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OpenAI’s Latest Deal, China Trade Tiff, and Why Tesla’s a “Must-Own” 10/13/25
00:42:58
OpenAI reinforces its AI moat with a Broadcom deal. What’s next in America’s trade war with China after Pres. Trump threatened new tariffs. Plus, Melius calls Tesla a “must-own” stock.
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No account fees or trade commissions on U.S. stocks and ETFs. Hmm. That's music to my ears. I can only talk Investing involves risk, including risk of loss. Zero account fees apply to retail brokerage accounts only $0 commission applies to online US equity trades and ETFs and retail fidelity accounts. Sell order assessment fee not included. Some account types and securities excluded. Details@fidelity.com commissions Fidelity Brokerage Services LLC Member NYSE SIPC and now a next level moment from ATT Business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident, but the vendor isn't responding. And International Sleep Day is tomorrow. Luckily, AT&T5G lets you deal with any issues with ease so the pillows will get delivered and everyone can sleep soundly, especially you. AT&T5G requires a compatible plan and device. Coverage not available everywhere. Learn more@att.com 5G Network. You're listening to the Exchange. Here's today's show.
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Thanks, Frank. Well, welcome to the Exchange. I'm Morgan Brennan in for Kelly Evans. Stocks are higher across the board this Monday as trade tensions with China seem to be easing. Tech leading the gains. The Nasdaq is up 2 and a quarter percent right now. Nvidia, Tesla, Broadcom, those are the standouts this session. Mizuho upping its price target on Nvidia. Tesla's higher on a bullish initiation over at Melias calling it a quote must own. The analyst on that call joins ahead. And Broadcom buoyed by a deal with Open Air. We have more on that in just a moment. We're also watching Rare Earths Related stocks. Those are higher again as China defends its export controls and as JP Morgan pledges to invest $10 billion in companies that are critical to national security. Plus shares of Bloom Energy hitting an all time high. The company announcing a $5 billion strategic partnership with Brookfield Asset Management to put fuel cells into a data centers. Oracle also gaining on that news. Bloom Energy is one of Orac Partners. But let's start with our top story. Broadcom. It's the latest chip company to strike a deal with Open Air to co develop custom chips and deploy 10 gigawatts. OpenAI co founder and president Greg Brockman described the partnership this way earlier today.
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We've been spending a lot of time talking to executives talking to these companies saying that, hey, we need far more power than has been planned for. We're starting to see the response in the market. But, you know, our view has been for the past couple of years, we see this wave coming and we've spent years really trying to say what is the way to increase every single part of the supply chain. So this deal is part of that, of trying to say let's build chips that are, that are tuned for workloads, that are more power efficient, but also how do we have every single part of the supply chain respond to the demand that we see?
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Well, amid all these massive ideals, our Sarah Eisen asked Oaktree Capital's Howard Marks, who's known for predicting bubbles, whether he thinks AI stocks are currently in one.
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The main ingredient in bubbles is psychological excess.
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There's no such thing as a price.
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Too high and I don't detect that level of mania at this time. So I have not put the bubble label on this incident.
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My next guest agrees with Marks that we are not in a bubble and still in the early innings of an AI buildout. Today's deal between Open Air and Broadcom is just another sign of that. Joining me now is Gene Munster, managing partner at Deepwater Asset Management. It's great to have you on. And let's start right there. Why do you think this is not a bubble, Morgan?
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I come back to what Satya Nadella said in April. In fact, that is going to solve the world's most complex problems. We haven't even scratched the surface. What we saw with Sora 2 more recently, content creation. So much magic around that what we've seen with the coding side, customer service, we just haven't scratched the surface. Another piece, if we look at Jensen Huang's comments on CNBC last week, he talked about this several many companies that are going to be mega companies, he referred to them as, that are private today, that will be public and and back to this idea about psychology in your previous clip. This euphoria is how can we have euphoria today if the most captivating companies are still in the private markets? They haven't had these breakout meme moments. And so when I look at the fundamentals about where AI can go, the substance about solving the world's greatest problems, when I look at where AI is today, largely a coding tool, customer service and some consumer generation, content generation, and, and think about this investment cycle that's going to go on and where these companies are that are most benefiting, I continue to believe that we still have Three strong years left and I just want to put kind of a final piece. I think this conversation about a bubble is most healthy for the market. It's good that we just keep shining a light on it. And I want to also emphasize that I don't believe we're going to have a spectacular burst in the bubble. A year two years ago I had predicted there'll be a big burst. Because there's so much conversation around this. I think it's unlikely that we'll have that outcome. It'll be more like kind of a leveling off in the next few years. So Morgan still most positive and on top of that what we have today with OpenAI and Broadcom, I think it just continues to build in that positive.
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Case you took the next question out of my mouth and that is what are your takeaways from this Open Air Broadcom deal? When you talk about private companies that haven't had their meme moments, I mean Open Air is kind of the pinnacle here and it has struck a flurry of multibillion dollar deals just in the last couple of weeks.
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B
So maybe let's just look at OpenAI for a minute here. Is that that company $500 billion valuation if you look at where it's expected to be in 2030, 200 billion in revenue, it's, it's trading at a multiple revenue multiple similar kind of at this 13 times as other kind of software companies. So I think that that's just good, some good healthy perspective if you believe in fact that this business can keep doubling as far as the kind of the cadence of these massive deals. And, and I think in some respects there's a narrative around it that is, it's circular in nature is that the big companies are kind of propping up. I remember that back in the dot com days you'd have advertising businesses selling to Other.com businesses that kind of propped each other up. This is a very different dynamic. I think what the message, your clip I think frame that in. Well the message is that the amount of compute that's needed is so mind boggling is that they just need to go after that in every capacity. That is a layered approach. It includes off the shelf whether it's Nvidia AMD and separately custom silicon. And so I think that this all plays into this question and I want to give a very clear takeaway from the conversation with OpenAI and Broadcom is what investors should focus in on is on October 29 and October 30 when Google and Amazon report this is going to be where the rubber is going to hit the road in the near term on this trade. Those two companies are looking for on average at least the street is looking for an average. A 10% increase in in capex in 26 over 25. Now Meta's at 21% and excuse me, Meta's at 40% and Microsoft's at 21% but just 10% for those two. And Morgan, if we see a reiteration of that 10% expectation, that's going to be a negative. I'm going to be wrong in the near term here. But if those two companies bump up their capex to around where Microsoft's at that plus 20%, I think investors are going to breathe a sigh of relief over all the tensions we've had over the last couple of days and continue to have confidence that we're still early.
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Hmm. Okay, so some key metrics for us to watch as big tech earnings get underway. If we look at the Broadcom piece of this specifically, I mean we keep talking about Mag7, it's not technically in Mag7, $1.7 trillion market cap. It is a monster here in this market. It's up another 10% today. One of the take one of the headlines that got my attention was this idea that $10 billion deal that, that they talked about a number of weeks ago was not with Open Air signaling that it's with someone else. Do you like Broadcom at these levels? Is this the biggest player that we're not perhaps talking enough about outside of the Mag 7?
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So I think the easiest way with investors to understand of what companies they like and don't like is just look at their portfolio. In this case Deepwater. We do not own Broadcom. I think that it has going to be a clear beneficiary, but we just see other companies being bigger beneficiaries that are less well known. A lot of those companies below kind of that $500 billion threshold. And so Morgan, to answer your question, I think companies like Vertiv, I mean this company has continued to continue to perform exceptionally well. I think that if you look at what's going to happen on this overall AI build out that whole infrastructure piece I think is going to be an important piece beyond the custom silicon. And so we have an ETF that basically targets these companies below 500 billion in market cap. But those are the types of things that we think that some of the there'll be some great performance still really important to own the Mag 7. Don't you know, I don't want to send a mixed message here, but I think the outperformance is going to come from some of those smaller companies.
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Oracle has its AI world going on right now. Your thoughts on that name?
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Yeah, I mean it's funny because typically on this I'll be cued into what the announcements are, what the pricing on products, what potential customers. But in this case it's all really noise. What we're really looking for is some commentary in terms of how fast how the OpenAI relationship is going to play out and specifically the number that I doubt that they're going to update on, but is some sort of a capex number that's going to give investors a better sense of the cadence that they're going to capture that open air revenue. And so it's a little bit of a unique setup with their event is that it's less about the announcements there and more about a hope that we get some more color about these big announcements that they've had recently.
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Okay. Gene Munster of Deepwater Asset Management, thank you for joining me.
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Thank you.
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Well, let's turn from tech to the broader market which is at session highs right now. While easing trade tensions are one of the catalysts fueling the gains today. Our next guests says that is not what matters. It's all about earnings. For more, let's bring in Matt Miskin, co chief investment strategist at Manulife John Hancock Investments. Matt, it's great to have you on. I know earnings are going to kick off and really get underway in earnest tomorrow when some of the big banks begin to report. Why is that the thing that matters here the most?
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Because at the end of the day multiples are stretched. There is a lot of actually froth in the market in our view. But the lone driver of markets from here is going to be earnings. And we're about to go into the most wonderful time of the year and it's earnings season because we can turn off, we can have a noise canceling headphones on and we could just focus on facts versus feelings. We could focus on numbers and be objective here. And what we're seeing is the best earnings revisions have been in the technology sector and financials, which is kind of an odd combo frankly, but they're almost symbiotic, meaning they actually benefit from each other. Financials are likely benefiting from the huge rise in equities, the technology sector driving stocks here and the technology profits are helping financial sector profits. And so in our view technology is of the best places to be. We do think that Some we might need to take a breather here if there's such a great run. But pound for pound, it's the best earnings growth in the world today.
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Okay, I'm looking at your notes here and you say we've highlighted that this is likely one of the most politically influenced markets in history and that this past week showed it is far from changing yet. So what should investors not be doing in this environment?
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So the easy thing to do, Morgan, is to get sucked into it and to try to day trade headlines and potential policy moves. And we've seen time and time again, if you're trying to time policy developments like this, you can get on the wrong side of it and you're focusing likely on the wrong things. Again, this is why we talk about earnings being so crucial. Because back in the day, in the 90s when I was growing up, there was this old saying, it was it's the economy, stupid. And we don't like to use those words around here in the Michigan household. So we don't say stupid. But in our view it's actually earnings, whatever you may say it is, that are really driving stocks. And so for politically we would remove the noise, focus on the economy. And in being an equity investor the next couple of weeks and even tomorrow morning, we're waking up with huge bank earnings. That's really what we've got to watch here because the political developments could get you whipsawed so easily. The earnings trends have been the best indicator of relative performance this year. We think it's going to continue to.
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Be the case if you've got a higher bar to beat with earnings since investors are getting so optimistic going into this reporting season. I mean, is that a risk in of itself?
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So it has come up some, Morgan, that's a good point. So it's up to about 8%. But relative to the last two quarters, they were doing about 13% earnings growth. So they could actually this is a lower bar than where it ended the last couple of quarters. And so at 8%, that's what the Street's looking for. We think they can do better than that. But yeah, into next year. This is where it gets hard. So technology earnings growth into 2026 is already penciled in at 20%. That's going to be hard to reach. And the Overall S&P 500 earnings growth in the next year is about 14%. So we've got to get it done here. So far, earnings have delivered every single time. It has been a year of earnings coming in and doing their job in Our view the earnings bar is not too bad here in Q3. We think it's manageable and the market's actually are trying to sniff that out even on a day like today, US.
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Versus the rest of the world, especially as we do have this conversation about earnings season.
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Yeah. So we're looking around the world for the best earnings we're trying to be. We're investing in companies, not countries. If you take the outside of the rest of the world marketplace. European earnings are growing at about 1% year over year. The stocks are up 30% in US dollar terms, their earnings are 1. China's earnings are up about 0 on a year over year basis. The S&P 500 earnings are growing at about 10 to 11%. So when I look around the world, the best earnings in the world is in the United States. And if that's going to be the long term driver of stock market returns, that's we're going to spend the most attention. That's we're going to look for the best opportunities in global equities.
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Okay. Matt Miskin, Manulife John Hancock Investments. Thank you for joining me.
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Thank you.
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With all the major averages up right now being led higher by a lot of those tech names. Coming up, easing trade tensions with China boosting the market today. But how will President Xi respond to the latest tariff threats from President Trump? That's next. Plus JP Morgan launching a decade long plan to invest up to $10 billion into four areas that are critical to US national security. Those details and a look at the future of our armed forces. That's ahead. The exchange is back after this.
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McCormick flavor sealed for unbeatable flavor. Welcome back to the Exchange. Stocks are higher to start the week as President Trump says not to worry about China, but how is that message being received in each country? We've got coverage from inside the Beltway all the way to Beijing. We're going to start with Eamon Jabbers in Washington with the latest out of the White House, but we also have Eunice Yoon in China's capital with how things are playing out there. So Eamonn, let's kick it off with you.
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Hey there Morgan. Well, President Trump dialed back his rhetoric against China on Sunday night after rattling the markets Friday with those tariff and retaliation threats. Now the latest de escalation appears to follow conversations between the US And Chinese sides over the weekend. Taking to social media, President Trump wrote, don't worry about China. It will all be fine. Highly respected President Xi just had a bad moment. He doesn't want to depression for his country and neither do I. The USA wants to help China, not hurt it. Now it's not exactly clear what caused the President to dial it back, but it was notable that those threats that he made on Friday were nonspecific, kind of vague, and no actual US Action actually took place against China at that time. Treasury Secretary Scott Bessant said in a TV interview this morning that there was substantial communication between the US And China over the weekend and the situation had now been substantially de escalated. Bessen also issued a vague threat of his own today, suggesting that the US has substantial levers that we can pull in response to China's threat to impose export controls on rare earth materials. So not exactly clear what Bessen is referencing there in terms of levers to pull, but it is clearly intended as a reminder to the Chinese side. So as of now at least, we are still back on track for a potential face to face meeting between President Trump and Trump and Chinese President Xi Jinping at the end of this month. But it is safe to expect a little More drama between now and then as both sides are jockeying for position. Morgan, back over to you.
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All right, Amy Jabers, thank you. So how is China reacting to Friday's tariff threat and sudden pullback? Well, Eunice Yun is in Beijing and she has this side of the story. Eunice. Thanks, Morgan. Well, the Chinese are defending their approach and their new restrictions on rare earth exports. The Foreign Ministry today said the U.S.
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Has continuously introduced a series of restrictions.
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And sanctions against China which have severely harmed China's interests. China firmly opposes this. So in other words, from China's perspective, Beijing is merely matching Washington's approach.
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The Chinese have also been threatening to.
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Retaliate against President Trump's threat of 100%.
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Tariffs over the weekend.
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The Commerce Ministry pledged to take corresponding measures, they said.
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At the same time, the Chinese appear to be trying to, trying to leave.
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The door open for some de escalation.
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Trying to head off some of the.
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Negro response, saying that the curbs do.
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Not equate to a ban.
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So China's expanded rare earths have become much more meaningful because they cover foreign companies that are overseas. And of course, these rare earth minerals and magnets are in a wide range of industries from defense as well as big industries such as auto and then.
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Finally some cutting edge technologies that include.
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Robotics as well as semiconductors. Morgan, as you well know. All right, Eunice Yoon, thank you. So was it surprising that the president walked back his tough talk on Chinese tariffs and what changes could we see before the November 1st deadline? Well, joining me now are Derek Scissors, Asia economist at the American Enterprise Institute, and Brendan Ahern, chief investment officer at kraneshares. It's great to have you both here. Derek, I'm going to start this conversation with you because what were your takeaways as somebody who has watched and studied and analyzed these relationships for as long as you have? And what do investors need to understand about the nuance?
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I don't think investors, and we're already seeing this, I thought on Friday when President Trump made his threat and he actually said this a little bit later when he said tariffs November 1st. It's an eternity between now and November 1st. I never took the tariff threat seriously. The other reason not to take this seriously is the Chinese don't have the ability to monitor and enforce their own action, which is due December 1st. So this really looks like jockeying for position. Why do you jockey for position? As Eamon said, because you're going to have a meeting. So I think the short term that people were very worried about on Friday and are now relieved about. There's still a relief. There's still going to be meetings between Besant and his counterparts. I think Trump and Xi will probably get together. I don't think the tariffs are going to go into effect. I don't think the Chinese are going to take any enforcement measures this year on their new export controls. However, I think there's a serious long term problem which is the Chinese don't have the capability to enforce now. They will later. Just because they don't take an enforcement action now doesn't mean they can't do it later. And they put everyone on notice that you depend on us. And if American firms stay dependent on China, they're going to be subject to this kind of threat the next time the US and China have some sort of head butting incident.
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Okay. As Eamon Javas put it on Friday afternoon on overtime, maybe perhaps right now between the two countries, some guerrilla dust. But Brendan, given the fact that you are the Crane Share cio, you invested in Chinese companies, particularly Chinese tech companies. Want to get your thoughts on this?
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Yeah, thanks, Morgan. Yeah, we certainly believe that, you know, we are in the process of a rerating of Chinese equities amongst global investors. We've had a very strong, not just year to date, but really over the last year and a half. And I think, you know, you're going to have some volatility due to some of the geopolitical narrative. But I really do think that if we see this coming together of Xi and Trump, the potential for a state visit, you know, President Trump visiting China in the first quarter of next year, it's really going to allow a further rerating of Chinese equities amongst US institutional investors who really are on the sidelines due to the geopolitical narrative at this point.
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Derek, I want to go back to something you just said and that's the fact that the Chinese maybe don't have the ability to enforce export controls now, but that could change. Obviously rare earths are very much in focus right now. But you say there are other materials, other sectors where you could start to see similar actions taken. How does that speak to this disentangling that is happening or needs to happen between the two countries in terms of things like supply chains?
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B
Yeah, I mean, this is a very clear. The Chinese are defending themselves by saying the US does this true, they have the right to try to make their own trade rules, but why stop at rear earths? The one I'm concerned most about is pharmaceuticals, where the Chinese make the fine chemicals that go into the world's pharmaceuticals. They have other strong positions in other supply chains. So there's no reason to think they're going to say, okay, well, we're going to make an announcement about rare earths and do nothing. They're going to take action down the line at some point about products which use rare earths and there's no reason for them to stop there. So firms that are using Chinese products have additional risk. And even though the next month I think is going to be fine, Brendan and I seem to agree, and I agree with your correspondence, Morgan, that we're not in a short term crisis. This is a warning shot not just to firms which use Chinese rare earths and rare earth infused products, but firms that use Chinese products where there's any Chinese material in them. The Chinese are telling you we have the right, they say, and in the future the ability to interfere with your, your, your ability to sell that product.
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Yeah, Brendan, I want to get your thoughts or reaction to that, especially because it does seem like national security is the, the tip of the spear, the spear on the, on the broader trade dynamics between the two countries right now. And I would actually argue that the annual defense policy bill that's making its way slowly, albeit slowly right now through Congress, what's called the ndaa, is a good example of that. So what does it mean in terms of navigating those dynamics as an investor?
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B
Yeah, I mean, certainly within, within that NDA, Morgan, you know, there's really two anti China provisions in there, the Bio Secure as well as the Fight China Act. And I think that shows from, from the China side why they should want to do a deal with President Trump, who is very much open to hearing US Corporate interests, which the US Obviously has extensive relationship with Chinese companies. You know, if it's a whole host of companies, we all know. But I think, I think President Trump is willing to do a deal with China where Congress is still very, very negative on China. That's why the Chinese side should want to meet with President Trump, do a deal. But at the same time, I think, I think there is this rerating that things are improving, that the two sides are talking to one another. And I think that will allow a lot of investors who have been on the sidelines because of the geopolitical to come back in. That's a huge amount of US Capital that's not participated in a very, very strong market thus far.
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Okay, Brendan Ahern and Derek Scissors, thank you both for joining me. Coming up, Domino's is set to kick off Restaurant earnings season. Tomorrow morning we're going to look at what's on the menu and whether value or premium is winning, winning over consumers right now. Plus, we are continuing to track this market rally. The Dow surging more than 500 points. The NASDAQ's up more than 2% right now. The Russell 2000 is outperforming everything. It is up 2.5%. Exchange. We'll be right back.
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Possibility of approving long range Tomahawk missiles for Ukraine.
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Russian leader Vladimir Putin has warned the US against supplying the weapons which could be used by Ukraine to strike deep into Russian territory. And residents along the northeast coast are bracing for more flooding today as powerful nor' easter continues to threaten the region. The National Weather Service said the storm set off power outages along with flooding.
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Just over the weekend. Forecasters say the storm is set to.
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Move out into the Atlantic by tomorrow. And Goldman Sachs says American consumers will likely bear the brunt of the cost of US Tariffs as companies raise prices. In a new research note, Goldman says shoppers may take on more than half of the impact of tariffs, with US companies taking on about 20%, and that tariffs could actually push inflation back to roughly about 3% by December. Morgan. All right, Christina Parsonevolis, thank you. Well, coming up, JP Morgan plans to invest $10 billion in four areas that it considers to be critical to national security. We're going to tell you what they are and what the secretary of the army told me just a short while ago about investing in the future of our armed forces and the military. We're back after this. JP Morgan pledging to invest $10 billion into companies that it has deemed crucial to US interests. The four areas of focus are frontier technologies like AI and quantum energy, tech, supply chain, aerospace, and defense. I asked CEO Jamie Dimon about the importance of national security and how that ties back to the economy at the Reagan National Economic Forum back in late May. Here's what he told me.
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We know what constitutes national security. We need, you know, I was saying we shouldn't be stockpiling bitcoin. We should be stockpiling guns, bullets, tanks, planes, drones, you know, rare earths. We know we need to do this is not a mystery.
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Well, I sat down with Army Secretary Daniel Driscoll earlier today who shared a similar sentiment, saying that we need to invest in the future of the army to stay ahead. He is looking to the venture capital and private equity world to do that and to do that more quickly and more cost efficiently.
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Our message this year is a message of it's time to change. The last 20 and 30 years of complacency and inefficiency and just kind of bureaucratic calcification is no longer sufficient for the American soldier. We are at a moment in time, globally, where change has to happen now. And so what we opened this conference with was a, I'd say a warning to those participants in the old system that things are different and an invitation to both those kind of old primes to change quickly, come join us. And an invitation for a big swath of new participants who have typically sat outside the defense space. So whether that's private equity investors or startups in Silicon Valley, whomever it is, we are welcoming them into this conference specifically and the Army's to broader innovation changes more generally. To say, we need your help, we want you, and we are in a inflection point. What we are doing systematically as an army is, we are saying we spend almost $200 billion a year and we are going to take our purchasing power and we are going to use it to partner with all sorts of new companies and we are going to do everything for the American soldier going forward. So they received the big best of technology, not the current state. When a soldier goes to base, they they time warp or time travel back 30 years, sometimes with the equipment we're giving them. They have a phone in their pocket that connects them to the modern world. It allows them to use AI. It allows them to do all sorts of amazing things. They drive in a car that may self drive them to base. But when we send them out to train in humvees that are 30 and 40 years old and we have the new software systems that were coded in the 90s, we are no longer going to do that as a United States Army.
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Well, Secretary Driscoll holds with Treasury Secretary Scott Besant the first ever Army Investor Day that's kicking off later this afternoon. The service is on the forefront of broader transformation both in the Pentagon and across the defense sector. It's kind of hard to understate how big that transformation is that's underway right now. We're going to have more on all of that and what it means, the companies, the technologies, how AI factors into it. It's coming up on overtime, kicking off at 4pm Eastern. Well, coming up here on the Exchange, every component in the SMH is higher today on that deal between Broadcom and Open Air. We'll get the read on what it tells us about the direction of AI competition. That's next. Exchange will be right back. Welcome back. Chip stocks rebounding on OpenAI's megadeal with Broadcom. It could also provide some insight into how Open I Open Air plans to cement its AI lead. Mackenzie Tagallos digs into that for today's tech check. Hi, Mac. Hey, Morgan. So this is OpenAI staking its claim as a hyperscaler, going head to head with Google, its most formidable AI rival. Alphabet locked in a competitive cost advantage years ago by vertically integrating building its own TPU chips with Broadcom. Now OpenAI is trying to do the same thing. After 18 months of quiet work with Broadcom, OpenAI is going public with plans to deploy 10 gigawatts of custom AI accelerators, racks of these inference optimized chips built just for its own models that compete directly with Nvidia and AMD. This is OpenAI's Apple Moment. Control the silicone, control the experience. It's Also part of a broader play to build a moat, not at the model level, but around infrastructure, hardware and developer ecosystem. Now, remember, LLM share the same underlying tech train on mostly public data and now benchmark within the same range. So OpenAI's real play here is building the ecosystem like Microsoft did for the PC. Its first moat becoming a hyperscaler because that checks a few boxes, control over hardware, tighter integration, and then a vertically stacked system that is harder to copy. Second, developers building on its models and selling software through its platform. That deepens lock in across both enterprise and consumer markets. And finally, these blockbuster deals aren't just about adding compute. They're also being viewed here in Silicon Valley as a show of force meant to intimidate Morgan. So Mac, when we look at all of these different dynamics, all of these different deals, I mean, is there anybody that's actually being left out? That's a great question. And at this point, we've seen OpenAI really work to diversify its supply chain and its partners across Nvidia, amd, Oracle. To me, the most notable absent name here is Microsoft, which, remember, still has right of first refusal. Most of open AIs compute historically was bought through Azure. And a lot of these deals that they're signing, it's not for existing compute, it's to build out new infrastructure that doesn't exist today. Something that they haven't announced that they're doing with their chief investor and their chief partner of the last several years. All right, mackenzie seagallos, thank you. Coming up, restaurant earnings kick off tomorrow morning with Domino's results. A rough go for a lot of those names this year, but there have been a few bright spots. We're going to dig into what's been working next and what's not been working recently, though that's Shake Shack Jeffries upgrading it to hold from under pressure. Performed today though writing risk reward appears more balanced after the recent pullback. That current share price reflects the challenging consumer environment. Jack's down more than 35% since its last earnings report, but is up more than 4% right now in trading. Almost 4 and a half percent. Exchange will be right back. Welcome back. Restaurant earnings are on deck. And with the consumer under pressure, companies are trying to pinpoint where they're willing to spend. Kate Rogers joins me now with that story. Hi, Kate. Hey, Morgan. So Domino's will be the first of the big restaurants to report tomorrow before the bell. In what continues to be a challenging environment for the sector. It's US comps expected to increase 4.2%. Domino's has been emphasizing value on what CEO Russell Wiener calls the center of the plate item or the thing that customers actually want, which of course is the pizza. That stock down around 2% on the year. While its competitor Papa John's is one of the few positive names year to date, value is going to continue to be a focus this quarter. We're going to find out more on how offers on extra value meals at McDonald's are resonating. McDonald's along with Yum brands and also Burger King parent restaurant brands International positive performers on the year. Just a handful of companies doing well. TD's recent check suggest McDonald's Extra Value meal relaunch was not as impactful in stealing share from quick service competitors as feared according to analysts. Now fast casuals performance here also going to be noteworthy. Remember names like Chipotle, Kava, Sweetgreen, they all had really challenging second quarters. Their offerings typically a bit more expensive for the consumer. And executives are taking note. Kava and Chipotle offering up some new buzzy menu items to lure in customers. Sweetgreen also interestingly enough investing in portion sizes for protein which is something that Chipotle has done in the past. But if you take a look at those names, they're all down on the year. Chipotle down over 30% kava down over 40% sweetgreen morgan down over 70%. Back over to you. If I take a step back and ask what is maybe a very basic question here, especially when you're talking about some of the fast casual names like the ones you just laid out, is there, is there a scenario in which they could just bring the prices down a little bit so that way they're not competing for for some of those sit down restaurant chain consumers as well. So Morgan, it's so interesting. The prices are kind of on par with sit down chains. And I've said this before in the past and I do believe it. First of all I think there's something psychological about that like ten eleven dollar price point for consumers. If you're going to spend that perhaps in particularly for the lower income consumer, you might want more of a sit down experience and that's something that you can get out of Chili's for example. That's going to be one to watch this quarter. They had same store sales up over 30% last quarter, which is just remarkable particularly in this environment. So yes, I'm sure they are thinking about pricing. But as Chipotle CEO Scott Boatwright said last quarter, you can get an entree in most places in the country. Just around $10 before taxes there. So. So it's not that expensive. Right. It's just about what the consumer is willing to spend right now. Got it. Kate Rogers. Thank you. Thank you. Well, coming up, Melia is calling Tesla a must own stock as AI is set to quote, wreck multitrillion dollar industries starting with autos. That analyst breaks down Tesla's advantages. Next.
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December 11, join Melissa Lee on the team of traders in New York City for an all access celebration. Live and on air Fast Money live trading the holidays. Get your tickets now@cnbc events.com fast money.
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Welcome back. Tesla shares are up 4% after receiving a fresh new rating from Melius Research, the firm initiating Tesla with a buy a $520 price target. That's 26% upside from here. Calling the EV maker a quote must own stock and uniquely positioned to capitalize on AI disruption. So for more on this, let's bring in the analyst behind the call, Melius Research's Rob Wertheimer. Rob, it's great to have you on. Why, why is Tesla must buy?
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B
So we're at the turning of an age here. I don't know how many of the viewers have had a chance to sit in a self driving car, but this is, this is a sea change and how we're going to interact with mobility. Tesla has a bunch of things that it does differently and historically been both risky and very successful. But we think that it can combine the ability to manage the massive increase in computing power, AI with the physical scale, the innovation and manufacturing scale to really put it together. So it brings AI into the physical world at a turning point in history.
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A
What are some examples of how we see this coming to the physical world? Is it really through autonomous robo taxis? Are there other applications here? I think about the energy and power side. We don't always talk about that business at Tesla.
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B
Yeah, no. So you're 100% right. So yes, I think it's going to change the way people interact with vehicles and change the way they drive, change the robotaxi, change the mobility industry. They also have grid storage, they have home based and also utility scale grid storage and the grid is under strain right now. So they're very innovative and a leading player, leading, leading player in deploying utility scale batteries to the grid. Following on to that, robotics is a whole lot more speculative. It's hard to know how transformational it will be in what timeframe. But what I think is going to become undeniable is that the world is changing and AI is here and that's going to be an investment theme that's.
- [41:39]
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Hard to miss, is the future of Tesla, as Elon Musk has suggested. And I realize that this is sort of like, you know, a moving, a moving timeline, if you will. But is the majority of the future of Tesla's value going to be wrapped up in these optimus robots?
- [41:55]
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I think that, so I think the first unlock is autonomy and vehicles and I do think that that will surprise people and how, how amazing and different they the experience is. You can't get around the fact that with the rise of robotics, that's become a larger portion of the potential value. And all these things are pools of value that are hard to predict because they don't fully exist yet. But again, there's not that many companies that can run at the pace at which Tesla and the Musk ecosystem kind of more broadly can do. And when we said it'll wreck industries, that's why we think it's a must own simply because you have to have some exposure to the changes that are very, very large and unpredictable.
- [42:30]
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How much of this hinges on the progression of X and investment by Tesla and synergies between the two companies?
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We do think it's actually important. I think it's a great question. I think that the rise of computing power is a new differentiator in the world of competition. Right. So can you scale out? Can you get access to compute, can you manage that? Can you channel compute effectively to do training for whether it's autonomous driving or autonomous robotics? And so I think the whole ecosystem does come into play and is an important one for Tesla. Tesla.
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A
Okay, I'm just looking at your coverage universe here. Are there other names that, that have this opportunity or this capability, even if maybe not as loud or aggressive as Tesla?
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There's a couple. I mean, we've written about Deere for years. I think Deere has a moat that is far wider and far more complex than most people understand in ag, tech and farming. And I think that their ability to deliver value to farmers is second to none and will be second to none for many decades to come. So that's a future of autonomy that people are going to appreciate much more over the next five years or so. And we've highlighted CAT recently. I mean, one of the bottlenecks of, of the build out is simply access to power. And some of the companies we follow from CAT to Nova are going to help unlock that.
- [43:46]
A
Okay, how does all of this set us up for earnings season?
- [43:50]
B
So for Tesla It's a confusing earnings season. You have the pre buy ahead of the, the, the some of these going away and, and you have an uncertain future after that. What we're really looking for in Tesla is just again progress as they roll out new iterations of full self driving. How does that look, how much training do you need before you roll out the next one, etc. And that's exciting for some of the others it's really a bifurcated market. So those attached to this thematic where just unimaginable amounts of cash are flowing are positively reflecting that in backlogs and earnings. And much of the rest of industrials is seeing more, more stable trends.
- [44:24]
A
Hmm. Is there anything you stay away from right now?
- [44:27]
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So what we have done you've seen ism has been stagnant for a long time, the longest period on record and so we have favored for the first time in a long time the more thematically exposed names as a firm that includes Nvidia, that includes Eaton, that includes Vertiv, that includes Cat and Vernova and Cummins for power gen and have disfavored in some ways some of the more diversified names that would normally provide stability and safety in industrial those.
- [44:52]
A
Okay. Robert Haimer, Amelius Research. Thank you, thank you. Covered a lot there. The shares of Tesla up 4%. Right now we're watching the metals and rare earth stocks as well. I feel like I've been saying that every day for a while now. The Spider Metals and Mining ETF this is Ticker XME hitting an all time intraday high. The VanEck Nuclear ETF also hitting all time highs. Meanwhile the Global Uranium ETF is also at its highest level since 2012. They've been some of the biggest movers as of late in part because of all of these trade dynamics. I'll see you tonight on closing bell overtime that kicks off at 4pm Eastern. We're going to bring you the rest of our interview with the Army Secretary, the honorable Dan Driscoll. His take on the use of AI in the military, the importance of rare earths. Speaking of plus the CEO of UiPath on the company's massive run in its deals with Open Air Microsoft. This has been a stealth mover. We haven't talked about it very much. In the meantime, as I mentioned it is a market rally to kick off the week. This is after the stark sell off we saw in the major averages on Friday. On Friday after all of those China trade and tariff headlines. But the Russell 2000s, the outperformer up 2.5%. Nasdaq also leading the charge, up more than 2% as big cap tech are the biggest outperformers today the S and p is up 1 1/2% and every sector is in the green except for consumer staples. That does it for us here at the Exchange. Power Lunch starts now. You've been listening to the Exchange.
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Make sure you're subscribed to get each.
- [46:23]
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Episode every day, same time, same place. What made you confident that you could do something that hadn't been done before? I have no fear of failure. Trailblazing women, Changing the game One of my favorite pieces of advice Think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself.
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Life is short and you just gotta think big to accomplish big things.
- [46:49]
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Julia Boorstin hosts CNBC Changemakers and Power Players New episodes every Tuesday. Wherever you get your podcasts.