastern Time. Coming up, this name on pace for its best day since mid December after beating on the top and bottom line lines. Our trader says the company continues to defy its critics, but it is a wild child. Send me your guesses. The reveal is after the break. Welcome back. As stocks are near session lows and so are shares of Nvidia. As we were just discussing down 4% today. Let's talk to our next guest about that. Jeff Kilberg is CEO and founder of KKM Financial and a CNBC contributor. Jeff will come to Tesla in a moment. Some of the other big movers today. But on its face, what does this decline in video tell you? Is it a big headwind for the rest of the market and do you have a view on what's going to happen next?
- [44:30]
Jeff Kilberg
Well, I think we have to take a step back and realized about five hours ago we had new all time highs and The S&P 500 was about to make a new all time high. So yes, it is a bit of a neck snapping day but this is deleveraging. This is de risking. You're seeing the VIX move up about three and a half points, about a 20% move in the Vix. And I think there's a lot of inputs. I think we're still digesting the Fed meeting last week, the new appointment in Kevin Warsh. We're also looking at Iran tensions. So there's a lot of inputs but we are seeing this bigger, broader picture. Kelly, we've talked a lot here on the exchange about this great rotation, this profit taking outside of tech, specifically in software. We're seeing great profit taking into some of these broader names. But I think it's what we've talked about before, it is a stock pickers market. But today we are seeing some indiscriminate selling across the board.
- [45:14]
Kelly Evans
Yeah, the Vix, I'm glad you mentioned that. It's almost up at 20 right now. So yeah, it's a big turnaround. I suppose though, if you're saying look, you know, stay the course, that's one thing. But people who have been in mega caps are not happy. I mean this has been months of this at this point.
- [45:30]
Jeff Kilberg
That's right. And we're seeing the continued rotation inside the Max 7. So I guess there's a lot of pressure on Google. Look at Google. Since January 1st of 2025 it's up about 80%. So it's had a heck of a run. So a lot is betting on two of the Mag 7 names. Earnings this week, we have Google tomorrow, we have Amazon on Thursday. But I think when you talk about this rotation, I think we're actually quite optimistic. We talked about the broadening of the market. You look at the S&P 500 Q4 earnings season better than expected. Year over year growth from earnings per share perspective, it's up a 12% again, surprising expectations. The upside and we were seeing 65%, nearly 325. The S&P 500 names are outperforming the S&P 500 index itself. So if you look at the S and P, of course it's trailing, but it's been so overweight. And we've talked about the vulnerability in nearly 40% of the S&P 500 for quite some time. Being 40%, absolutely.
- [46:23]
Kelly Evans
Palantir was our mystery chart. Just want to bring that back. You still like. I mean, it's doing incredibly well. I don't want to dwell on that though because I want to move along to Tesla. Jeff, at a time when a lot of people, Tesla shareholders are concerned about this ultimately kind of getting stuffed into their company, this XI Space X merger. Why do you think this is? This could be a positive catalyst.
- [46:43]
Jeff Kilberg
I think Tesla has so many different inputs. We've kind of forgotten about what's going on with FSD. They're knocking on 10 billion miles. That's going to help their FSD in the robotaxis, but also Optimus the robotics. So I get optimistic. We're going to see some momentum come back in when the global macro environment cools down and Tesla at $500 I think happens in Q1.
- [47:01]
Kelly Evans
Wow.
- [47:02]
Phil LeBeau
All right.
- [47:03]
Kelly Evans
Says that even on a tape like this. Jeff, thanks. Really appreciate it today. Jeff Kilberg. And that's it for the exchange. I'll join Brian Sullivan for Power lunch right after this break. You've been listening to the exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [47:21]
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