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OpenAI Optimism, Microsoft's AI Malaise, and Bitcoin $38K? 2/9/26
00:44:08
DA Davidson says Oracle is a 'Buy' on renewed optimism for OpenAI. Melius Research is downgrading Microsoft saying CEO Satya Nadella has "lost the AI narrative." Plus, why Bitcoin could drop to $38K
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- [00:00]
Kelly Evans
Thy ticket, Lady Jennifer of Coolidge. Well, many thanks, good sir. Here is my Discover card. They accept Discover at Renaissance Fairs.
- [00:11]
Pippa Stevens
Yeah, they do here.
- [00:12]
Kelly Evans
Discover is accepted at the places I love to shop. Get it with the times. With the times. You're playing the loot. Yeah, and it sounds pretty good, right?
- [00:23]
Ben Wright
Discover is accepted at 99% of places.
- [00:26]
Kelly Evans
That take credit cards nationwide, based on.
- [00:28]
Ben Wright
The February 2025 Nielsen report. The this episode is brought to you.
- [00:32]
Kelly Evans
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. Thank you very much. Scott Is open Optimism eating Microsoft and the case for Bitcoin 38k welcome to the Exchange. I'm Kelly Evans and we have a mixed bag for stocks today. The Dow hitting a fresh record to start the session, still holding above the 50,000 level. It closed above Friday for the first time. That said, the rest of the major averages are in the positive. The Dow is down about 50 points at the moment. Tech is leading the way, up nearly 1% today. Software in the semis are mostly higher and this is the narrative. Oracle is the standout on the chip side, or I should say the software side. More broadly, it's sharply higher this session. We'll have more on why ahead. The software ETF up 3% after a similar rally on Friday. But it's a different story for Bitcoin under pressure once again down about 2% and going back and forth right around the 70,000 level. Really on a knife edge at this hour. We'll keep a close eye on it, but we begin with these two diverging AI calls. First, DA Davidson upgrading Oracle from neutral to buy on renewed faith in OpenAI as OpenAI CEO Sam Altman told employees on Friday that Chad beat is back to exceeding 10% monthly growth. On the flip side, Melius Research downgrading Microsoft to hold, saying CEO Satya Nadella has lost the AI narrative is moving too slowly and will have to spend heavily to compete with the likes of Amazon and Google. Remember, the capex spend is what sparked Microsoft worst single day loss on January 28th after earnings. Those are the two calls dominating today and we have the two analysts behind them. Let's start with Ben Wright, says head of technology research at Melius on Microsoft. Ben it's great to have here and people are really starting to understand the impact that the rise of Gemini has had on the shares. But how would you most quantify it?
- [02:47]
Ben Wright
Well, if you look at today, I think the OpenAI optimism is helping the stock. Microsoft as well as Oracle and a lot of names in the, in the open air cohort. But in general, Microsoft has underperformed lately because there's been more concerns around their narrative. And what concerns us is that these aren't easy fixes. I think that the fact that Copilot needs a lot of investment is going to actually take away from Azure upside because they have to use more compute internally to make Copilot good. And actually we don't think paying extra for AI is a thing. We think that eventually they may have to give away Copilot. So in order to stay competitive with all these upstarts such as Cowork and what's coming from OpenAI and what's coming even from X down the road. So that's why we move to the sidelines here because those two things are interlinked and impact the narrative of the stock. And it's. Some of it's already in there, but as we've seen with other names that have exposure to sas, it can just keep going and going and it's expensive on cash flow so you don't know where the valuation support is.
- [03:57]
Kelly Evans
We were just showing the one month chart where the stock is flat. It's down 21% over the past six months. Now, I might suggest it's not that people aren't going to pay for AI, but they're clearly not going to pay for what it's offering. Right? I mean you have to pay for Cloud, you have to pay for OpenAI.
- [04:12]
Ben Wright
Yeah, there's no room to pay for Copilot and three other tools. So what is more likely to happen is that they have to give it away and that will actually increase the usage and consume more compute. So once they start giving it away and they probably say I'm a lunatic for saying this, right, but I think that that's going to have to happen. You're going to see every week an announcement that probably, you know, is like a open air anthropic whack a mole, where these kind of things just keep happening, where you're going to see that some of these incumbents who are seat first and agent last companies are going to have to give away AI to compete with upstarts. And this is just part of that narrative. And then the more usage you get of Copilot actually that takes away from Azure upside for the extern channels. So it just kind of could be in this range for a little while. That's all we're saying.
- [05:08]
Kelly Evans
They almost sound trapped the way that you're describing it. That said, they do have an incredible CEO who even if, look, a year ago we were writing their success story, a year later things, things pivoted very quickly. What should he do? What should the company do? Are they capable of pulling a Gemini like move where Google had bought DeepMind. They were able finally, you know, they had barred, they had a few missteps, they figured it out and off they go. Does Microsoft can they pull a similar rabbit out of their hats now?
- [05:36]
Ben Wright
Well, what's difficult in my opinion about software is part of the reason why, you know, we said I was eating software before was that the companies with the large language models were going to disrupt software and we're seeing that and then the market's looking through the near term earnings and, and discounting it. I think that one of the things about Microsoft that causes them, in my opinion, like over optimism is that they dominate your desktop and that they dominate the ISV and reseller channels. And what is going to happen with AI potentially is that these channels cease to matter. You're going to have startups that are smaller that use things differently. And I just think that what Satya needs to do is to get Copilot in more people's hands and then raise prices maybe later, but I think it's just going to be really hard to get that through the channel securely while startups like, like Anthropic don't need to care about that channel and the inertia of security. Right. And selling it the same old way they used to, while Microsoft does. And so I think that if they can get Copilot to work better in more hands, then sentiment could change.
- [06:48]
Kelly Evans
If they just say find Copilot, it's a free add on. If they effectively abandon the idea that it's going to be a competing tool and say just use these other tools on your machine because we're still the operating system for that. We're talking about plugins to Excel, which is better for Microsoft than if we weren't. In other words, could they do that and then just say it's an Azure business model, we don't have the overhang. But is your point that should they almost just walk away from Copilot altogether, forget even making it free, should they just say, you know what, they forget it Use the other tools, then we just get all the Azure upside. We don't have to worry about that channel.
- [07:24]
Ben Wright
You know, I don't see any way they could do that. The productivity and business Processes segment is 40% of sales with 60% EBIT margins. It's basically a SaaS business seat based. They can't, they can't abandon it. They have to make copilot work and they, I think they're just going to have trouble getting paid for it by a ton of users who have to pay for a ton of other stuff and that takes away from Azure upside. So. So I think the thing to do is to spend more right now and just get tons of capacity out there so they don't have to deal with this. And that may be just a little difficult for the near term in terms of free cash flow going very low, if not to zero and, and then come out the other end of this thing maybe later in the decade.
- [08:05]
Kelly Evans
Yes, some people are highly highlighting them in a positive sense because they're one of the few MAG7 whose cash flows are kind of in excess of their spending plans. But of course you might see that in a different way. Just one more time to come at this question before I let you go, Ben. Co pilots only existed for a couple of years so of course they could abandon it, right?
- [08:23]
Ben Wright
I wouldn't do that if I were Satya. I think the actually right thing to do is protect that productivity, but they just have the innovators dilemma. They're sort of damned if they do, damned if they don't. I mean they just had to spend a lot on compute to make that thing better. They were supposed to have invested in Open Air so that it was an amazing app and it's just going slower and they're going have to spend more in R and D and cloud capacity to do it. So I don't think they can abandon it. You know, that's like saying CRM is not going to abandon Agent Force and all that stuff. These guys are going to have to go for it and see if they can come out on the other side with better cash flows. But for now I just thought it would be in a pickle between the two and it could impact the stock. And we made calls on like this before. They don't necessarily go down the first day, but when we did a call similar to this on Adobe, it got really bad. I don't think it's going to be as bad for these guys because they have a lot of assets and should.
- [09:21]
Kelly Evans
They come if OpenAI is still to some extent a partner and now has this Codex tool and it's gotten, you know, this uptake and whatever. Should Microsoft just plug that in in a more significant way with some kind of relationship that makes Copilot much more effective?
- [09:37]
Ben Wright
You know, you hope so. But obviously I think it's difficult to work with OpenAI in that regard because OpenAI has their own sights set on being a public company, having their own suite of office like tools, just like Cowork from Anthropic and their own set of coding tools. So I think the way to think about OpenAI best is they're going to share IP, it's going to help them with some models. But I think Copilot needs a little bit more Microsoft's own special sauce than we all thought. And people got to come to grips with that reality. And OpenAI is going to do what's best for OpenAI. So we're going to see how that plays out. But OpenAI's prospects are going to be increasingly open eyes.
- [10:19]
Kelly Evans
And your target, the firm's target for Microsoft goes to 430,164 Oracle. Ben, thanks for joining us to talk about it today. Really appreciate it, Ben.
- [10:26]
Ben Wright
Right, Kelly, thank you.
- [10:28]
Kelly Evans
Yep. Let's turn now to Oracle. Julie just mentioned, which is sharply higher, up 11% today because it just got an upgrade at DA Davidson to buy from neutral on OpenAI optimism. The firm says OpenAI is back on track after correcting several strategic missteps, which greatly benefits Oracle, which is having its best day since September. Gil Luria is head of technology research at DA Davidson. Gil, jump in, okay. And position this narrative as it comes right after the one we just heard about with some of the challenges facing Microsoft and that firm believes some challenges for Oracle as well here.
- [11:01]
Gil Luria
So Microsoft is actually our top pick and is going to be a phenomenal performer. Talking about Copilot is a complete misdirection. It's a tiny, insignificant part of their business. Here's what is important. Microsoft Azure $100 billion business is growing 39% and will continue to do so for the rest of the year. Microsoft's backlog is 625 billion compared to Google and Amazon at 240. Even if you take out OpenAI's portion of that backlog, Microsoft backlog 350 compared to Amazon's 200 and US is a bigger business. Microsoft is winning in AI because it's providing everybody compute and it's providing the infrastructure software around that allows that compute to be very high Margin. Microsoft is winning more than anybody else in AI, and copilot is an insignificant rounding error. Now, OpenAI does deserve credit here for driving Microsoft's growth. And our point of all the call today is to say OpenAI is actually winning. The narrative has been, oh, Google's already won. OpenAI is the loser. But that's not the case. What we've learned over the last few weeks is OpenAI is now focusing on ChatGPT, which is the right thing to do, including turning on advertising. OpenAI because everybody believes Google's winning. Open Air is going to be able to raise $100 billion from Microsoft, Amazon and Nvidia because they're so scared about Google winning. So with another 40 billion of cash on hand, OpenAI now has the war chest to continue to compete. And guess where ChatGPT is run on Microsoft Azure, which again is why their backlog is more than twice as much that of Google and Amazon. It's more than Google and Amazon combined. So Microsoft's the biggest winner. But also another winner is Oracle. Oracle has been the most direct play on OpenAI. Concerns about OpenAI is what drove the stock from 345 to 143. And what we're saying today is, hey, if OpenAI can raise all this money, they can afford to pay for all that Oracle compute they promised to pay for.
- [13:20]
Kelly Evans
I see.
- [13:20]
Gil Luria
Which is why Oracle is also going.
- [13:22]
Kelly Evans
To outperform one little point just to go back to Microsoft for a second. You know, one of the arguments that Melius was making is that as Microsoft doubles down on copilot, it's going to consume internal capacity of Azure, which limits their beats, their ability to kind of drive better profitability than expected going forward. I'm just curious if you have a response to that.
- [13:44]
Gil Luria
It's not copilot that they're diverting their attention to. They're diverting their attention to all the other internal tools and the internal research they're doing. They've decided to. We don't want to be completely reliant on OpenAI for IP, so we need to do our own research. And that's what those internal resources are aimed at. This is more equivalent to what matters. Doing META only needs a tiny fraction of that data center capacity to make ads better. That most of the investment is actually to be more competitive in AI. And Microsoft has said, hey, look, we're invested in OpenAI in a big way. We're invested in anthropic, but we need to have our own intellectual property around AI. Because seven years from now our agreement with OpenAI rolls off. That's what the capacity is going to. Again, I can't emphasize this enough, copilot, a rounding error, talking about it as an issue is complete misdirection.
- [14:37]
Kelly Evans
All right, all right, all right, all right, all right. I feel like I should have had you guys on to debate, you know, so he can come back and defend himself. So let me just move on to Oracle for a minute, the huge mover of the day, up 11% as you mentioned. And again, if investors want to take issue with the idea that OpenAI has some momentum, I mean, that's the heart of what you're saying, which is that as it's been showing a little bit more of an inflection point to the positive, it's going to be able to pay for that Oracle compute and put some of those concerns about its, you know, basically its capital structure to rest.
- [15:06]
Gil Luria
That's right. So if we were just a week ago or a couple of weeks ago, then we weren't sure Oracle is going to be able to raise the capital and then we weren't sure whether OpenAI is going to have the capital available to pay for the compute. Oracle's building right now we know Oracle is well on its way for a fundraise. They'll have the money to roll out CapEx this year and OpenAI again because Google did so well, there's going to be a rush to give OpenAI capital so they can pay for this. So it's not that Oracle is in a precarious position, but we now believe they'll be able to build the capacity, Open Air will be able to pay for it.
- [15:44]
Kelly Evans
Is this going to be a moment where a year from now we look back and say that was an, you know, the past year, Google up 70%, Microsoft flat. Is that going to reverse in the 12 months to come or are we now at a point where they're all going to win?
- [15:58]
Gil Luria
We think they'll all win. But in terms of the stocks, you look at Microsoft and Nvidia in the low 20s on earnings with the best business they've ever had. Microsoft hasn't had this good of a business in 30 years and they're trading at one of the lowest multiples ever. Google, by the way, trading above the high end of their multiple range and in video trading at the very low end of their multiple range, in spite of the fact that it's going to grow all the mag 7 and take most of the profits and cash flow that's generated this year. So, yes, Absolutely. We think there's going to be a big reversion. Microsoft and Nvidia will revert to the mean with Google this year and that's, that's because they'll all be winners, including Google.
- [16:41]
Kelly Evans
I know a lot of investors are hoping the Mag 7 are all Mag again and they don't have to pick or choose or decide or just stick with Google. Gil, thanks very much for joining us to explain today.
- [16:50]
Ben Wright
Thank you.
- [16:51]
Kelly Evans
Gil Lauria of DA Davidson again moving that stock on Oracle sharply higher coming up. There's still much more to this market than those tech stocks. We have consumer staples, energy and industrials all at all time highs along with the Dow Jones industrial average. And our market guest says there are a lot of non AI related themes emerging for investors. We will go through them ahead. But first, bitcoin hovering right around 70,000 again after falling to a 15 month low. Stiepel strategist though says it's not over. The case has been made. He says for 38,000. He'll join us next to explain. This is the exchange on cnbc.
- [17:33]
Gil Luria
Hey Fidelity, can I get a second opinion on stocks in the Fidelity app?
- [17:38]
Kelly Evans
With Fidelity, it's easy to get an outside opinion from independent experts in a single score.
- [17:44]
Pippa Stevens
And then when you're ready, trade US.
- [17:46]
Kelly Evans
Stocks and ETFs with no commissions.
- [17:48]
Ali Ghodsi
That's right.
- [17:49]
Kelly Evans
I am always right. Investing involves risk, including risk of loss.
- [17:53]
Ben Wright
Online US equity trades and ETFs and retail fidelity accounts sell order assessment fee.
- [17:56]
Kelly Evans
Not included, some account types and securities excluded.
- [17:58]
Ben Wright
Details@fidelity.com commissions Fidelity Brokerage Services LLC Member.
- [18:00]
Kelly Evans
NYSE, SIPC Comcast Business helps retailers become.
- [18:05]
Gil Luria
Seamlessly restocking, frictionless paying favorite shopping destinations. It's how nationwide restaurants become touchscreen ordering quick serving eateries and how hospitals become.
- [18:15]
Kelly Evans
The patient scanning data, managing healthcare facilities.
- [18:19]
Gil Luria
That we all depend on. With leading networking and connectivity, advanced cybersecurity and expert partnership, Comcast business is powering the engine of modern business, powering possibilities.
- [18:31]
Kelly Evans
Restrictions apply thy ticket lady Jennifer of Coolidge. Well, many thanks good sir. Here is my Discover card. They accept Discover at Renaissance fairs?
- [18:43]
Pippa Stevens
Yeah, they do here.
- [18:44]
Kelly Evans
Discover is accepted at the places I love to shop. Getth with the times. With the times. You're playing the lute. Yeah, and it sounds pretty good, right?
- [18:55]
Ben Wright
Discover is accepted at 99% of places.
- [18:57]
Kelly Evans
That take credit cards nationwide based on.
- [19:00]
Ben Wright
The February 2025 Nielsen report.
- [19:03]
Kelly Evans
Welcome back. Bitcoin sliding again and falling below 70,000 a few moments ago to start the new trading week. Our next guest is among some of the Bears who says don't necessarily bet on a rebound. In fact, it could fall further, perhaps all the way down to 38,000. Let's bring in Barry Bannister. He's the chief equity strategist at cfl. Barry, it's great to have you. And I don't know if this is part of a broader macro case or a bitcoin specific kind of move that jumps out to you after a lot of the trading damage we've seen.
- [19:32]
Barry Bannister
Yeah, Bitcoin is not digital gold when you think about gold, when it does well and when it does best. Historically it's because of higher than expected inflation with lower growth stagflation, basically. But bitcoin really behaves more like a high liquidity driven speculative financial instrument. More like a big tech stock.
- [19:54]
Kelly Evans
Right. Which if it's, look, if it's just a big tech stock, then you have cash flows, you've got earnings you can argue about. You can, you know, pick it up on the cheap because you know what it's cheap relative to. So continue that analogy a little bit further because in bitcoin's case, obviously you can't make those same judgments.
- [20:13]
Barry Bannister
Well, we've seen a big shift, I think in the last year and that's what's so odd about it. In the last year. It used to be for 15 years that Bitcoin would go up when the dollar, now the dollar goes down and bitcoin also goes down with it for 15 years. Bitcoin would go up when global money supply, this is total money supply in the world denominated in US Dollars. When that thing grows, then bitcoin would rise. Now it's going the opposite direction. So it is behaving differently. It's not behaving as a hedge against dollar oblivion. It's behaving more like an overextended tech stock that's worried about whether the Fed will rates more. And I don't think the Fed's going to cut too much.
- [21:00]
Kelly Evans
So yeah, in other words, this is still kind of a liquidity argument. It's why, look, all of this talk over the weekend about Warsh and whether he's really going to have an accord with the treasury and is he really going to be dovish, really be hawkish? I understand why if you're in the crypto world, you know, this matters. I understand why it matters to all investors. But for you, is it a liquidity story for crypto? Because even with a fair amount of that going around, I mean, look at stocks, they're at all time highs. It's hard to make the case that we're suffering from a shortage on the liquidity front at the very moment that it's collapsing.
- [21:32]
Barry Bannister
Well, I think that the market's need for liquidity and ever cheaper rates, ever lower Fed funds, ever lower real treasury yields, either yields after inflation. That was the major driver of PE multiple expansion and one of the major drivers of crypto. Crypto, the only reason to really own it is for the most part is that you're betting on the oblivion of the doll, betting on fiat money just going away. It's kind of a libertarian dream, I guess. But I don't think the dollar is going away. And it is interesting that as we can't count on the Fed being the savior to the market as it has been for two years, I think that's a drag on bitcoin's price.
- [22:18]
Kelly Evans
Why 38k? Why does that number kind of stick in your mind?
- [22:22]
Barry Bannister
Well, we just looked at how it's behaved. You know, one of the best ways to look at any investment or instrument is to look at what it did in previous CYC. We've had three major drawdowns in 15 years and each one stopped at roughly the same point on a chart in percentage terms, slight increase in angle and that came out to be roughly 38 to 40,000. So I would just say hold on, be careful, hold on to your britches because this is a highly speculative instrument, much like NASDAQ 100 and we do a lot of fundamental analysis on stocks. The Bitcoin note was really just to point something out. And it does not look to us like the multiples can be sustained for the broader market. And as the multiples come down, as interest rates are not as cooperative, you would see some pressure on the most speculative elements of the market. And Bitcoin's in that bucket.
- [23:20]
Kelly Evans
And then finally, for those who are persuaded by this or a little worried about tech or crypto and so forth, where could they feel more comfortable?
- [23:30]
Barry Bannister
Right now the market's making a big bet that we're going to have a broad cyclical smooth rotation into, you know, everything from industrials to financials to insurance to whatever is cyclical, basic materials, you name it. You know, right now you've got slowing wage growth, weak monthly new jobs created and hours worked are not really cooperating. So where is the buying power of most consumers going come from? The response is, is that it's a K shaped economy. The wealthy will spend more, but the wealthy have entirely leveraged their spending to rising stock markets. So as the stock market wobbles, their spending will wobble and we won't have anything, not a leg to stand on. So I think that the slowdown risk, the interregnum, the pause before you get the cyclical rally, it reminds me a little bit of 01 02. You had to get through that 01 mild recession before you got the 023456. Huge move in industrials and cyclicals. I think it's a little early to bet on a big industrial rebound.
- [24:41]
Kelly Evans
That's fascinating because that's one of the highest conviction cases we've seen at firms like Wells Fargo and others. So you're saying, you know, that may be coming, but like the interregnum reference, there might be a pause, maybe a painful one before that dawns. Barry, thanks. Appreciate it today.
- [24:54]
Barry Bannister
Thank you very much.
- [24:55]
Kelly Evans
Barry Bannister joining us from Stifel. Coming up, the metals trade has been back in the green with silver soaring today. But who's propping up the trade? Is it retail investors? Is it buying in China? We'll have a deep dive on the momentum behind the metals trade next. And as we head to break, take a look at shares of Applovin, which are springing back to lead the S&P 500 today after the short seller Capital Watch issued a correction and apology for a money laundering charge it made in January against the company. Applovin demanded that Capital Watch retract its report and the shares are up 14% today. More of today's biggest movers when we come back.
- [25:32]
Pippa Stevens
Hey, Fidelity, what's it cost to invest.
- [25:35]
Kelly Evans
With the Fidelity app?
- [25:37]
Pippa Stevens
Start with as little as $1 with.
- [25:39]
Kelly Evans
No account fees or trade commissions on U.S. stocks and ETFs. Hmm. That's music to my ears. I can only talk.
- [25:49]
Ali Ghodsi
Investing involves risk, including risk of loss.
- [25:51]
Kelly Evans
Zero Account fees apply to retail brokerage accounts only.
- [25:52]
Ben Wright
Sell order assessment fee not included.
- [25:53]
Kelly Evans
A limited number of ETFs are subject to a transaction based service fee of $100.
- [25:56]
Ben Wright
See full list@fidelity.com commissions Fidelity Brokerage Services LLC.
- [25:59]
Kelly Evans
Member NYSE, SIPC Thy Ticket Lady, Jennifer of Coolidge. Well, many thanks, good sir. Here is my Discover card. They accept Discover at Renaissance Fairs? Yeah, they do. Here. Discover is accepted at the places I love to shop. Getth with the times. With the times. You're playing the loot. Yeah, and it sounds pretty good, right?
- [26:25]
Ben Wright
Discover is accepted at 99% of places.
- [26:28]
Kelly Evans
That take credit cards nationwide.
- [26:30]
Ben Wright
Based on the February 2025 Nielsen report.
- [26:32]
Ali Ghodsi
Before we had AT&T business Wireless coverage. Our delivery GPS wasn't the most reliable once our driver had to do a 14 point turn to get back on route. A 14 point turn. An influencer even livestreamed the whole thing.
- [26:46]
Kelly Evans
Not good for business.
- [26:48]
Ali Ghodsi
Now with AT&T business wireless routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though.
- [26:57]
Ben Wright
AT&T business wireless connecting changes everything.
- [27:04]
Kelly Evans
Welcome back. Record high for the Dow earlier it since turned slightly negative although the nasdaq still up 1%. Hymns and hers is also plunging after Novo Nordisk sued them saying they're mass marketing cheaper unapproved copies of the Wegovy weight loss pill Novo, asking the court to permanently ban hims from selling compounded versions of their drugs. Though shares are down nearly 20%, Novo's up three and a half. And Kroger finally has a new CEO after longtime leader Rodney McMullen was ousted nearly a year ago for an undisclosed ethics violation. The grocer now naming Walmart's former US CEO Greg Foran as its new CEO, effective immediately. He oversaw the turnaround of Wal Mart's US business from 2014 to 2019. Investors excited, giving Kroger their best day since June, up four and a half percent to their highest level since August. And Cleveland Cliffs is down sharply after posting weaker than expected fourth quarter revenue. The steel giant blaming weak auto production, an unfavorable slab contract and weakness in the Canadian market, but says 2026 should be better as the trade environment in the US continues to improve. It is their worst day since since October. Don't mean to pile on Jim, you know, just saying. Speaking of steel, the metals trade is back in the green with silver and copper coming off back to back losing weeks for the first time in three months. Let's turn to Pippa Stevens now for a closer look at these charts. Pippa.
- [28:18]
Pippa Stevens
Hey Kelly. So the dollar's retreat this morning is boosting the precious metals trade. You can see gold up 2% back above the $5,000 level with silver up 7% right around $82.50. Now we've spoken a lot about how the roller coaster ride this year has been driven in part by retail activity and Bespoke actually analyzed Google trends and you can see a massive spike in searches for buy gold and buy silver, by far the highest on record, although it has pulled back a little bit in the most recent days. Now you've also seen an increase in searches for sell gold and sell silver, but not nearly as high as the buy side. Now the firm added that we've also seen a big increase in specifically how to buy, which does speak again to maybe some first time buyers getting in the market. Now we are seeing a spillover effect into the broader, broader metals ecosystem. Lithium prices up more than 60% on the year. That's according to Benchmark Mineral Intelligence. And the firm said that financial speculators are playing a part here. But it's also a story of low inventory, meaning greater price sensitivity as well as strong demand from battery storage for the grid. And finally, take a look at uranium topping $100 briefly last week according to UXC for the first time in more than two years. Now, prices did trade largely in sideways activity for the last year. But now utilities are coming back to the market and the Sprott physical fund is buying. We've seen a huge response in uranium stocks on the back of this.
- [29:42]
Kelly Evans
Move higher, Kelly, not just silver. Interesting, Pippa, thank you, Pippa Stevens. Let's get to Kate Rooney now for the CNBC news update. Hi, Kate. Hi there, Kelly.
- [29:50]
Pippa Stevens
British police are reportedly looking into a claim that former Prince Andrew shared confidential trade documents with Jeffrey Epstein when he.
- [29:58]
Kelly Evans
Was UK Trade envoy.
- [30:00]
Pippa Stevens
Police confirmed to the Associated Press that they are assessing those claims at the center of the controversy. A 2010 email chain between those two, which NBC News says appears to show.
- [30:10]
Kelly Evans
The former prince forwarding trade reports to.
- [30:13]
Pippa Stevens
Epstein about after trade visits to China, Vietnam and Singapore. Meanwhile, American Airlines flight attendants are now calling on CEO Robert Isaac them to resign. The union's board unanimously voted no confidence in his leadership, the first time the union has taken such action against a sitting chief executive. The airline's financial performance has lagged behind.
- [30:34]
Kelly Evans
Most of its competitors recently. And finally, the Trump administration filed a notice of appeal for a Friday decision by a federal judge to unfreeze federal.
- [30:43]
Pippa Stevens
Funding for the $16 billion Hudson Tunnel Project in New York Today.
- [30:47]
Kelly Evans
The judge temporarily halted his order to.
- [30:50]
Pippa Stevens
Un unfreeze those funds.
- [30:51]
Kelly Evans
Kelly, back over to you. All right, Kate, thank you very much. Coming up, the software stocks, they're trying to climb back up again, up 7% in two days. In fact, after their worst eight day stretch in nearly six years. Our next guest says the sell off was driven by sentiment, but not fundamentals and seize better opportunities regardless outside of tech. We will break it all down next. Welcome back. These competing narratives are causing huge dislocations in stocks. One day it's the ChatGPT ecosystem, of that it's Google. One day it's the software stocks down, then they're back. But my Next guest says there is much more to do in this market than to just worry about tech. She's here to tell us where she's finding opportunities. Anastasia Amoroso is the chief investment strategist for private wealth at Partners Group. Welcome.
- [31:37]
Pippa Stevens
Good morning. Good afternoon. Rather good to see you. Kelly.
- [31:40]
Kelly Evans
Before we talk about other stuff, I mean, what would you say to people about tech right now? I mean the Mag 7 is a very frustrating trade for many.
- [31:47]
Pippa Stevens
That's right. I mean, first of all, you can get away from tech, but I do think you have to think about, about software. What happened last week it was sell everything. It felt like risks were coming out of everywhere. This week, I think it's right to kind of think through the pieces that are likely to be disrupted by AI and those that are incumbents with strong moats that actually still have their fundamentals intact and growing. So I do think it's important to not only think about the disruption but also the opportunity. And you know, look, if I look at the software fundamentals, 20% of the companies reported, 80% of them are beating expectations, dividends. And we're looking for software earnings growth to be up 20% this quarter. We're looking for it to be up about 13% in public markets this year.
- [32:27]
Kelly Evans
Amazing.
- [32:27]
Pippa Stevens
So if there is the death of software, it is not now, it's not tomorrow and it's not of all software.
- [32:33]
Kelly Evans
You know, I'm not a day trader, although I aspire to be. And you know, looking at IGV for instance, on Friday, you just think how many times does one of the main sectors of the market trade this cheaply? Now I understand the competitive threat. It may not be cheap if earnings collapse. Collapse, fine. Yeah. But do you also, it sounds like you're saying you could also view this as an entry point for, for those who might be a medium or long term holders.
- [32:55]
Pippa Stevens
Well, that's right. But I'm going to approach this from the angle of the private markets longer term investor. You know, when I look at something like IGV, 70% or so of those software names are application software names. And there is a degree of disruption from artificial intelligence. But if you can think about can I identify vertical software companies that have vertical domain expertise, they have proprietary data sets and they're embedding agentic AI into their operations. That's the kind of transformational, transformative companies that we want to invest in and we invest in in private markets. You know, some of them maybe are available in public markets. But I will tell you, Kelly, there's you Know, the ratio of private software companies to public is about 4 to 1. And when you think about the types of private companies you have, they have focus on AI because they have likely grown up in the age of open air as well. So selectively in preference for private markets.
- [33:47]
Kelly Evans
There you are brave to come on and talk about how the private markets are investing in software right now. This has been a time when these stocks, not that the company you're working for, you're not publicly traded. Are they founders?
- [33:56]
Pippa Stevens
No, we are.
- [33:57]
Kelly Evans
You are. Okay, so you've probably seen then this move where it's like, let's just throw out the private markets that might have exposure to this until we can figure out where the problems are. What's your response to that? It sounds like what you're saying is similar to what we've heard. Who is it that made the comment the other day, Blue Owl, that they're not seeing red lights or even yellow lights in their portfolio, they're seeing green lights? I mean, can you offer any more context on that?
- [34:21]
Pippa Stevens
Yeah, a couple of things I would point to. First of all, there is the industry software exposure and that I do want to differentiate partners group software exposure for the industry. There's been a lot of money chasing the software trade both in private equity and private credit market. And depending on what you look at, between 25 or 30% is sort of the industry exposure to the software sector. If you look at partners group exposure across our platform, we have about 9% of exposure to software across the platform. And so that's meaningfully below the industry. It is intentional. It has been, you know, 2025, for example, that was the peak year in investing in software for us. Our allocation was less than 9% of our transaction activity.
- [35:00]
Kelly Evans
And Aries, and that's similar. I saw they had earnings the other day and I think they said that their exposure was more like 6% or something or maybe a little bit higher. So where then, where are the roaches? Or is it the case that there are no roaches? Are all of you know, I see Monday.com down 20% today. And Deirdre Bosa was messing around with some tools to kind of replicate what they do, but not in a true scale meaningful way. But the stock is down big. So is it going to turn out that this was all just a huge buying opportunity or are we going to look back in two or five years and say like a lot of these companies?
- [35:30]
Pippa Stevens
Yeah, I don't think think all of it is a huge buying opportunity, Kelly. And we really kind of dissect the incumbents into three categories. These are incumbents with little to no competitive moat whatsoever. And a lot of horizontal or application based software falls into that category. So think about anything that's point and click or you know, maybe a dashboard that really doesn't have that deep vertical expertise, you know, that is likely going to be disintermediated by agentic AI. So that category is not of interest. Interest to us has not been. The other category is incumbents with limited competitive moats. And some of them, you know, maybe it's right to pick up the pieces in those as long as they're actually investing in those agentic tools. And then that third category is incumbents that are actually the leaders in the agentic AI category and they have strong competitive modes, meaning again, they have the domain expertise. You know, maybe it's, you know, a particular sector, a particular industry, but it's hard to replicate that proprietary data data. And if those companies are adopting or building out those AI tools, that's really the winner. So that's how we think about dissecting them. You know, when I look at the industry exposure, the 30% that went into software, which categories are those? I don't know. But I can speak for us at Partners Group for the last number of years, deploying the AI playbook and thinking through housing at a disruptor housing a create opportunity that's been front and center labeling.
- [36:49]
Kelly Evans
We're going to, I mean we're going to have data bricks on and just a moment and talking to them. I think they're on series like L or M of fundraising. They might just stay private at this point and ride this out. Okay, so thank you for spending the time on tech.
- [36:59]
Pippa Stevens
Yeah.
- [37:00]
Kelly Evans
What about more broadly? So we've had, we've heard from some analysts like Wells Fargo who say there is a massive capex boom coming. Totally underappreciated. That's why industrials are flying and so forth. Barry Bannister of Steve was just on, he said I might agree, but we might have to go through a little bit of a downturn first before we get there. He doesn't think it's necessarily going to, going to be seamless. I'm curious what, what your advice would be about the markets more broadly.
- [37:21]
Pippa Stevens
Yeah, I think the markets are well supported here, Kelly, from a couple of reasons. You know, first of all, I'm kind of calling this the year of the US Consumer because that's what the policymakers are going to focus on. They got to shore up the consumer heading into the election and whether it's the tax refunds that are coming, whether it's the rate cuts that are working their way through the system, whether it's, who knows, we might see more housing stimulus on the horizon as well. So I think that's a big lift for the U.S. economy. I mean, the tax bill alone is forecast to lift this GDP by about 1 and a half percentage points. So I like that. But what I also like, and I'm sorry to lead this back to tech, but I will say productivity is a meaningful factor right now and not only for some of the big tech companies, but for companies in general. So we see adoption, for example, rise to about 17% of the economy. But what's really critical is that sales per employee for the s and P500 company went from something like 450,000 right after the pandemic to over 650,000 today. So that's a significant rise in sales.
- [38:21]
Kelly Evans
Per share for employee, practically.
- [38:23]
Pippa Stevens
That's right. And that's what's driven the margins for the s and P500 companies were we're supposed to see a record 13.9% margin. So you put the strength of corporates together with the strength of the consumer and that's a market that's tough to not be in. But yes, there's tech, there's other trades.
- [38:41]
Kelly Evans
As well we're going to be able to do. We should all, this is my joke. We should all thank the Mag 7 for, for all this productivity, for whether or not they're a good trade this year. Anastasia, thanks. Good to see you. Really appreciate it. Good to see you. Anastasia Amoroso with Partners Group Databricks. As we mentioned, doing a $5 billion fundraise today to put them at $134 billion valuation. Does investor appetite for software still exist when it's the right company? The CEO joins us live next. Welcome back. Databricks has announced a new $5 billion funding round at $134 billion valuation, making it the fourth largest private company in the US and at a time when there's lots of questions about all of these software business models, if we can call them that. Deirdre Bosa joins us now with Databricks CEO Ali Godse in today's Tech check. Deirdre, thank you, Kelly. And hi, Ali. It's nice to see you. Now, the number that jumped out to me in this release this morning, it wasn't just the funding. It was actually this 80% number of databases on your platform. They're now built by AI agents So what does that tell us about what's actually happening inside of your customers workflows right now?
- [39:52]
Ali Ghodsi
Yeah, I think actually one thing that people don't look at is when we're seeing this AI, large language models, generative AI, vibe coding take over, what things are they using? The agent, whatever they're using is going to increase in usage and there's going to be more consumption and more revenue towards that. So one of the things they're using, they're writing software. The software needs a database. So that's what's happening. So the creation, usage optimization of databases is going to increase significantly just in the next couple of years. We're going to have more software, more databases than we ever had in the history of mankind. So the question is, can you optimize the database to be really catering towards the agent and not humans? Database administrators. So that's, that's, that's what we are laser focused on with Lake Base, which really tailors these agents instead of humans.
- [40:39]
Kelly Evans
Right. So what does this mean for the software trade at large? Kelly alluded to this at the beginning, but there's all of this anxiety at least in the public markets that at least some of the software companies are going to be disrupted. And if what you're saying is that it's easier for non technical people to make their own databases or the AI itself to make the databases, where does that leave this trade?
- [41:01]
Ali Ghodsi
Yeah, I mean markets are funny. First they ignore this problem for two, three years, now they wake up and they think it's going to happen in a week. You know, but the reality is that look, this moat of it's very hard to move databases or it's very hard to use, you know, a different interface, teach humans to learn a new interface. That moat has decreased and almost is evaporating because, because humans can now just talk to an AI instead of learning a new interface. Does that mean that everyone immediately is going to switch away? It's going to take some while. For instance, for databases you need a really compelling reason to change database. So that's why we really want to make sure that Lake Base really has huge advantages over say traditional Oracle databases so that people have this compelling reason to migrate to it. It's going to take a while. I don't think it's going to happen overnight. But yes, I think the disruption is coming. By the way, some of the SaaS vendors might be able to actually counter it. I think, you know, I think a company that's actually has amazing data and it's not that Easy for others to replace it. And I think they're going to continue doing well. Is SAP. You know, there's, you know, what would you replace SAP with? There is not really an alternative. And, you know, they're leaning into AI. So I think, you know, it's definitely not clear what's going to happen in the next two years, but there will be big changes.
- [42:17]
Kelly Evans
I'm glad, Ali, that you make that distinction. Right. Not all SaaS is created equal, and certainly some may be disrupted sooner than others. Others. SAP is one that you bring up. But what about some of the more vulnerable software companies? What kind of companies are those? And when do you think they're going to be disrupted if they're not already being. I mean, look@Monday.com, today, down some 20%.
- [42:40]
Ali Ghodsi
Yeah, I mean, look, first of all, there's SaaS, companies that have huge revenue, huge customer base, and they are the system of records for all these enterprises around the world. They're in a different class than the tiny ones that don't have any of the big ones. I do think that the interface is now going to be an agent. So most of us will be using an agent to talk to our system. For instance, at databricks, one of our biggest problems last 10, 15 years has been reporters keep asking me, what does databricks exactly do? How does it exactly work? It seems very technical. That was the issue last 10 years. If you actually knew what you were doing, if you were technical enough, you had an engineering degree, you could use databricks. Now we've built the product genie and you can just ask it. And it has this data intelligence, so it can directly just respond to your questions if you ask. I actually used this last week, Thursday, last week, before the quarter ended, the year ended, we had a big spike in usage. And I wanted to know what's going on. And I just asked Jeanne and immediately told me there's one particular customer that started using a product and it's spiking and we were able to chase it down. This would have taken me a week earlier. So that's going to be the new norm, is that you talk to these interfaces.
- [43:49]
Kelly Evans
It feels like that's been the big shift. All the things that were technical are no longer so technical. I'm seeing that firsthand myself as well. Last question, Ali, you knew this one was coming. What is it going to take for you guys to become a public company? As we hear OpenAI and Anthropic talk about it, I mean, this was Series L. You're Releasing more and more financials. Seems like you have the internal discipline there, your free cash flow positive over the last 12 months. What else do you need?
- [44:14]
Ali Ghodsi
Well, one of the reasons we actually raised was that we weren't sure what's going to happen to the public markets. You know, it's just seem that lots of volatility was on the horizon. So we just want it to be really, really, really, really well capitalized in case, you know, we have a 2022 situation again because basically we are AI bulls. We want to continue investing long term for five, 10 years in product like GENIE that just lets you just ask and have data, intelligence or lake base where we can just use the database. We don't want to suddenly have a situation where the public market is down, your stock is down, you know, 30, 40, 50% and everybody's telling you you have to like do layoffs and then, you know, it's a big distraction when you have a big secular shift like AI that you want to double down on. So that's part of what we did. So, you know, I don't think we're looking at an IPO right now or any, any time soon.
- [44:59]
Kelly Evans
But you said something really key. They're worried about a potential 2022 situation. Ali, we'll talk to you more on the live stream. But thank you so much for joining us today, Kelly. I'll hand it back into series Z. I think at this rate it's fantastic though. I appreciate your candor. All about all the. Sally, go see Deirdre Bosa. Take a quick break. Coming up, it's a big week for Meta with two new trials kicking off today. Both could have a big impact on the company and usage of social media. We'll take a look at what's at stake next. Welcome back. And despite Meta shares being up 3% today, the company is actually facing two new trials today. One in Mexico, one in Los Angeles. Let's bring in Julia Borson with all the details. Hi, Julia. Well, Kelly, the opening arguments are happening today in two high profile cases that attack social media not for the content shared on their platform, which section 230 has protected them from, but for the design of the algorithms and apps themselves. New Mexico's Attorney General is suing Metta for allegedly endangering children by facilitating sexual exploitation with its app design choices. The plaintiffs accusing Metta of prioritizing profits over protecting users, lying to parents and making little effort to keep kids under 13 off the platform. New Mexico's Attorney General citing examples from an undercover sting which had created fake social media profiles of a 13 year old girl. Meta denying the allegations and responding, quote, we're focused on demonstrating our long standing commitment to supporting young people. For over a decade we've listened to parents, worked with experts in law enforcement and conducted in depth research to understand the issues that matter most. Another trial that's happening in Los Angeles today against meta and Google's YouTube also has opening arguments happening right now. Now, in that case, a woman and her mother alleged the company's knowingly designed addictive features including Autoplay and Infinite Scroll. In that trial, we expect the head of Instagram, Adam Mosseri to testify this Wednesday with Mark Zuckerberg expected to take the stand the following week. Guys. And you know, we talk about in many ways Meta is the proxy for social media, Julia. But when I go to these, you know, parent meetings about the problems, I mean they talk about messaging groups, they're talking about Snap all the time. And these Snap streaks, I know you're familiar with that. I mean, even if you took all of that away, they talk about the pressure of being in text message groups and you know, oh, you know, if you don't, if you don't check your messages before you're, you know, late at night and then you wake up and you have 88 things to catch up on and did you respond in the right way? So, so there's just so much to unpack here. I don't know if they're going to be scapegoated or if they view that the problems from Metta are kind of unique to that platform. I know that's hard thing to answer in 10 seconds. Well, I would say it's worth noting that TikTok and Snap both did settle the case that's happening here in Los Angeles. And in terms of the one in New Mexico, we do expect Meta to point to the other challenges and other issues surrounding social media and other issues that teens are facing. All on the phone too. Who's the gatekeeper? Julia? Thanks very much, Julia. Boy. That's it for the exchange. I'll join Brian Sullivan. Power Lunch will pick things up right after this break. Introducing Fidelity Trader Plus. With customizable tools and charts you can access across all your devices. Try our most powerful trading platform yet@fidelity.com TraderPlus investing involves risk, including risk of loss. Fidelity Brokerage Services LLC Member nyse, sipc.