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Not Nvidia, Mamdani's Property Tax Plan, and Zuckerberg Takes the Stand 2/18/26
00:43:39
Retail investors are passing on Nvidia in favor of other beaten down tech names. The owner of the Empire State Building weighs in on NYC Mayor Zohran Mamdani's new property tax proposal. Plus, Mark Zuckerberg heads to court in one of Meta's most high-profile trials ever.
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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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The Jack Welch Management Institute at Strayer University helps you go from I know the way to I've arrived with our top 10 ranked online MBA. Gain skills you can learn today and apply tomorrow. Get ready to go from make it happen to made it happen and keep striving. Visit strayer.edu Jack WelchMBA to learn more. Strayer University is certified to operate in Virginia by Chev and its many campuses, including at 2121 15th Street north in Arlington, Virginia. You're listening to the Exchange. Here's today's show. Thank you very much, Scott Selling in video and buying Amazon. Mark Zuckerberg heads to court and the New York City property tax panic. Welcome to the Exchange. I'm Kelly Evans. All of that ahead, but let's start with the major averages where we're seeing a bit of a counter trend day, at least for 2026 with the Nasdaq leading the way up 1.3%. We're seeing point six gains for the Dow, point eight for the S&P 1% for the Russell 2000. The Nasdaq's up though as I mentioned with Nvidia higher on this multi year partnership with Metta and after a long stretch of losses, Amazon is higher for the second day. Take a look there at the shares, up two and a half percent, pretty much green for the MAG7. And we're also seeing a bounce in software with the sector ETF in the green and names like Cadence you heard about earlier, Applovin, Synopsis and Palantir all rallying. We're also seeing a broad move higher in the commodity sector and this has been the story of the year. Attention on oil after VP JD Ban said Iran failed to address US red lines during nuclear talks this week a WTI crude is trading around 65. It's up 4 1/2% amid that persistent concern and chatter today. But let's turn our attention back to tech. Nvidia is where we start with the shares actually up about 2% today, 2.2 with just one week to go until its earnings report. Morgan Stanley noting that mega cap tech stocks are the most under owned in 17 years, with Nvidia at the top of that pack, it's currently trading around 70, 27 times, which has Wells Fargo saying to buy shares ahead of earnings. They say near term sentiment is likely bottoming. Let's bring in the analyst behind that call, Aaron Rakers. Aaron, it's great to have you here. Talk a little bit about what you foresee.
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C
Yeah, thanks, Kelly, for having me on the show. So, I mean, we are, we're out with a note this morning on some pretty robust demand data points that we've seen through the course of this quarter. Not just the capex spending trends that we've all talked about and seen, but, but also you look at some of the export data out of Taiwan, 200% growth in server exports out of Taiwan, you're seeing commentary out of others, you know, Bloom Energy, Vertiv, Eaton, all pointing to this robust investment cycle. And I think at the, at the end of the day, what we see is Nvidia trading at, you know, over a 40% discount to where it's traded these last three years on a medium multiple basis, which we think sets up for a very positive risk reward into next week's print.
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B
You know, the one thing that's always gotten me about Nvidia is, is not the P E or anything like that. It's just the sheer size. You know, it's just the market cap. You know, it's, it's just to reassure me or anyone who understands. Look, I get the case for it. I understand the AI boom, I, I see the demand. You know, I look at the, I can wrap my head around all of it, but sometimes I just look at the sheer size and think, how much bigger can it really get?
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C
Yeah, I think that's a great point. I mean, you know, we put in our note this morning, like one of the deterrents of Nvidia moving higher has been the fact that it's touched, I think roughly 8% of the S&P 500, about 5%, five and a half percent of the MSCI index. And we speak with a lot of investors that are kind of capped out. Right. In terms of owning more. That being said, I think there's been a lot of momentum in moving, you know, towards the memory space, some of the storage names and some of, kind of the tangential plays on this build out. I think if Nvidia puts some robust numbers out, some of that momentum moves back in favor of Nvidia. But you know, I think it is interesting to point out like 8% of the s And P, that's kind of where we saw Apple kind of, you know, hit a, hit a threshold that kind of deterred some of the movement higher in the stock. I think we just need to see the strong results. And then also you've got their GTC event coming in mid March and that's always a pretty positive update from the company just given the roadmap looking forward.
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B
Yeah, so I take that concern so a little bit more in terms of what investors are looking for here. You know, it still remains this tale where as good as the results might be, I'm not sure if we're able to reignite a Mag 7 trade. Right. Like we saw predominating in the past. And Nvidia may do quite well, it may be fine, but it just feels like the energy, the enthusiast look, energy's up 20% year to date, materials are up 15%. It feels like investors are just going to go chase those returns no matter what Nvidia puts up.
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C
Yeah, and that's our call I think, you know, given what we've heard from Jensen throughout this quarter, given the strong data points that we've seen, you know, I think upside results will be rewarded. And I think at the end of the day the stocks trading at less than a 19 multiple in our calendar 27 EPS estimate looks very de risked in our opinion. And so I think some of it's just getting that momentum trade back in this name that we can, we think can move shares higher. And you know, at the end of the day too, the extreme co design platform breadth of Nvidia is hard to refute from a competitive positioning perspective. And we think that competitive moat will continue to deepen and make it the, the dominant play on this infrastructure build up.
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B
Yeah, you know, it would still seem to me that Nvidia could end up being in a better position than some of the other Mag 7 names simply because. And we'll talk more about this going forward but to the extent that they're all now they're having to spend, they're kind of turning into utilities. I know we've made this analogy but the idea is you have to do a lot of capex. Your output is kind of a commodity and I'm not sure where that leaves them. So instead of them each having these beautifully protected moats, they're now all competing against each other in a game where they kind of turn into commodity producers which over time have not really traded at high PS or been necessarily great, great businesses for the long haul. So I don't think Nvidia is like that. I mean I'm talking more about the Amazons and metas and Microsoft's and those of the bunch. But I guess Nvidia can continue to do well simply by serving all of them as long as it can't be displaced by a Google by what's coming out of China. You know, that has certainly heated up in recent days. So where do you think they face the most competitive threats?
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C
Yeah, I mean I look, I think there's been a narrative around custom XP use obviously Broadcom, Marvell and what's happening Google, TPU and some of the efforts. But yesterday's news with MATTER in our opinion was a big because you know, not only does validate the position that the GPU plays in this infrastructure bill, but it also highlights I think more importantly that extreme co design, that ability to move out beyond just the GPU complex into the networking layer and obviously with yesterday's move with the Vera and the gray CPUs indicates that Nvidia is playing a much broader, deeper game that that they can monetize a lot more of the complete stack. And to say infrastructure bill, the other thing you pointed to that I think is interesting is this idea of commoditization. The next phase of AI is really driving token unit economics. How do I create a platform with breadth that drives greater tokens per second per watt? Any metric you want to look at. And it's hard to believe that Nvidia wouldn't continue to be that, that dominant provider of that compute infrastructure.
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B
All right, so finally what's, what do you be most closely listening for or watching for when they reporter on the call?
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C
Yeah, so I think investors are sensitive to gross margin. Obviously there's a lot of memory inflation, pricing dynamics around this. So you know, I think the ability to keep that 70 plus percent gross margin is important. And then I think the other big metric would be is that 500 billion backlog order backlog that they've talked about through fiscal 26 and extending that out and increasing. That would be notable for a lot of investors as we start to really look at the potential breadth of this Vera Rubin product cycle kicking in in the first half of this year and certainly into the, into the latter Part.
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B
Of 26 margins backlogs is good to know. I mean that that's kind of the areas that people might be most sensitive to any disruption or any strength. Aaron, I love how we're talking all this. It's not even for another week but that's how the market is feeling about this Aaron, thanks very much. Appreciate it.
- [08:55]
C
Thank you.
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B
Aaron Rakers of Wells Fargo. While Nvidia may be relatively cheap these days, it's not yet attracting the attention of the retail investor who instead are buying other hard hit names. According to Robinhood, Nvidia saw a big volume last week in the stock, but investors were net sellers. They were buyers, however, of Amazon and Microsoft, both of which have had a rough patch. For more, let's bring in Steve Cork, he's Robinhood's chief brokerage officer. So they are picking up these names, Steve, because we're looking at, I mean, Microsoft has having one of its worst runs in a couple of decades. Amazon, same kind of thing. And you're seeing buying activity.
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A
Yeah, I think what you'll see over time and our customers generally do this is they really capitalize on weakness. We've had this rolling AI scare that's gone through a variety of sectors and we've seen the firms that are in those sectors impacted pretty negatively. And as a result of that, we've seen some pretty strong moves down. And I think a lot of our customers are, you know, if I'm looking at their behavior, I think they think that some of that may be overblown. I would point out they're still, Nvidia and Tesla are still the largest holdings. I think they're just trimming some of that, which is something that they do on a fairly regular basis.
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B
Okay, so what else has jumped out at you? Go ahead.
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A
Yeah, I think a couple things have jumped out. So I know in the past when I've come on, we've talked about in times of, like I said, of a little bit of volatility or uncertainty about where the market's going to go. I think what happens with retail customers is they sort of flock to broad based ETFs, however that has happened. But I think in this instance with the AI scares that are happening, I think what our customers are realizing is they can't just buy sectors of stocks because there will be some of those that will be impacted by everything that's happening on the AI front. They have to be a little more selective and be buyers of companies that they think either are embracing this and will be able to do this on their own or are going to benefit from it. And that extends all the way into the ecosystem around it, which you were talking about a little earlier. The infrastructure, the energy, even all the way to metals. You know, we have a lot of customers that have been in the, in the metals market, in the energy market, and that you Know that popped up to being one of the top names for us silver and gold over the course of the last couple weeks just because of the need for all of these materials in association with everything here.
- [11:47]
B
Yeah. And so I would have kind of expected that maybe when they were at a frenzy back in early January, and this is kind of the same period you're talking about, but you're speaking to this kind of continuing interest. So it sounds like there is this conviction that this isn't just a one off kind of meme stocking of silver. I mean, whatever has, has happened with silver, I don't profess to know, but that the kind of fundamentals underpinning all of this are, are this scramble for physical product. Right. That people want right now. And we see this in the supply chain and it sounds like we're seeing retail investors and kind of investors writ large scrambling to be a part of that story too.
- [12:25]
A
I completely agree. I think it's like there's a safety in the physicality of these things because they're something that's a known commodity or a known entity or a known infrastructure piece that is going to benefit regardless of who the winners are. And so it provides you a little bit more safety than an individual name. And so that's something that I think is kind of resonating. I also think the market is just at this point where there's a lot of uncertainty about where we're going to go. You know, we're sort of sitting at the same place and churning back and forth and getting a different sector that's going to lead us out of it. And we haven't really made any progress. So. And that's not always a bad thing. Sometimes you just need to sit and create a foundation for the next leg up. So it'll be interesting to see where.
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B
We go where, you know, you mentioned there just feels safety in kind of the physical thing. Where does this leave Bitcoin? I know it's been a big headwind for the platform broadly when bitcoin trades lower and you know, that's fine, but I just mean what are you learning about. It's like a living philosophical process. What are you learning about bitcoin and the behavior of retail traders and investors around this massive sell off at a time when a lot of people are scrambling for something that they feel is more durable.
- [13:48]
A
Yeah, I think it's Bitcoin. And then the cryptos in general have such price sensitivity. No, they just lose a lot of the allure for many retail customers and probably institutional as well when they get to levels that we're seeing today. But I think there are plenty of people, and we are in that camp that are true believers in the technology underpinning it and even the tradable assets themselves within Robinhood's 27 million customers. So I think I've told you this before, but we have something called reoccurring investments, which means I put $100 in every week, every month, every quarter, whatever it is. And I can say purchase this equity asset, etf, et cetera, every single time that I do this. And it's been bitcoin for over five years.
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B
You ever worry it's going to go to zero? What happens if it goes to five or ten? I don't know.
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A
I will never prognosticate that it can't go there, but I'm doubtful that it will.
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B
I just wonder sometimes. Anyway, Steve, thanks so much. Really appreciate you taking us today. I appreciate again, Steve Cork from Robinhood Coming up. We've heard a lot of talk about looking overseas for better opportunities, but our market guest says his firm is keeping most of its money in US Stocks. He'll join us next to make his case, but first we'll speak exclusively with the head of the company behind the Empire State Building that's also one of the most prominent pure play New York City REITs. We'll get his take on the state of commercial real estate and the business impact of Mayor Mamdani's policy proposals. Anthony Malkin joins us next.
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This is the change on cnbc. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com Market Update podcast or find Schwab Market Update wherever you get your podcasts.
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Not every sale happens at the register before AT&T business Wireless, checking out customers on our mobile POS systems took too long. Basically a staring contest where everyone loses. It's crazy what people will say during an awkward silence. Now transactions are done before the silence takes hold. That means I can focus on the task at hand and make an extra sale or two. Sometimes I do miss the bonding time.
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Sometimes AT&T business Wireless connecting changes everything.
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Try angel stuff for your tushy. It's made by Angels Soft and strong Budget friendly. The choice is simple. Pick up a pack today. Angel Soft Soft and strong, simple. Welcome back to the Exchange. New York City Mayor Mamdani says he may raise property taxes by nearly 10% if he can't persuade Governor Kathy Hochul to raise income taxes on the wealthy. According to Mamdani, this last resort plan would impact 3 million single family homes, co ops and condos and over 100,000 commercial buildings in New York City. That includes the vast portfolio of properties my next guest oversees. Empire State Realty Trust, manages the Empire State Building, 1 Grand Central Place, 130 Mercer, and many more. The stock moving higher on results that beat street expectations with the company seeing its commercial occupancy rise. Let's bring in Tony Malkin. He's Empire State Realty Trust CEO. Tony, it's good to have you back. And yeah, I mean, it's. Real estate stocks are starting to actually behave quite nicely this year after what's been a rough patch.
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D
Well, first of all, thanks. It's great to be back. We're delighted with our results. Flight to quality, top of tier. We did over a million square feet of leasing in 2025 and people continue to expand in our portfolio. Burlington GLG growing to, between the two of them, almost 300,000 square feet in our portfolio. So we're pretty excited, I would say that as a sector, my goodness, we've been very much on the office side overlooked and the whole sector is so down. But our balance sheet and our opportunity to take advantage of things, we've been able to do quite well this year. Appreciate that.
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I was just speaking with a friend down in Raleigh who said he's like, I'm looking around and there's vacant class A space. There was lots of building activity. He literally is just wondering like, could the unwind of, of this whole software boom have a bigger impact than we're even really thinking right now? And maybe we're taking this too far, Tony, but suddenly places like New York City, some of the core city centers are looking pretty good relative to the areas that were booming over the past 15 years.
- [18:44]
D
New York City is just, it's, I've said this so many times when we've chatted. It's the best market in the world. And we're, we're, we're just confined in how much space we have in which. And we're very fortunate with our balance sheet. You know, balance sheets really matter to that. And if you saw defaults by office landlords nationwide or at an historic recent history high. And at the same time, you know, in New York City, we've got the Demand, unfortunately, we've got the balance sheet and that's really our biggest issue right now is how much space we have to lease as opposed to is there demand?
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B
Yeah. So in other words, you wish you had more. What happens if a 10% property tax, it's nine and a half percent, I believe. Do you think that could really happen and what would be the impact?
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D
Well, it's got to go through city council and to some extent I don't understand how it actually works in the dialogue between the mayor and the governor. In short though, let's be clear. There is a real impact on an awful lot of people if he goes to property taxes and if that's allowed, an awful lot of those people voted for him for mayor. So we'll find out. In the meantime, proof's in the pudding and they haven't even put the ingredients in the kitchen yet. He's just trying to sort things out. Rather famously, someone said, you know, everybody blames the prior president or mayor. So we've gotten that out of the way and now we'll see. You know, it's hard to give away a lot of things for free if you don't have the political power to raise more money. So we'll see what happens.
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B
Right, but I'm just trying to connect the dots here. If you're saying you wish you had more capacity, you wish you had more supply that you could lease out right now, so I don't know, I guess then I guess maybe his taxes. I'm just trying to understand the market dynamics, the tax like that might be levied into. Maybe it wouldn't have a huge effect, at least on the commercial side. I don't know.
- [20:35]
D
Well, on the commercial side, first of all, tenants leases in New York City have pass through of real estate increases. So in some way he'd be passing through an increased cost and burden on those tenants. But then they get a new base year when they sign a new lease. And the second thing is, though, the impact on the residents is quite high, at some point fiscal discipline, I think logically comes into play. Look, I'm more concerned about the fact that we may be at war in Iran in two weeks than I am right now about real estate tax increases.
- [21:08]
B
Would you say you're more concerned about.
- [21:10]
D
The fact we might be at war with Iran in two weeks?
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B
So, yes, I take that would be something to maybe put at the top of the worry list. Where does the kind of AI state of affairs fall on that worry list for you?
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D
So the biggest thing for us is we're always very careful as to the tenants to whom we lease space. So right now there are a lot of AI companies with demand in New York. Estimates of over a million and a half square feet of demand in New York City for office space. From new AI entrants into New York City's office. We have seen a really very strong demand and growth. So we haven't seen on the ground the impact of the great hollowing out that has been discussed by different people who are on book tours or attract people to their blogs or their ex accounts. But what I will say is, hey, it looks very real. The biggest thing for us is how do we use it and how do we demand from our people in our own company to be more efficient and how do our vendors give us better service and save us money? So we think overall, the AI pieces, it hasn't hit demand and it should increase productivity and create more business.
- [22:23]
B
I want a debate between you, so Matt Schumer, who was on last week with us, you know what? I want you and him, okay, a one hour debate. All because this, you know, which one of you are correct has, you know, trillions of dollars at stake in this software trade and everything else that's blowing up right now. So.
- [22:39]
D
But you know, if we have to, if we have to roll up the carpets and leave, the world comes to an end, I don't think we get a very good look at that scenario, you know, but look, it's crazy not to pay attention to developments of technology and, and right now we think it's a driver of demand.
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B
All right, Anthony. Tony, you know, which I don't know, I like Anthony. It just rolls off the, the tongue. Maybe if you're on set, I'll call you. Tony, thank you so much for making the time.
- [23:08]
D
It's a pleasure. Thank you very much.
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B
Tony Malkin, Empire State Realty Trust. Coming up, Mark Zuckerberg taking the stand in Los Angeles today in one of Meta's most high profile cases to date. We'll tell you what he's saying and how the ruling could impact that platform and others. Shares, by the way, are nearly 20% off their record high now. We'll be back with more after this.
- [23:33]
A
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.
- [24:02]
B
Not every sale happens at the register. Before ATT Business Wireless, checking out customers on our mobile POS systems took too long. Basically a staring contest where everyone loses. It's crazy what people will say during an awkward silence. Now transactions are done before the silence takes hold. That means I can focus on the task at hand and make an extra sail or two. Sometimes I do miss the bonding time.
- [24:26]
A
Sometimes AT&T business Wireless connecting changes everything.
- [24:32]
B
Try Angel Soft for your tushy. It's made by Angels Soft and Strong Budget friendly. The choice is simple. Pick up a pack today. Angel Soft, Soft and Strong. Mark Zuckerberg is on the stand today in a very high profile social media trial in downtown Los Angeles. Julia Boorstin is live outside the courthouse for us today. For today's Tech check, no less. Julia, what can you tell us?
- [25:03]
E
Well, Kelly, Mark Zuckerberg has been testifying for the past hour in this trial on the addictive nature of Meta's product design and potential damage done to kids and teens. Now one key line of questioning that he's been facing is whether Metta actually prevents kids under age 13 from being on their platform. Zuckerberg said it's hard to enforce. Now when pressed on his power at Metta, he verified that he can't be removed as CEO because he controls the voting shares. And when asked about media training, Zuckerberg said, I'm known to be bad at this, referring to the testimony and all of his speaking. Now we did see him walking into the courthouse earlier. As this landmark case shifts focus to companies liability for product design rather than the content shared on the platform. Section 230 shields them for liability for that content. Also entering the courthouse to watch the trial, we saw bereaved parents whose children died after after social media led to encounters with predators or led them to becoming depressed and suicidal. Now Meta denies the allegations of this case, saying they're confident the evidence will show our long standing commitment to supporting young people. But the stakes in this and following cases are certainly high. Meta, along with YouTube, which is part of today's trial, could face both monetary damages and also they could be forced to to make changes to their apps. There's some talk of changing the algorithms.
- [26:30]
B
Kelly, and so you said we've been hearing from Zuckerberg for about the past hour. How much more do we expect from him?
- [26:38]
E
Well, we know that the testimony today is scheduled between 9am Pacific and 4:30pm Pacific. They typically typically take at least two breaks, but I expect he'll be speaking for for many more hours.
- [26:51]
B
All right, Julia, thanks. Thanks for now. We'll leave it there. Julia Borson, right outside that courthouse. Our next guest says even if Matter wins this, it might still lose as revelations from the trial would hurt its reputation. Let's bring in Alex Cantrow, it's founder of Big Technology. It's a newsletter and a podcast. I was even going to clarify. Everybody knows. Anyway, Alex, it's great to have you here. So, first of all, to Julia's point, the concern is that there might have to be both monetary fines here, possibly changes to the app. That would probably be the biggest thing that could hurt it, right. Is if it has to go make significant changes to how people use its apps and Instagram, definitely.
- [27:28]
F
If there are structural changes to the way that that company is able to run its app, that would be massive and fairly unprecedented, I would say, in U.S. history. So that would be the ultimate bad outcome here for Meta. And there's various cascading other outcomes that I don't think that company would like either.
- [27:45]
B
This is in California. Would it apply? You know, because what they have to do for one jurisdiction, they'd have to do for all of them. You know, just kind of explain how this works in terms of them going on trial in Los Angeles, but how it would apply to their technology writ large.
- [28:01]
F
Definitely. I mean, look, media could, if it wants to, like, play games, but advertisers in the United States, they don't want to have a bucket of users that you can target in California and then a bucket of users that you can target in New York ultimately met as policies. And the way that the platform works is going to have to be uniform across the United States. And California, of course, is the biggest market for that company within the United States. So I don't really think that there is a way where Matter says, okay, we're just going to make these changes for California users or shut off in California like it's threatened in other jurisdictions that tried to put rules on it. I think this would be. If this ruling comes down the way that it could, in a way that forces the company to change the structure of its products, I think there's no way that you could get around doing it for the entire. Doing it. Just one jurisdiction, I think, would have to be for the entire country.
- [28:50]
B
Do you think this is meta specific or could it apply to a Snapchat and other apps like that?
- [28:56]
F
Well, notably, Snapchat settled and so did TikTok beforehand Because they didn't want to end up in a place that Zuckerberg is today. They didn't want to be testifying. They didn't want to have the chance to lose this case. And by the way, it's not just this case. And I think this is the most important detail. There are hundreds more along these lines that will be coming now. This is the landmark case because it's the first and there's going to be precedent. And so if matter loses, that will be really bad because it could end up getting hit with similar judgments in cases throughout the country. But ultimately, that's why you see the Snapchat and the TikTok settlements happen beforehand. Meta and. And YouTube did not. And we're going to see how this works out. But there could be a cascading effects in other cases. Absolutely.
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B
And in this case, the specific thing that they're being sued for is not having protections on the, on Instagram that would have protected these users from those who are doing them harm. What is the. What is the specific thing at fault here?
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F
That's correct. So the jury is basically going to decide whether Instagram and whether YouTube ruins a very young girl's life. And I think the one thing that's important to note here is this is very different from the antitrust world, where certain legalese and technical arguments seem to have played very well with the judges. This is in front of a jury, and these emotional conversations are really going to impact the jury. So I fully expect meta. If it won't lose this one, I think it will lose one of these cases down the line. Because these are real stories about real people told to real people. People and saying, well, if you use 16, if you use Instagram for 16 hours, that's problematic, but not addictive. You know, maybe that plays well in a clinical setting, but in front of a jury, I don't think it will play well at all.
- [30:33]
B
I hate to make the analogy because lives are at stake here, but it reminds a little bit of chemical companies with environmental lawsuits throughout the 1900s or even before. Just reading the story about Honeywell, where, you know, you. Many decades after they're in their heyday, you take over a company and you have billions of dollars of kind of these issues and settlements to still deal with. And you wonder if there'd ever be, if it would become such a chronic issue like that for big tech, that you add it to the list of reasons why they're no longer appealing for investors. They have lawsuits hanging over their head. They have massive capex you know, they become like commodity companies because of these AI models. So I just, I offer that observation while asking, since you mentioned YouTube, it sounds like they could also be implicated here.
- [31:13]
F
I think YouTube will actually be able to fare better here because YouTube by the public is seen as something where you kind of laid back and you watch similar to a TV network, similar to Netflix, where Facebook feels much more active, much more short form, where that addiction behavior can feel and the loops that you get put in can feel much more visceral than a YouTube, which, you know, maybe you sit down and you watch 30 minutes of Mr. Beast. Is that the same as watching 30 minutes of reels? In a jury's mind, that could be very different. But I think you're totally right that this is going to be something that is going to follow Metta through the years. They could have made some product decisions where they were very strict about not letting young people on the platform, where they were very strict about the targeting and the different addictive features that they, they might not like word addictive, but we all know what they are. Those type of features, maybe they could have put walls up ahead of time, but they didn't. And that's why they're in the position today. And sentiment through the country, by the way, is very negative towards Metta in terms of the way that people use its products and social media. I think 71% of people surveyed in a recent poll by the Wall Street Journal said that social media should be banned for kids 16 years and younger.
- [32:21]
B
Yeah, I saw Jonathan Haidt the other day said even he's been surprised by how quickly the tide has turned, actually against giving access to these tools to a lot of young kids. Alex, thanks so much. Appreciate it.
- [32:31]
F
Thank you.
- [32:31]
B
Alex Kantrowitz with Big Technology. Let's get to Contessa Brewer now for the CNBC news update. Contessa. Hi there, Kelly. A big US Arms sales package to Taiwan reportedly is in limbo after pressure from Chinese leader Xi Jinping. Members of the Trump administration are also concerned that green lighting this sale could affect the potential visit by President Trump to Beijing in April. That's according to the Wall Street Journal. The president said Monday he will make a decision about that arms sale soon. Almost 3 million people with Medicare Advantage plans had to find other coverage this year because insurers left certain markets and scaled back plan options. According to the Journal of the American Medical association, that's about 10% of all enrollees in the program. The disruptions hit members in rural areas at double the rate of those in urban areas. And NASA began another practice launch today of the crewed mission around the moon as part of the Artemis program. The first fueling test was halted two weeks ago when leaks were discovered. Well, after a successful leak free test, NASA will set a launch window with March six as the first possible date. So we wait to hear how those tests are going. Kelly, a real moonshot contestant. Thanks very much, Contessa Brewer. Coming up, take a look at shares of Nvidia which have turned positive year to date. In fact are the only Mag 7 stock in the green. What do the tech sector struggles say about the rest of the market and where are the best opportunities? Maybe none of the names on your screen. We'll talk about that next. Welcome back. Want to bring you up to date on the 20 year bond auction. Top of the hour. Normally, Rick Santelli we wouldn't cover it in great detail, but when it goes this poorly, are you going to give it an F?
- [34:19]
G
Oh, you know what, I'm not actually. I'm giving it a much better grade than I thought I should have. I gave it a D plus. And the reason I graded a bit on the curve on this really horrible metrics for this auction is because the 20 year just is not a darling on the yield curve. As a matter of fact, it's an outcast, it's an orphan. So that has to be taken into consideration. Real quickly, let's go over the details. As you look at the two day chart, we have 16 billion, which means it's a primary auction. Kelly. The next two will be reopenings at 13 billion. So primary auctions are always a little bit more prioritized, a little bit more important. So the 1 issued market was trading around 4.6, 4.4. And what we end up with at this auction is 4.664. Higher yield, higher, lower price. Not a good thing when the government's a seller. And the metrics were just awful. If you look at the bid to cover at 2.36, it was the weakest since November 24th. What does bid to cover mean? It's for every dollar of securities, how many dollars worth of bids are coming in? So $2.36. It should be more like $2.75. So much lower. And if you look at the buffet table, the primary dealers, the buyers of last resort, ended up with 17.6% of this auction. That's the biggest helping they've had since decent 24. When investors take more, which is the way you'd prefer it, dealers of course, take Less. But the biggest deal is we're flirting with almost 4% in a 10 year intraday yesterday. Now with this auction on a long maturity, even though it's not a favorite, it kind of poisoned the well a little bit. We see all maturities going up and with the minutes coming out in a little bit I think there was a bit of nervousness. So a D plus for this auction, if it was a 30 year auction I probably would have given it an F plus.
- [36:17]
B
Why? I don't think you can get an F plus.
- [36:21]
G
Well, you can't give an F. Okay. Because the F's aren't allowed. The treasury will make sure some primary dealer does something to avoid the really ugly outcome.
- [36:31]
B
All right, thank you. Definitely worth mentioning have people have in the back of their minds. Rick, thank you very much. You get a two basis point tail now from bonds to equities, stocks are on pace for their third straight day of day of gains right now. And tech is the outperformer. Memory, yes, leading but software that's doing pretty nicely today as well. Still it's the so called boring sectors that have been winning this month and this year materials industrials and staples are up 6 to 7%. In Fab my next guest says while that's creating some value valuation distortions, Nvidia at a Forward P E of 26 while Wal Mart is nearly double. That's creating some opportunities to. Mark Desard is the chief investment officer at Huntington Bank. It's great to have you here. Welcome.
- [37:09]
H
Thanks Kelly.
- [37:09]
B
Okay, what, what do you sit back and think is going on with this market?
- [37:13]
H
Well so the sector rotation, that's certainly what we've seen. It's actually quite healthy and we think it's really positive. And if you look at across all the different sectors, yes, materials, industrials, staples, they're all leading the way but the market overall is holding up. It's slightly positive flat for the year. That rotation is helpful and even though you've seen some indiscriminate selling with some of the name brand names, you're actually seeing some opportunities that still are there.
- [37:40]
B
So what are you going to do? Are you going to kind of position for the rise of the revenge, the old economy, all, all of that, the stuff that's working now, energy, materials, maybe staples or do you look at the sell off off in areas like software for I heard them saying this morning now that Salesforce has underperformed the S and p on a 10 year basis is that a more attractive positioning point from where you sit?
- [38:03]
H
So it's both. The revenge economy, right, it's certainly there. The old economy, the industrial, all of that. We think that's sentiment driven right now. People want tangible products that aren't going to be impacted by the AI trade. That is certainly what's happening right now. But if you look through some of that noise, as you mentioned, some of these companies that grow at 3 to 4% are trading at much higher valuations than the companies that are expected to grow at double digit return earnings growth. We think that's a really powerful thing and we'd be cautious for investors not to get whipsawed and move all into that sector rotation. We believe in diversified portfolios, that's a healthy thing. But if they move all into the sector rotation and get some of these, you know, more cyclical, even defensive type names and forget about the earnings growth and where that lies. Looking out the entire 2026, we think there could actually be that rotation back into some of these tech names, back into where the earnings growth is and they might be caught watching from the sidelines.
- [39:08]
B
I don't know if you'd go stock specific but when you talk a little bit, we got a downgrade for Costco today which has been trading at this lofty P E but then a little bit of a, of a diesel issue recently. We have Wal Mart at high levels where it is now and some of the food stocks having a bad day yesterday. What would you, what are all of you. Put that all together. What is that telling you? Kind of what do you do with that ball of yarn?
- [39:29]
H
Yeah, so if you put the macroeconomic backdrop on this, you've got inflation that's coming down, likely to continue coming down. You have a Federal Reserve that is likely to start cutting interest rates again somewhere around mid year. You have a labor market that's solid and you have GDP that's surprising to the upside. That's a pretty healthy market backdrop. So you could actually see this, I'll say reacceleration within the cycle itself and that is positive. So instead of focusing on purely valuation, I think, you know, when you think of Walmart, what's it going to come down to? It's going to be less about what the price is for the individual items that people are buying and more about basket. So you can see this re acceleration, you know, when we think of what names, it's really the durable names within some of the tech pieces. You know, thinking of like Texas Instruments, you know, when I think of like industrials, Caterpillar things that have this long trajectory that are taking parts of some of these themes within the current cycle that could really do well and be poised to outperform.
- [40:28]
B
And so you're not afraid of owning Walmart here?
- [40:30]
H
No, we're Caterpillar. Yeah, we're not afraid of owning those names because, you know, when you think of like Caterpillar and the construction backlogs that they have, the mining backlogs that they have, there's a lot of earnings growth that's still there. When you think of Walmart. Yes, you have.
- [40:45]
C
Right.
- [40:46]
H
The consumer that views Walmart and says, okay, I'm the go there for, for a difference in value that I can create. But they're going to look, you know, they've got the digital ads business, they've got other revenue streams that actually at these valuations we're not concerned about it and we'd still be owners.
- [41:00]
B
Couple of quick five. I'll make this like the rapid round we're going to call it. What about Costco?
- [41:04]
H
Yeah, you know, Costco is interesting. I, I think there's, it's a membership issue. Not specifically an issue, but. Right. That's how they're going to continue to grow. So how do they drive value while increasing their membership? That's going to be the critical factor, I think, as they go forward here this year.
- [41:22]
B
Then what about the Mag 7, which leads me then to wonder about Amazon. What about Microsoft? What about some of those names?
- [41:27]
H
Yeah, I mean, if you take Microsoft for example, the valuation looks really attractive. They're going to be participating in the cloud revenue, they're going to be participating in the AI components of the market that everyone, you know, there's a lot of uncertainty around. But if you look at the companies like Amazon, Microsoft Matter, all of these, they're going to spend nearly $1 trillion in CapEx this year that, you know, yes, there's a lot of uncertainty of whether or not that will be profitable and yield profitable results in the future. But the reality is they're spending it and because of that spend, that's going to drive other earnings growth for other companies. And so, you know, again, thinking of like Texas Instruments, that'll be helpful to them, like Corning, that'll be helpful to them. So there's other parts of this capital expenditure that also goes to owning an.
- [42:14]
B
Amazon or maybe you do a little bit here.
- [42:16]
H
Yeah, I mean again, they've, they've come down so quickly in a lot of way. Again, there's some indiscriminate selling in a way just because of the trade and what that means to replace businesses. But yeah, we would certainly be owners here. And looking at those valuations, we still think they're attractive.
- [42:31]
B
I'm going to call it Rapid Fire with Mark. Mark Dizzard, the wizard. Yes. Desire. All right, fine. That desired is more like Lazard. Anyway, Mark, thanks very much, Kelly. Appreciate you coming in today with Huntington Bank. Coming up, we're going to talk to the La Z Boy CEO on the heels of their better than expected earnings stocks. A little bit down down though. And we're watching the New York Times hitting an all time high after Berkshire Hathaway disclosed a new stake at $352 million last quarter, which was also the last quarter with Buffett at the helm before current CEO Greg Abel took over. That has NYT shares up about 3% in extended hours. Paring those gains though it's really only up about 1% now. We're back with more right after this. Shares of La Z Boy are on pace for their worst day since August, down about 7 1/2 percent. Despite better than expected results. The fourth quarter guidance came in a bit light with management warning about choppy consumer demand and bad January weather impacting sales. Still, the shares are up about 20% in the last three months as their expansion continues to gain momentum. Joining me now is Melinda Whittington. She's the chairman and CEO, I should say chair and CEO, whatever. Melinda, it's great to have you here. Welcome.
- [43:40]
I
Thanks for having me.
- [43:41]
B
Talk a little bit about what you're seeing with the consumer. We're all hopeful we can get out of the K shaped economy and into like a, an E or what would be all up upward together. But, but what are you finding?
- [43:52]
I
Absolutely. I think we're all looking for, you know, that consumer strength and particularly for our sector, which is so much driven by housing affordability and availability has been challenged for the last several years. Everyone's looking for that inflection point of seeing the consumer come back. I mean, for us, you know, we're expecting a consumer for the foreseeable future that looks a lot like it has for the last several quarters.
- [44:16]
B
Really.
- [44:16]
I
No new news there and meanwhile looking to build our own momentum. So, you know, we're, we are looking to connect with those consumers that are out there in the market, make sure we are delighting them with what we're able to do both from a product messaging and in our expanding retail organization to really give them an incredible experience. And you're right, we're definitely seeing that, that consumer that is challenged. We still have consumers that are able to invest in and really want to do big projects in their homes, and we're able to meet those needs, particularly in our La Z Boy stores. We're also seeing those strapped consumers that really want to be able to invest in our quality and our customization that we're able to deliver with our North America footprint. And so we're doing all we can to make sure we have a select set of offerings for that consumer as well. While times are a little more challenging.
- [45:06]
B
Yeah, no, it makes a lot of sense. Look, the housing cycle is. Is frustrating for everyone, really. So I imagine that would be like a top priority. Are you guys AI proof? You know, if the market is looking around and saying, you know, we want to be in cereal tin foil and, you know, look at. I mean, I imagine it could probably help with business efficiencies. But just curious if you have any kind of remark about that.
- [45:28]
I
Yeah, I really think about AI in kind of three buckets. First of all, there's definitely the efficiency side. And we're already looking leveraging AI in a lot of places as a tool, whether that be for data analytics to understand the consumer and get even better in how we approach and message to the consumer, whether that be in some of our workforce management tools to make sure that we're understanding and engaging our employee base and obviously all the regulars like coding and just some of those type of efficiencies. The second piece is, of course, managing through the cyber risk that is ever increasing. And I think we've got, you know, that's an ongoing challenge, but we've always got our eye on that. But probably the biggest opportunity for us and anyone dealing with the consumer is really staying ahead of what does agentic commerce, agentic search look like and how's that consumer behavior going to transform over time and making sure we're staying ahead of that because everything we do is about delighting that consumer, and we need to make sure we're ahead of getting their attention as the shopping experience changes over time.
- [46:37]
B
Yeah, no, it's fascinating to watch people now train their PR campaigns to try to answer the chatbot results, you know, and all of that. Anyway, Melinda, we'll bring you back. They're playing our music, but thanks so much for your time. Appreciate it today.
- [46:48]
I
All right, thanks.
- [46:49]
B
Melinda Whittington with La Z Boy. That's it for us. Thanks for watching the Exchange. And 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.
- [47:08]
A
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