Not Hot on Nvidia, Public Offering Parade & Hundred-Point Hike? 5/20/26

Summary

Podcast Summary – The Exchange (CNBC)
Episode Title: Not Hot on Nvidia, Public Offering Parade & Hundred-Point Hike?
Date: May 20, 2026
Host: Kelly Evans

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Episode Overview

This episode of The Exchange dives into three major financial stories shaping markets: the Federal Reserve's potential rate hikes amid sticky inflation, a surge in high-profile tech IPOs (OpenAI, SpaceX), and skepticism around Nvidia's soaring valuation ahead of another pivotal earnings report. The show features expert insight from economists, market analysts, and high-profile guests, including direct quotes from Jeff Bezos and analyst commentary on the market's rapidly changing landscape.

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Key Discussion Points & Insights

1. Federal Reserve: Looming Rate Hikes and Inflation Pressures

Segment Start: [00:59]

• Guests:

  • Joe Lavornia (Chief Economist, SNBC Americas)
  • Steve Liesman (CNBC Economics Reporter)

• Current Market Snapshot:

  • Yields retreating, oil prices down.
  • Stocks rallying, notably small caps and chip stocks ahead of Nvidia’s earnings.

• Discussion:

  • Joe Lavornia argues the inflation data does not support Fed rate cuts.

    “The inflation data just do not suggest the Fed should be cutting rates... We're not going to get inflation down and the economy has held up reasonably well. So that does not suggest rate cuts, but rather rate hikes, probably at least the amount to which inflation will remain further above target.” (Joe Lavornia, [02:16])

  • Lavornia expects up to four rate hikes in the next 12 months, possibly totaling 100 basis points.
  • Liesman points out how core inflation metrics vary, making the Fed’s job trickier as incoming Chair Kevin Warsh considers new data sets like trimmed means.

    "What I'll be watching for today in the minutes is how many of dissenters, people who did not dissent, were supporting the dissenters who wanted to move the Fed back to a neutral stance and how many of those folks even were talking about rate hikes." (Steve Liesman, [03:34])

  • Historical reference: Both experts agree high inflation rarely falls without rate hikes or recession.

    “The history is that it takes either a recession or Fed rate hikes to bring down inflation. Oil coming down on its own may not be enough...” (Steve Liesman referencing Joe Lavornia’s research, [05:28])

  • Impact on sectors: Housing and low-end consumers are most vulnerable to higher rates ([07:33]).
  • Fiscal risk: Rate hikes combined with existing deficits could worsen budget outlooks, especially if recession hits ([08:25]).

Notable Quote

"If you look historically when inflation's been well above 2%, how do you get back 2%? ... Many times it's the Fed creating that recession through excess demand." (Joe Lavornia, [05:58])

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2. Taxes, Social Policy, and Jeff Bezos’s Take on the Deficit

Segment Start: [10:16]

• Jeff Bezos Interview Excerpt: Bezos says the U.S. doesn't have a revenue problem as the tax system already leans highly progressive.

  “The top 1% of taxpayers pay 40% of all the tax revenue. The bottom half pay only 3%. ... I think it should be zero.” (Jeff Bezos, [10:31])

• Panel’s Reaction:

  • Liesman agrees “the rich pay an awful lot of taxes,” but also notes that profits are flowing increasingly to higher earners, especially with technology’s rise.
  • Discussion broadens to implications for social programs like Social Security and Medicare ([11:15]).

Notable Quote

"The rich pay an awful lot of taxes, but they also make an awful lot of the money in this country..." (Steve Liesman, [11:15])

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3. Tech IPO Parade: OpenAI & SpaceX

OpenAI's Confidential IPO Filing

Segment Start: [12:16]

• Kate Rooney Report:
  • OpenAI to file confidentially with the SEC as soon as Friday; IPO could happen in September.
  • Reported private valuation at $850B, with speculation IPO valuation could approach $1T.
  • OpenAI racing against Anthropic (another prominent AI startup) to be first to market.
  • Legal hurdles with Elon Musk resolved.

Key Details

• Confidential filing gives OpenAI flexibility in timing.
• Market conditions and comparison to Anthropic are pivotal factors.

“This definitely starts the [IPO] shot clock... and Anthropic has been fighting to get out first. OpenAI appears to be at least preparing to be first out of the gates.” (Kate Rooney, [13:40])

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Housing Bill Update

Segment Start: [14:37]

• Emily Wilkins Report:
  • House passes bipartisan bill to address housing affordability; controversial provision affecting large institutional investors was removed.
  • Outcome offers relief for firms like Invitation Homes and American Homes 4 Rent ([15:55]).

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Nvidia Earnings: Too Hot to Touch?

Segment Start: [15:55]

• Guest: Tom Hancock (Portfolio Manager, GMO US Quality)
• Analysis:
  • GMO has been selling semiconductors for risk control, particularly Nvidia.
  • Concerns about high industry concentration and Nvidia’s “unsustainable” 75% gross margins.

    “There’s a little bit too much concentration in the market... The stock prices have gotten ahead of the pace of AI adoption.” (Tom Hancock, [16:36])

  • The growth has come more from higher chip prices than from true volume increases.
  • Prefers more traditional chip companies with diversified, less AI-dependent exposure (e.g., Texas Instruments).

MedTech as an Undervalued Play

• Hancock sees medical device/tools sector as the next area for outperformance given its recent underperformance vs. AI-driven names ([19:49]).

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4. Bezos vs. Musk: Data Centers in Space & SpaceX's IPO

Segment Start: [23:09]

• Bezos (on data centers in space):

  “Are data centers in space realistic? The answer is yes. The timeline is harder to answer... Elon’s talked about two or three years, that's probably a little ambitious.” (Jeff Bezos, [23:09])

• Rohit Kulkarni (Roth Capital Partners) Analysis:
  • SpaceX's business is complex: Starlink, Falcon 9, Starship, XAI—all with different revenue and capex profiles ([24:12]).
  • Investors will have to assess how Starlink can scale and how much the “moonshot” projects (Starship/AI) consume cash.
  • Valuation will blend precedents from space, AI, and defense sectors.

    "SpaceX is once in a generation or probably once in several generation companies..." (Rohit Kulkarni, [27:35])

Investor Doubts and "Retail Lambs to the Slaughter" Concern

• Discussed by Jim Cramer and echoed by Kulkarni—some IPOs may be overvalued and risky for retail investors, but SpaceX could have unique staying power ([27:13]).

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5. Airbnb as the "Amazon for Services"

Segment Start: [31:45]

• Interview: Brian Chesky (CEO, Airbnb)
  • Airbnb introducing new services: grocery delivery, airport pickups, luggage storage, and car rentals.

    “I think we can build a little bit like an Amazon for services at least for traveling and living.” (Brian Chesky, [31:45])

  • Focused on guest feedback and expanding Airbnb’s platform beyond accommodations.

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6. Replit: Spotlight on Vibe Coding & Tech Disruptors

Segment Start: [34:35]

• Guest: Amjad Massad (CEO, Replit) with Julia Boorstin (CNBC)
• Replit’s Growth:
  • Describes Replit’s unique “vibe coding” agent—enabling non-engineers and solo entrepreneurs to build, deploy, and run apps entirely in the cloud.

    "One person now extended by these agents... can create enormous amount of value in the world. And that really didn’t happen before." (Amjad Massad, [37:18])

  • Differentiates from other AI coding tools (like Claude Code) with strong focus on security and sandboxed execution ([38:39]).
  • Replit projected to $1B in ARR by 2027; cybersecurity and privacy are top enterprise concerns.

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7. Trump’s Anti-Weaponization Fund Legal Challenge

Segment Start: [42:29]

• Eamon Jabers Report:
  • Trump administration’s $1.8B fund for “victims of government lawfare” struck by new lawsuit, with questions over legality and constitutionality.
  • The fund was created to settle Trump’s lawsuit against the IRS; lawsuit challenges the unprecedented exemption granted to Trump and family.
  • Ongoing litigation may end up in the Supreme Court ([43:54]).

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8. Nvidia’s Earnings Expectations & Options Set-up

Segment Start: [44:55]

• Christina Partsinevelos Reporting:
  • Three things to watch: $1T cumulative Blackwell and Rubin chip revenue goal, Rubin chip launch timing, and sustainability of 75% gross margins.
  • Stock has traded down after 5 of last 7 earnings reports; large options exposure with most call buyers at risk if the stock falls post-earnings.

Notable Quote

"If Jensen Huang confirms that it’s on track with no caveats, that removes somewhat of a real overhang." (Christina Partsinevelos, [45:31])

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Notable Quotes & Memorable Moments

• “Inflation is not going to come down magically… the history is that it takes either a recession or Fed rate hikes to bring down inflation.” — Steve Liesman ([05:28])
• “We don’t have a revenue problem in this country. We already have the most progressive tax system in the world.” — Jeff Bezos ([10:31])
• “There’s a little bit too much concentration in the [semiconductor] market… the stock prices have gotten ahead of the pace of AI adoption.” — Tom Hancock ([16:36])
• “If you want it to be six years, say it’s three.” — Jeff Bezos, on Musk's ambitious timelines for data centers in space ([23:35])
• “I think we can build a little bit like an Amazon for services at least for traveling and living.” — Brian Chesky ([31:45])
• “One person now extended by these agents… can create enormous amount of value in the world.” — Amjad Massad ([37:18])
• “SpaceX is once in a generation or probably once in several generation companies...” — Rohit Kulkarni ([27:35])

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Timestamps for Key Segments

• 00:59 – Fed rate hike debate and inflation metrics (Joe Lavornia, Steve Liesman)
• 10:16 – Jeff Bezos on tax revenue; Liesman's analysis
• 12:16 – OpenAI IPO update (Kate Rooney)
• 14:37 – Housing affordability bill news (Emily Wilkins)
• 15:55 – Nvidia & semis: risk, margins, and market concentration (Tom Hancock)
• 23:09 – Jeff Bezos & Rohit Kulkarni: SpaceX IPO, space data centers
• 31:45 – Airbnb's new suite of add-on services (Brian Chesky)
• 34:35 – Replit and vibe coding’s future (Amjad Massad)
• 42:29 – Trump Anti-Weaponization Fund lawsuit (Eamon Jabers)
• 44:55 – Nvidia's earnings: what's at stake? (Christina Partsinevelos, Oliver Renick)

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Overall Tone & Takeaways

The episode is brisk, news-heavy, and analytical, in CNBC’s newsroom style. It features a mix of cautious skepticism (on overvalued IPOs, Nvidia’s rally, and the impact of inflation), probing conversations on tech’s impact on wealth, and optimism about the transformative power of new business models and industry disruptors.

This summary highlights each key guest, subject, and timestamp to help listeners quickly revisit specific discussions and understand the episode’s core market and business takeaways.

Transcript

[Narrator/Announcer]

Beth and Rip are back in a new series, Dutton Ranch, streaming on Paramount Plus. Kelly Reilly and Cole Hauser return, and this time they're taking on Texas as Beth and Rip begin to build a life together. Peace will have to wait as they face corruption, danger and a ruthless rival ranch willing to protect its secrets at all costs. Legacy is a beautiful thing, but only if it survives. Dutton Ranch, starring Cole Hauser, Kelly Reilly, Annette Bening and Ed Harris. Now streaming on Paramount Plus.

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[Steve Liesman]

Gut check.

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[Kelly Evans]

Here's today's show. Thank you very much, Scott. We've got yields on the retreat today, oil down as well. And Jeff Bezos questioning Elon Musk in a CNBC interview this morning. While Musk rival OpenAI is reportedly expected to file its IPO any day now. Welcome to the exchange. I'm Kelly Evans. Those declines in bond yields and oil helping stocks catch a bid today. You can see 1% gains or so across the board. A little less for the S&P, 2% plus for the small caps. The chip stocks are also rallying into Nvidia's earnings report after the bell, 3%. Hop in the SMH today and videos up a couple. And while yields are taking a breather today, the long bond, that's the 30 year U.S. treasury is still near a two decade high. And that's where we begin this hour because this is complicated. New Fed chair Kevin Warsh's job. In fact, our first guest thinks Wash might have to hike by at least 100 basis points. Joining us in our opening exchange is Joe Lavornia. He's chief economist at SNBC Americas and former counselor to Treasury Secretary Scott Bessant. CNBC economics reporter Steve Liesman is here as well. Steve, what are you doing? The Fed minutes.

[Steve Liesman]

Fed minutes, ma'. Am. Yes, I am.

[Kelly Evans]

I see. All right, Joe, what's your version of what you think is going on with the economy enough to warrant a one point hike? And what would your former colleagues think about that?

[Joe Lavornia]

They're probably going to be mad at me a little bit maybe, but unfortunately Right now, Kelly, the inflation data just do not suggest the Fed should be cutting rates. The core PC deflator, for example, in the last year is up 3.7%. In the last three months it's up 4.4 annualized and that's only through March. And unfortunately, given the situation in the Middle east and stubbornly sticky oil prices and other energy and commodity related items, we're not going to get inflation down and the economy has held up reasonably well. So that does not suggest rate cuts, but rather rate hikes, probably at least the amount to which inflation will remain further above target.

[Kelly Evans]

The market's moving towards a hike at the end of the year, but four hikes?

[Joe Lavornia]

Well, yes, four hikes, perhaps in the next 12 months. Absolutely. I mean right now the real Fed funds rate is negative and will continue to shrink, become more negative, Kelly, the longer that rates stay where they are. It's an implicit easing of monetary policy.

[Kelly Evans]

Steve, I'm struck by the fact that everybody's take on what to do with the Fed comes down to which reading of core inflation they're following. So Joe just mentioned core PC at 4.4% annualized, which suggests kind of the policy he's talking about. We have other people come on this program and they're slicing and dicing it differently and they're getting numbers, numbers in the twos or threes, which would point to a very different set of policy tools.

[Steve Liesman]

Well, there's a lot of talk about Kevin Warsh coming in and talking about different data sets to look at, including like trim mean forecasts. And they for the moment, pardon me, are a bit lower, especially the Dallas trim mean is lower, the Cleveland trim mean a little bit higher. It's going to be tough for him in that regard to reorient the market towards a new target. The Fed has to. The Fed does things slowly. So it's going to be really difficult. What I'll be watching for today in the minutes is how many of dissenters, people who did not dissent, were supporting the dissenters who wanted to move the Fed back to a neutral stance and how many of those folks even were talking about rate hikes. I think Joe might be a little aggressive on the 100 basis points, but I don't think he's wrong when it comes to the issue of whether or not the Fed should really stake out this idea that inflation has been too high. There's an inflation impulse coming and the Fed is not going to abide it. Warshire's going to have to put a stake in the ground on that.

[Kelly Evans]

The President was asked about this in an interview yesterday and he said I'm going to let him do what he wants to do. He's a very talented guy. He's going to be fine. He's going to do a good job. Joe, you're familiar with this administration. Do you believe that?

[Joe Lavornia]

Oh, absolutely. I think Kevin will be very persuasive and he will let the body of evidence dictate where monetary policy wants to go. Steve made a very good point about these other inflation metrics and the Fed moving more slowly. But even these other metrics, the median CPI's, the trim means, based on what I'm seeing right now, Kelly, even with a very imminent and successful resolution of the Middle east where prices were to come down dramatically, there was enough dislocation and supply disruptions in the system that you are going to see inflation continue to move higher. That will pull up these other metrics such that when we get to the point where we're debating how much the Fed is going to be hiking, it won't really matter what inflation metric we're looking at. They'll all be well above target.

[Kelly Evans]

Steve, your thoughts? Yeah, go ahead.

[Steve Liesman]

Yeah, I want to bring out something that was in Joe's piece that I thought was really important. What Joe said in his piece was inflation is not going to come down magically, which is this notion that even if oil prices come down, you could still have high inflation. And what Joe said, and I wish he could elaborate on this, is the history is that it takes either a recession or Fed rate hikes to bring down inflation. Oil coming down on its own may not be enough to bring it down.

[Joe Lavornia]

Yeah, thank you, Steve. I mean, this is the thing. If you look historically when inflation's been well above 2%, how do you get back 2%? And it generally doesn't happen unless there's some outside force that exerts significant downward pressure on demand. It's either through tighter monetary policy and higher interest rates and implicitly less liquidity money and credit creation, or it's a recession that just destroys demand. Unfortunately, many times it's the Fed creating that recession through excess demand. I'd also, by the way, in the short term we talked about all these different CPI metrics, various measures of inflation expectations would be important because I know Steve give his extensive backdrop of the Fed and who he talks to if they see an unanchoring of inflation expectations, that would argue Kelly, for a lot more than 100 basis points.

[Kelly Evans]

Steve?

[Steve Liesman]

Kelly. Yeah, I just want to show you where the market is, I don't know. We have this chart that I tried to make up which is the two year versus the fed funds and what you'll see is that the two year was below fed funds for a while and that's, that's the Fed tamping down on the economy and now the two year is higher than fed funds and that speaks to the Feds. There's the Fed rate hike probabilities right there, which you can see all the way to July are talking about at least one rate hike. But the issue being the two year is now 50 basis points above the fed funds rate. That could be a metric for maybe not a hundred, but it's a metric for maybe doing the Fed doing at least 50.

[Kelly Evans]

Let me ask, we've got reaction already coming in from our viewers, Joe. So let me ask you one question than we're getting from a big money manager who says how would the interest sensitive elements of the economy do to a rate hike, specifically housing and the low end consumer?

[Joe Lavornia]

Not well, Kelly. I mean normally recessions are about 15% of the economy getting hurt, which is consumer durables, residential investments, some commercial activity and certainly an unwinding of inventories. Interest rates were coming down before we went into war with Iran, before we attacked Iran. Oil and gas prices broadly speaking were approaching five year lows. Mortgage rates were under 6%. So we're in a very different environment right now. The backdrop has totally shifted. The Fed raising rates will hurt those sectors even more. They've been declining already and one would think that if rates continue to push higher is a global phenomenon. This isn't just the US bank of Japan's been raising rates. Bank of England and ECB may also be raising rates. It's going to push interest rates higher and it's going to hurt those sectors even more. And unfortunately it's going to hurt the low end consumer who's already been hurt by the fact that they're paying these high gas prices.

[Kelly Evans]

I suppose your point there is they're, they're going to get hurt one way or the other either by inflation or by the policy meant to address it. Joe I'm also curious about the state of the budget and the Treasury. You know it's one thing when we're talking about hiking rates and you know we're running practically a surplus like in the late 90s when we have already a wide deficit and when interest is already eating up, I think you know, a dollar of every five that comes in on the revenue side, what happens if we hike

[Joe Lavornia]

it's going to increase the cost of servicing the debt to some extent. But that's not going to be the bigger problem, Kelly. The bigger worry I would have is that God forbid the economy were to go into a recession, you're going to add at least 3 to 4% to your deficit to GDP ratio. We're already operating at a 6% plus deficit to GDP ratio. The administration had been making some very good progress on that on a calendar year basis. Last year we were in the low fives. That was good. I don't know though what it's going to look like this year because this war is not cheap. But a hike could make that change. Wouldn't you talk to me in February 27th? You got a totally different Joe LaGuardian that was talked to me on February 28th.

[Kelly Evans]

Joe, wouldn't a tightening of policy make it more likely the economy slows and we get that budget outcome that you're talking about?

[Joe Lavornia]

Yes, but the Fed has to worry and Steve knows this. The Fed has a dual mandate which is essentially full employment and low and stable prices. So they've got to do something and it's going to be the lesser of two evils. Maybe they decide they can live with higher inflation for a while, but if that's the case, you're going to get more term premium built into the market, Kelly, and it's still got impact and hurt negative or hurt interest sensitive parts of the economy.

[Steve Liesman]

They can't fall too far behind the market here, Kelly. If you look at where the market is and what the market's expecting, the Fed is going to have to either engineer or jawbone the market lower or come up to meet the market. And that's why 50 to me doesn't sound crazy. Unless this inflation problem takes care of itself, which according to Joe's work, is not going to happen.

[Kelly Evans]

Led me on the revenue question. This was something from the Bezos interview with Sorkin this morning that I think made a lot of people kind of sit up and pay attention when he was saying, well, I'll let him say it. This was Jeff Bezos in conversation with Andrew about the deficit. Take a listen.

[Jeff Bezos]

If you really are being honest about it, we don't have a revenue problem in this country. We already have the most progressive tax system in the world. The top 1% of taxpayers pay 40% of all the tax revenue. The bottom half pay only 3%. We have already and I think it should be zero. I don't think it should be 3%. I think it should be zero. So we'd be making more progressive that

[Kelly Evans]

way we don't have a revenue problem. Joe is his point. He's also talking about how the lower income American, which he implicitly is saying that's the reason for all this anti billionaire agita that they their taxes should go to zero. Joe, I'm just curious what you think about that.

[Steve Liesman]

I guess maybe Joe, Joe, can you hear? Joe maybe can't hear, but I'll just tell you one thing, Kelly, which is I think what he's saying is right. The rich pay an awful lot of taxes, but they also make an awful lot of the money in this country. And we have an issue here that's related, I think mostly to technology. And the question is whether or not in this world today the profits of our industry flow to middle and lower class people. And if they don't, we're gonna have to figure out that as well. So maybe we tax the rich a lot, but maybe there's more to go if we have to figure out how to solve these social issues like Social Security and Medicare, keep people healthy and let them have something to retire with.

[Kelly Evans]

All right, this was fascinating.

[Steve Liesman]

I'm sure Joe had a different point of view.

[Kelly Evans]

I'm sure he did too. But we'll bring him back and we can talk more about it. Steve, thank you. We'll see you next hour for the Fed minutes. Steve Liesman, Our thanks to Joe Lavornia as well. We have an update on OpenAI's IPO. We've had a lot of breaking news on that in the past hour. Kate Rooney has more for us. Kate?

[Kate Rooney]

Hey, Kelly. That's right. So OpenAI, from what I'm hearing, is preparing to file for its IPO confidentially or the. We're going to get the confidential filing as soon as Friday. We could get that IPO as soon as September. This is according to a source familiar with the deal process company, as I mentioned, plans to file confidentially with the sec. That from what I'm hearing, could happen as soon as this week. It was first reported by the Wall Street Journal, I am told by a person familiar with the deal that OpenAI is working with Morgan Stanley Gold Sachs. No comment from the banks yet, but this would be confidential, which is increasingly common with IPOs. Yes. One wouldn't flip until closer to that listing date, so likely closer to the fall, although it's very fluid. Also the valuation, when we look at the numbers here, some are reporting it could be close to a trillion dollars when this company goes public and private markets, it's been valued closer to 850 billion. It does come after OpenAI. Kelly, of course cleared that legal hurdle with Elon Musk. That trial wrapped up. OpenAI does appear in this to be looking to get ahead of rival Anthropic, which I'm told by other sources has also been getting ready for an IPO as soon as this year. But OpenAI appears to be first out of the gates here. No comment from the banks. As I mentioned, statement from OpenAI saying as part of normal governance we regularly evaluate a range of strategic options. Our focus remains on execution. Cal, back over to you.

[Kelly Evans]

So the filing could come as soon as Friday and they would eye a September ipo.

[Kate Rooney]

That's right. That's right. So that is the official. You know, it starts the shot clock for going public. Although there's a ton of flexibility when these companies file confidentially because they can go back and forth with the sec, answer questions behind closed doors and then as we get closer to the IPO again as soon as September, although they have a lot of flexibility on when they could actually list depending on market conditions, depending on a lot of other factors. And then weeks before that we will get the S1, which is what everybody is really waiting for. The numbers behind this company, the numbers behind these valuations and but this definitely starts the Anthropic is also so interesting in this, Kelly. I mean they have been fighting from what I'm hearing to get out first. OpenAI appears to be at least preparing to be first out of the gates

[Kelly Evans]

and we'll have all summer long to talk about that. Kate, thanks for now with the latest. We have some breaking news on Capitol Hill as well. Let's get over to Emily Wilkins now. Emily.

[Angelica Peebles]

Hey Kelly. Well, the House has now gone ahead and passed a bill that is set to make housing more affordable. This is one that initially caused a lot of heartburn in the housing industry because when the Senate moved this bill, it had a provision that would have required major institutional investors to sell housing units that they built by a seven year window. That would have really hurt the build to rent market. Now that provision has been removed and the House bill has actually gone through really strong bipartisan support here. 396 members voting yes, only 13 voting against. This also has the stamp of approval from the White House. However, we know that two top, top senators who have been working on this, Tim Scott and Elizabeth Warren, they've said that there is still more work that needs to be done. It's not clear that the bill can pass as is in the Senate but look, we're coming up on the midterms here. Both parties are really trying to push that affordability message and this is really one of the only bills that is going to actually could potentially be done in time for the midterms and address some of the high costs that Americans are currently seeing. That makes it a top priority for Congress to get done as well as frankly one of the very few things that has the bipartisan support needed to get it done within the next couple months. So still ways to go, but a huge hurdle clear today and a sigh

[Kelly Evans]

of relief for Invitation Homes, American Homes for rent, those in the build to rent space with that provision stripped. Emily thanks. Emily Wilkins, let's turn back to the broader markets now where stocks are extending their gains as we await Nvidia's earnings after the bell. My next guest has been a seller of semis for risk control purposes and warns it'll be challenging for Nvidia to maintain its market share and profit margins. Tom Hancock is the portfolio manager of the GMO US Quality GMO or between you guys and bmo, I'm going to go crazy. Tom. And the CBO and the nyse. I hope I said it correctly. Is this trimming in semis then for risk control purposes or because you have concerns about those sustainability issues with Nvidia?

[Tom Hancock]

And you can call us Grantham Mayo, I think Jeremy would like that. Or Grantham Mayo, then Autumn, out of due respect to Ike, our other co founder. So if you look at the semiconductor industry, the last time an industry group in the S and P has gotten this big was software around Covid. And then we're talking about energy stocks and the great super cycle bubble in 2008 or tech hardware back in 2000. My point is your spider senses should be going up a little bit. There's a little bit too much concentration in the market. And so on the one hand, you have a great secular story that we, I think everyone else believes in, but on the other, we've seen the stock price moves, right? This clearly looks like the stock prices have gotten ahead of the pace AI adoption. So that's our main caution is around risk control. And specifically, a lot of the growth in at least some parts of the semiconductor market has really come out of pricing rather than volume. And that's obviously very true about the memory chips. But to some extent it's true of Nvidia, too. Their supply is constrained and they're able to have these 75% gross margins that I don't think ultimately are sustainable. There are Places in semiconductors we like, I think they're the ones that have been growing, they're AI trained, they haven't been growing quite as quickly, but we think they're kind of the. The tortoises rather than the hare, and they'll catch up and win over time.

[Kelly Evans]

What you said about pricing is interesting. We've heard that from others that a lot of the earnings kind of leverage, if you want to use that term, that they've seen has come from higher prices as opposed to volumes. And so the second the price cycle turns, watch out. Are you worried that we're at that kind of juncture already here?

[Joe Lavornia]

Yeah.

[Tom Hancock]

These turning points are really hard to call, but I think there are some things to really get you scared. If you look at, like memory stocks, right. Micron's PE is quite low, but those stocks are usually priced off book, not earnings. And its price to book is over 10x now, after being around two times for the better part of the last decade. Nicely cycling. So just sort of the level of enthusiasm, what you see with the IPO market, it's, you know, these are not the sort of things that tend to, I'd say, work out too well in the intermediate term.

[Kelly Evans]

So you're a little worried, like you said, about whether Nvidia can maintain the 75% gross margins and its market share. Obviously there's a lot of competitors. But you say analog is back. What do you mean by that? You like Texas Instruments. Obviously you still like tsmc. So where you mentioned a few of the places in the space that you do prefer.

[Tom Hancock]

Yeah, I mean, Texas Instruments isn't analog, so their end markets are more industrial, automotive. They haven't really been caught up with the AI frenzy, but they do have a business there. They've started to disclose their data center segment and it's small, but doubling, and that's meaningful. The other narrative about Texas Instruments is the market really hated them because they were building out fab space in advance of demand. They were depressing their free cash flow, which is why people have traditionally liked the company in preference to generating capacity that might not be used till 2030. People were thinking, and then suddenly, if we look around today, a company that builds fab floor space in advance of demand suddenly looks like the smartest company in the world. Perhaps like Texas Instruments, they actually bought unused fab space from Micron a few years ago. I wonder how Micron is feeling about that today.

[Kelly Evans]

You also mention, and Medtech investors will groan. Med devices, I should say. But you do have big stake in terms of your portfolio. Weights in Thermo, Fisher, Intuitive, Surgical, some of these names, when do you think they're going to start showing better performance?

[Tom Hancock]

Yeah, hopefully anytime. We've seen them do very well on Friday and Monday. It's almost like they have been trading like software stocks. Even though I think the AI disruption narrative is pretty far fetched for those kind of companies, we have seen a lot of turnaround in other areas of healthcare. If your pharma is doing better, managed care is off the bottom and we still think has room to run. But the med devices and tools. Yeah, if you buy the IHI or look at its performance, it's kind of shocking. Sure there's a capex story there and some idiosyncratic noise, but the breadth of the cellular mind has just gone, gone way too far. So if you want to sort of sidestep the AI debate, if you will, and not try to pick the winners and losers, I think that's a nice, theoretically at least uncorrelated IHI.

[Kelly Evans]

We just showed year to date, it's probably down 40 points against the, you know, the triple Qs or something like that. So it's interesting that you, you know, your conviction still remains high and maybe it will, you know, maybe as things possibly turn, that would be an area to show some life. Tom, we'll leave it there for now. Thanks so much. Really appreciate it. Tom Hancock with gmo. Coming up, more from our exclusive interview with Jeff Bezos this morning, including his timeline for when we could first see those data centers in space. And does it match Elon Musk's plus Replit? It's one of the startups that became synonymous with vibe coding. We'll speak with the CEO. On the heels of the company's debut on CNBC's Disruptor 50, the exchange is back after this.

[Narrator/Announcer]

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[Jeff Bezos]

Are data centers in space realistic? The answer is yes. The timeline is harder to answer. So, you know, some of the timelines you hear are very short. They're probably not right. You know, people who talk about two or three years, that's probably a little. Elon's talked about two or three, probably a little ambitious. Okay. You know, but I think what Elon would tell you is if you don't set an ambitious timetable, you know, you know, if you want it to be six years, say it's three.

[Narrator/Announcer]

Right.

[Jeff Bezos]

So exactly how long it will take, I don't think anyone knows. But it is real. It will happen.

[Kelly Evans]

That was Amazon founder Jeff Bezos taking a somewhat subtle jab at Elon Musk's ambitious timeline for space based Data centers as SpaceX gears up for its IPO, with the company reportedly preparing to unveil its long awaited S1 filing as soon as today. Joining me now for more on the setup around SpaceX and what investors should be on the lookout for. Rohit Kulkarni is a senior analyst at Roth Capital Partners. Rohit, welcome. Do you have a sense for what this company's business model is?

[Rohit Kulkarni]

There are four layers that we need to unlock here. One is what people know. Starlink satellites, they are selling monthly subscriptions for that. Then we also know they have the Falcon 9 launch business. So these two make money. Not too sure about profitability, but there are those revenue generating businesses and then there are two kind of cash consumers. I would say obviously the AI business, which is Xai and many things around it. Twitter, for example. And then you have the starship business. So I think as we learn about the S1 filing, I think we'll need to unpack these four layers and what is generating money, how much over what period, and what needs money over what period of time?

[Kelly Evans]

So let's go over this One more time. Starlink we all know very well obviously, although Amazon again we spoke with the Delta Airlines CEO about this, this just the other day. They have Leo coming online. It's going to compete with that. So SpaceX has Starlink, they have Falcon 9 which is its launch franchise. They have Starship which you're calling a long duration capital program. And then they have Xai and kind of wherever, wherever that's going to go, which of these so do you get to 1.75 trillion from that?

[Rohit Kulkarni]

There is going to be a lot of art and science behind the math of valuation that we probably need to do. Again, I've been talking to investors and I think what public comms you look at, how you look at the comparables and there are companies trading at 150 times sales. There are certain space companies trading at that levels. There are defense tech companies trading at 40 times sales. There are AI infra companies like the one that went public last week trailing 150 times sales. So there are precedents out there that. And if you combine all three of them, SpaceTech, AI tech and futuristic aviation, I think you have a conglomeration of highly valued, highly aspirational businesses trading at significant premiums to what we typically see.

[Kelly Evans]

Right. Some of them we could probably just say are more aspirational. Others I mean Starlink, Falcon 9, those are real businesses. But again, just going back to this question about data centers in space, does that question have to be answered for you to get to the valuations that we're talking about for this ipo?

[Rohit Kulkarni]

I doubt. I think what would probably be the biggest question that people would need to get at is how does Starlink scale? When does it go from consumer to enterprise to kind of anything that moves connectivity? So there is a pathway to that. While there is more competition coming from Amazon and many of the companies, I think the bulk of institutional investor focus would be on Starlink in my opinion. And then the true moonshot businesses like Starship and Xai probably if there is a way to box them into what amount of capex they would need, I think that would be helpful. So those, those would be the two biggest questions. Starlink pathway and kind of the capex for the big moonshots, which is XI and Starship.

[Kelly Evans]

We spoke with Jim Cramer about this yesterday or the day before and you know, he, he kind of suggested with all of these big IPOs, SpaceX, OpenAI and Anthropic, it could be leading lams to the slaughter. In terms of the retail public, do you share concerns that These might be extremely overvalued or going back to the multiples you referenced before. Do those valuations make sense to you?

[Rohit Kulkarni]

Hard to say about a lot of other companies, but SpaceX is once in a generation or probably once in several generation companies, particularly with the layers that we just talked about. Not many companies have these kinds of potential long term possibilities that they have been working on over the last 15 years and they're coming together in a way that nobody anticipated. So. So whether this company is worth a trillion or 2 trillion on 15th of June, we don't know. But there is going to be a lot of investor demand, a lot of investor demand from both institutional and retail investors. And probably that leads them to a pathway of success, at least near term. Longer term, it remains to be seen.

[Kelly Evans]

Rohit, thanks very much. It was fun to go through that. We'll be doing a lot more of it in the days to come. Rohit Kulkarni from Roth Capital Partners. All this talk of SpaceX brings us to today's Power Poll. Which IPO would you rather buy into, SpaceX or OpenAI, which Kate Rooney just told us could be coming as soon as September? OpenAI SpaceX, probably more like June. Scan that QR code on your screen now to vote and we'll reveal the results next hour on Power Lunch. Speaking of Jeff Bezos, Amazon could face a new challenger in grocery delivery and namely its Airbnb will jack that give a kick to shares that are flat year to date and still 40% below their Covid highs. We'll have all the details of their new partnerships next.

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[Kelly Evans]

Welcome back. And we're back to rally mode for the stock market today. The Dow's at a session high right now up 564 points. Better than 1%. Nasdaq up 1.3%. We're also watching shares of Target selling off despite beating earnings estimates and snapping a 13 quarter streak of falling net sales. They also posted their first positive same store sales numbers in five quarters. They're raising their full year outlook for sales, but they only reiterated their forecast for 20 basis points of operating margin expansion. Those shares are down about 4%. On the flip side, TJS just keeps winning. They're up 6% after better than expected results. They raised full year guidance on the top and bottom lines, citing strong demand from value focused shoppers. Shares are actually having their best day in four years. And Airbnb shares are also rising today about 3.5%. The company just announced at the top of the hour a whole new series of services starting this summer. That list includes grocery delivery, airport pickups, luggage storage and car rentals. They're adding AI tools to their app as well. Here's what co founder and CE Brian Chesky told Andrew Ross Sorkin about the strategy behind today's announcements.

[Brian Chesky]

We asked our guests like what do you want most of Airbnb? And one of the things they said is, well, I love that in Airbnb I have a kitchen, but it'd be nice to not to have to go grocery shopping. So now you can order groceries and they can have them ready at your Airbnb. The next thing people said is, you know when I'm in Rome, Uber is not as reliable in Rome. It's hard to get public transport to my Airbnb. What if somebody could be greeting me at the airport and do airport pickups? So we're doing that. Some people told us, hey, I'd like to check in in Tokyo, but I check in at 2pm I arrive at 10am I have my bags with me for four hours. I don't want to walk around the sea with bags. So now we can store your luggage. I imagine one day we'll have dozens, possibly even hundreds of categories, just like Amazon. I think we can build a little bit like an Amazon for services at least for traveling and living. I think it's a very fragmented market. It's really hard. There's only two really big services, Riot Sharing and food delivery that I think have become really, really, really large through Uber and Door Dash. But there is a long services and so I think what we're building is an ecosystem of services.

[Kelly Evans]

Very interesting. For more of their conversation, tune in tomorrow to Squawk box starting at 6am Eastern and you can catch much more of it. Let's get to Angelica Peebles now for the CNBC News Update. Angelica hey Kelly.

[Angelica Peebles]

Former Cuban President Raul Castro has been charged in the United States. According to court records, he is charged with counts of conspiracy to kill US national murder and destruction of aircraft related to a 1996 incident in which Cuban fighter jet shot down planes flown by Cuban exile groups. It's the latest and latest move in President Trump's push for regime change in the country and helped Secretary Robert F. Kennedy Jr. Recently fired the heads of the Preventative Services Task Force. That's according to Reuters, which says that the chair and vice chair were fired earlier this month. That task force is key to deciding which preventative medical care is covered covered under the Affordable Care Act. It last met more than a year ago after Kennedy canceled regular meetings and Single Gen Z women are outpacing their male counterparts when it comes to buying a home. That's according to survey data from the national association of Retailers of Realtors. Excuse me. The survey included home buyers from several generations who purchased between July 2024 and June 2025 and showed that no other generation had a bigger share of women single home buyers than Gen Z. Kelly, back over to you too.

[Kelly Evans]

Surprising. Angelica, thanks. Coming up, it's one of the biggest names in vibe coding. Replit making its debut this year on CNBC's Disruptor 50. And we'll speak with the CEO about that and more after this.

[Schwab Representative]

Foreign

[Kelly Evans]

CNBC is out with its annual Disruptor 50 list where we highlight the most promising private venture backed companies. Today we're homing in on Replit. Making its debut at number 42, Replit lets users write, run and host code directly in their web browser. It's currently valued at $9 billion and saw annualized recurring revenue jump from under 3 million to 150 million late last year year that's projected to hit a billion dollars by 2027. Repl.CEO Amjad Massad joins us now along with our very own Julia Borson. Welcome to both of you. Julia, kick us off. Thanks.

[Julia Borson]

Kelly and Amjad, thanks so much for being here to talk about REPL. This is the first year not only that Replit has been on the Disruptor 50 list, but also the first year we've seen this whole category of Vibe coding companies on the list. Your rivals, cursor as well as lovable are also on the list. Explain to us how you think about differentiating this new and growing category.

[Schwab Representative]

Thank you Julia and Kelly. You know, I spent the better part of my career teaching people how to code. Before Replit was into AI, we kind of had a platform to make it easy to get started with programming. And the thing that we realized is what really matters is to create software. You know, ultimately this is the potential for people making software software, creating businesses, making the business more efficient is much more important than just learning how to code. And so in 2024 we invented this category. We came up with Replit Agent. And Replit Agent was the first so called vibe coding before the term was coined. And Replit is kind of. Replit Agent is sitting on a platform that's been developed over many years that has incredible depth and range. Replit is the only platform that takes you from design. So we have a design system where you can go and of doodle around and draw UIs all the way to an application that you can ship and scale and run mission critical software on it. And I think the other tools are really great tools, but the kind of tools that sit as part of the stack, no one really has the range where you can build anywhere from web apps to backend systems, to APIs to even mobile apps that you can ship on the app store.

[Julia Borson]

So who do you think of as your main competition? We talk about how the disruptors are challenging the status quo. Do you see your tech technology is enabling a whole new range of apps to get built that wouldn't get built otherwise. Or are you challenging traditional software companies and engineering roles?

[Schwab Representative]

Yeah, I think that, you know, one of the main use cases of Replit inside the enterprise is to replace this one size fits all kind of SaaS software that a lot of people are just really, really tired and kind of frustrated with because, you know, they keep the data in these silos and people just want to customize. You know, I'm at an investor conference today. I see so many Reput users. They're telling us how I built this custom CRM for my private equity that, you know, has all the features that Salesforce can give me. And so a lot of it is really about creating these custom solution. But also a lot of it is just like net new apps that wouldn't otherwise been created. There's a lot of entrepreneurs running their business on Replit. You might have seen the New York Times profiled this first one employee billion dollar company, it's called medv and that's running on replit. That wasn't possible before. One person now extended by these agents. And one thing about replit that's amazing is you can run parallel agents. You can run 20 agents at a time building the software for you. And so one person can create enormous amount of value in the world. And that really didn't happen before.

[Kelly Evans]

I'm Judd, this is Kelly here. Do we need replit though in a world where now we have Claude Code and Codex and all of these tools?

[Schwab Representative]

Yeah. So if you're someone who's not an engineer and you download Claude code, which again is a fantastic tool and cursor, you might ask the agent to do something and the agent might install a package that's actually infected with a worm. There's these zero day supply chain attacks that are happening now that can go into your computer, infect other computers in the network, steal your data. We've seen a lot of issues like companies like Mercur had this massive data leak from these zero day supply chain attacks. So by coding is really a fantastic, revolutionary kind of technology. The problem is that there's a lot of safety concerns, especially if you don't know what you're doing. Now on Replit, we have the sandbox environment in the cloud and the agent knows what kind of packages to install. We don't let you install kind of new packages because that might have a risk of it being infected. Once we deploy this entire sandbox environment, we have a partnership with Google Cloud that allows us to create these siloed environment and the enterprises really like it because we focused a lot on security. I think of ourselves as maybe quarter cybersecurity company because a lot of what we do is how to create secure app because that's going to be one of the biggest challenges of the future, especially with upcoming models like Mythos.

[Julia Borson]

Yeah, there is so much concern about cybersecurity, especially in the wake of this report that some of your rivals were used to create apps that then revealed all this personal and corporate data. How much do you think those cyber concerns could limit not just your growth, but the growth of the category in general?

[Schwab Representative]

I think the category will grow just fine. I just think that we, we need to invest in reliability and security, in privacy. And that's going to be an industry wide effort. And I think the most important thing is for especially buyers inside the enterprise enterprise and it is to kind of make sure that people, you know, they're sitting on a platform that has guardrails. I don't think we should just roll out quad and cursor for everyone and just, you know, people will kind of run into trouble. So that's the main thing. And then the other thing, I think with a lot of entrepreneurs starting new companies, we're going to probably run into this issue where there's a lot of new apps to kind of choose from. We, you know, famously had an issue with Apple not letting us through the App Store because Replit created an enormous explosion of apps in the App Store. So we're working through these issues just to make sure we're creating high quality software. And I'm really proud to say that Rapid probably generates the highest quality of software because we spin up a lot of tokens on reliability, on security, and it's important to be responsible in this era.

[Kelly Evans]

Well, that's fascinating. It certainly helps me wrap my head around it more. And again, congratulations on all your success, John, and we look forward to the IPO soon, maybe, hopefully. Hopefully. Amjad Massa joining us there. Julia Borson, thank you very, very much. As well. To see the full list of this year's companies, head to cnbc.com disruptor50. Coming up, a settlement or a slush fund? The Trump administration's $1.8 billion anti weaponization fund announced yesterday. Already facing legal challenges. Those details are next on the exchange. Welcome back. President Trump dropping his $10 billion lawsuit against the IRS earlier this week for the leak of his tax returns. He and his family and businesses won't receive any compensation for that leak as a result. Instead, the Department of Justice is creating a nearly $2 billion anti weaponization fund for broader victims of government lawfare. It was announced yesterday and the legal battles have already been. Eamon Jabers has more for us from Washington. Eamon.

[Eamon Jabers]

Hey there, Kelly. We are now seeing the first lawsuit today that's aimed at blocking the president's new fund that's designed to pay people who say the Biden Department of Justice harmed them. Now, the fund, remember, was created as part of this broader settlement with President Trump by his own government resolving a $10 billion lawsuit that he filed against the IRS. The lawsuit filed this morning is by a former U.S. capitol Police officer and a current D.C. police officer. And it argues that the $1.8 billion fund was created illegally and is unconstitutional. Now, given how controversial all this is, any suit that gains traction in the courts here is probably going to go all the way to the Supreme Court. So it could be a while before we get a resolution. The officers are responding to what is really an unprecedented arrangement in American history, as the Trump administration has now barred itself from pursuing any and all claims against President Trump and his family that could have been made by the irs, including his tax returns. Now, the sweeping exemption of Trump and his family from normal obligations under tax law raises the question of whether Trump has directed his government to award him a settlement on favorable terms that no other American could get. A Department of justice spokeswoman, however, defended the deal, saying there would be little point in settling several significant claims if either party could simply turn around and seek to administer, initiate more adverse claims that could have been pursued previously. Kelly so we'll see where the lawsuit

[Kelly Evans]

goes, but does the lawsuit halt the the payment, any kind of payments or claims for right now, or no, no,

[Eamon Jabers]

it doesn't have the authority to do that. So everything will go on as continued. But at some point a court could weigh in and reverse this, but we're a long way from that.

[Kelly Evans]

All right, Eamon, for now, thanks very much. Amen. Jabbers Coming up, Nvidia has beaten on the top line for the past 20 quarters in a row when it comes to its earnings, while it's only missed estimates once, with shares up more than 16% since its last report. We'll get the three numbers to watch this afternoon when the exchange comes right back. There's a lot of debate over whether Nvidia's earnings report tonight is still the most important quarterly event for the markets. Some say it's now moved on to the chip names, for instance. Regardless, it's still the biggest company in the world. And Christina Parts Nebulous has the keen numbers investors will be watching. Christina it's definitely important because it contributes

[Christina Parts]

roughly 18, 19% of the S&P 500. But a beat to your point is largely expected. There are three things we need to focus on. One, the trillion dollar number. CEO Jensen Wong raised the cumulative Blackwell and Rubin revenue these are different chip architectures, to a trillion dollars through 2027. Just at GTC a few weeks ago in March, Morgan Stanley thinks it's tracking well above that $1 trillion number. So any update here would really shift the entire narrative. Second, you have Rubin timing, that is Nvidia's next generation chip platform. Street really wants a clean timeline. Barclays, Susquehanna, many have just flagged component delays that could push out volume just a couple of months. So if Jensen Huang confirms that it's on track with no caveats, asterisks, then that removes somewhat of a real overhang. And then lastly, gross margins, the street is pretty comfortable at 75% right now. But as Nvidia transitions to that latest generation Ruben and input costs rise heading into 2027, most notably memory, Morgan Stanley is already modeling a dip to 73% so bulls will need to hear that profitability holds up through the other side of that transition. And then Kelly, Nvidia has really traded down the day after five of the last seven earnings prints. So what actually breaks that pattern could be if the CEO gets more aggressive on buybacks and dividends. And that would open the door to a whole new class of income oriented investors, the kind of buyers who have, you know, had no reason to own this stock. Maybe until now.

[Kelly Evans]

Now you play Christina Banks. The Options Action and Nvidia's could also be telling. Ahead of today's report, Oliver Renick is at the CBO with more.

[Tom Hancock]

Oliver hey Kelly, three quick things to know For Nvidia, the post earnings move has been smaller than options implied 14 of the past 20 quarters. But this time around it's the smallest implication since 2021. So it could be time to buck that trend. 2 of the billion dollars in OPT premium today, 75% of it is in calls. That means if Nvidia drops, which it has the past three reports, it's going to be painful. But what it also means is three Using spreads makes sense for traders given how rich the calls are. Just take it from the biggest Nvidia trader of the day who bought $9.6 million of the 235 strike calls expiring this week, but also sold the same amount of the 255, lowering his cost by 1.6 million.

[Kelly Evans]

Oliver, thanks. And that's it for us. Thanks for watching the Exchange. And before we hear from Nvidia, 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.

[Narrator/Announcer]

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