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OpenAI's Make or Break Year, Intel Interrupted, and Blizzard Bracing 1/23/26
00:43:51
Will OpenAI be able to cover its cashburn or will it continue to fall behind Google's Gemini? Intel's momentum hits a wall after weak guidance sends shares tumbling. Plus, millions of Americans brace for a massive winter storm.
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- [00:00]
Kelly Evans
Before we had AT and T Business Wireless coverage, our delivery GPS wasn't the most reliable.
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Scott Wapner
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Kelly Evans
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Scott Wapner
Not good for business.
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Kelly Evans
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. AT&T business Wireless connecting changes everything.
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The choice is simple. Pick up a pack today. Angel Soft Soft and strong Simple. You're listening to the Exchange. Here's today's show. Scott, thank you very much. It's a make or break for OpenAI, a crucial moment as well for the MAG7 trade and the latest on that massive storm threatening nearly half the country. Welcome to the Exchange. I'm Kelly Evans. Stocks are actually on track for their third negative week in four despite or in some ways because of today's price action. Only the Nasdaq is positive right now. The Dow is down 390. The small caps are down almost 2%, maybe harvesting some gains. Even with this move, they're still in the green for the week. Now as for the tech trade, kind of a mixed bag today. As mentioned though, it is one of the brighter spots of the market. Nvidia shares up a percent as Jensen Huang is reportedly traveling to China next week with the country evidently telling its top tech firms to prep their H200 chip orders. And take a look at Microsoft, another standout, up nearly 4% today, on pace for its best day in nearly six months. Now as you've heard, shares of intel are heading the other direction, falling sharply on soft guidance. They're down 17% now as they just keep sinking throughout the session today again after a huge run up into earnings and over the past several months. But let's begin with the shifting narrative around AI, which has been reshuffling the Mag 7 and AI trades. The biggest concerns center around Open Air and the companies and its ecosystem. This morning Deutsche bank warns that Open Air is particularly extended and may be most at risk as it doesn't seem to have found a workable business model yet to cover its reported cash burn. That cash burn was $9 billion last year and is likely $17 billion this year. Sebastian Malaby taking it a step further in a recent New York Times article predicting that OpenAI will run out of money in the next 18 months. And Google shares have far outperformed OpenAI names like Microsoft and Oracle, at least until today. So is the reshuffling since Gemini's launch over, or is there more still to come? Let's bring in Deutsche Bank's Adrian Cox, who wrote that note on OpenAI today. And Adrian, what do you. I mean, not to be too myopic about the action today, but our investors now, they've digested this massive reset over the past few months since Gemini's launch. Has that cleared the way actually for, you know, for some maybe better data points or. Do you think this is so existential for open AI, it's going to be really hard for them?
- [03:05]
Adrian Cox
Well, I think you're right. This is actually, in a way, going to be a year of disillusion, not only for Open Air, but for the rest of the trade. And that isn't necessarily a bad thing. It's probably a good thing that as any technology is becoming applied in real life, then you begin to really understand what are the strengths of it and where the challenges lie for OpenAI. I think you're really seeing the problems that you have when you're a company which absolutely had the field to itself for the first couple of years, but then began to be followed up by other companies producing similar or in some cases, superior models. And if you're Google, for example, then you have the advantage of massive distribution. Already a huge audience of users using your product absolutely every single day, not needing to go into a special app for it. You also have enormous data that you're gathering every time you do a search. And on top of that, and possibly the most important thing, you have enormous capacity with data centers, which you're investing in tens of billions of dollars every year. And this is also the case with the other hyperscalers. So unlike them, OpenAI has to go out and raise funding for all of the training that it's doing in data centers, which presents it with a real challenge. And so you can see why it is having to look around for different business models. Yeah, and it has 800 million daily weekly users, but its subscriptions are only a small part of that. And in fact, Deutsche bank data that we've gathered in Europe shows that those subscriptions have more or less flatlined since the middle of last year. So they have to find some other way of generating revenue.
- [04:45]
Scott Wapner
And they seem to be kind of casting around for those ways. Slow Ventures general partner Sam Lesson is also with us. Sam, welcome to the conversation. And how would you spin this narrative forward? I'm curious if you. I'm sure Everyone is talking about this, right? The way that OpenAI is pivoting to find other kinds of business models and levers that can pull. I think the broadly more interesting point is that the Mag 7 used to all have their lovely little moats. You know, Yardeni Research talked about this. You know, Apple had the handset and Google had Search and you know, Metta was. And now AI. They're all at each other's throats and introducing ChatGPT as a competitor as well. So do you see it that way? That the gains of one come at the expense of another?
- [05:27]
Sam Lessin
Well, I think you have to break out, you know, what AI is and kind of where we are. It's a one remember, OpenAI today is what I call a narrative asset, right? It's a story, it's a great story, but it's a story where the, you know, the vision is far outpaced reality. Right? And if you kind of unwind a few years, we were talking about whoever gets to AGI first is the ultimately wind or full stop. It turns out that actually no like people can catch up. The model competition isn't over. Lots of different takes. You know, my personal view is that actually AI is great for all the incumbents. It's great for Google, it's great for matter they don't have to compete long term. They actually have distinct business models, all of which are levered by AI. The interesting battleground is kind of the new surface of the net, new where there is kind of a feeding frenzy of who can try to win. OpenAI is trying to. They're seriously outgunned from a distribution perspective in most other areas. But they did for a while own the narrative. The question this year is can they continue to own a narrative and how much will the market in the world support that narrative as actual evidence piles up about the viability of businesses?
- [06:29]
Scott Wapner
Look at what's happened in the market since. I mean you could go back to last summer, but especially since November. Most of these. Oracle is down like half a billion in market cap since September. Microsoft has shed I think 600 billion in market cap since last summer. I mean, these are two of the names that were most levered to the rise of OpenAI. And here comes Google, which was the mag7 name that by far has done the best over the past year. It's up like 70% and it doesn't even need Nvidia's chips in order to do this. So I guess that's my point. And you're right, maybe AI just is a sheen that helps all of them. But right now there certainly seems to be Gemini's rise is coming at the expense of the valuations of a lot of those involved with chat.
- [07:07]
Sam Lessin
I will agree with that. But I think for me, I think the thing to keep in mind is my narrative on air has always been the incumbents win, right? And the open air trade was. No, no, actually this is so disruptive. The incumbents won't win and ChatGPT will be able to take down Google and there's going to be a whole new economy. I don't, I just don't buy that. I never have. I think what you're going to see is that this is not AI, is an extending innovation. That means Google crushes it if they get their stuff in line, which they are. That means people like Metta crush it because their ads model is perfectly aligned with AI. And everything else is going to be a slog and a battle, right? There will be some winners out of this. It's not like nothing will change at all. But you know, I think what we're seeing right now is reality kind of coming in and people start to look at reality versus the narrative story of AGI is coming and whoever gets there first is the ultimate winner and everyone else goes to zero.
- [07:55]
Scott Wapner
What I like about what you're saying and Adrian, I'll put it back to you. This is what as people have been messaging me the quote unquote smart money is with sale this one into next week. Meaning now that we've had this massive valuation reset from Gemini and away from ChatGPT is is earnings next week's Adrian, a chance for the Mag 7 to prove, you know, look at Apple's struggles, that they still have a good story to tell and that in the long run AI is still additive, enhancing whatever you want to say for them. You know, they certainly, the expectations have certainly been pulled in for everyone except maybe Google for next week.
- [08:30]
Adrian Cox
Yeah, I think that's right. I mean there has been, as I say, a certain disillusionment. I think that people are also coming to terms with the dislocation in the markets, which means that even though there is massive demand out there, there is also a whole host of supply constraints that are only now beginning to emerge. Whether that's HBM memory or whether it's energy or whether it's capacity with, with talent just to build data centers. So that is one issue. And then also there's just an issue of distrust as which the entire market is going to have to grapple with. Because however Successful you are if that begins and, you know, sounds. We're talking very compellingly about narratives here. If the narrative begins to go against AI, then there is always the chance that politics can get involved. Not just geopolitics, but just domestic politics, and put the brakes on some of the developments that can happen, whether you're a hyperscaler or whether you're open.
- [09:26]
Scott Wapner
Well, I certainly think, you know, Sam, if this becomes too much of the narrative, you know, people are already mad that Google's winning. Like, come on, you know, we've been fighting, you know, antitrust. Where are you? They're monopolistic. They don't like the idea that the winner, Google had the biggest market cap of the Mag 7 in 2015. They were still saying in Kramer's lexicon back then. And in 2025, they're back to having almost the biggest market cap again. So it might feel unfair and it might generate pushback, but again, I just want to kind of bring this to kind of the trading point of view, which is. Sam, then do you think people will ultimately say, yeah, you can own the Mag 7 trade? It's going to be. Because this has been one of the biggest debates in the market and it sounds like you're taking the side of kind of stick with that trade. It's going to be fine.
- [10:07]
Sam Lessin
I mean, that's been my talking point for two years. Right. And the reality is, because the narrative around winner take all AGI race has been so strong in a very compelling narrative to a lot of people. You've seen this dislocation where a lot of strange things have happened based on theory, not reality. I think as people start being sober and thinking about profitability and growth and kind of who owns what lanes, you're going to see things shift back towards the Mag 7 narrative. And then, look, there'll be some weird things that happen on the side. Like it's not. Like nothing will change. And I do think is important. I don't think regulation stopping this train. The question is just who gets rich off of it and who grows off of it. And I just don't. There are gains that are disruptive to the incumbents. AI is actually not one of those games.
- [10:54]
Scott Wapner
Yeah, no, in this case that does appear. I mean, look at, you know, with the Gemini things you want to cheer for the underdog, you know, they're not.
- [11:03]
Sam Lessin
I just don't know that. I don't know that. I think the interesting opening eyes, they set themselves up narrative wise, just all storytelling as the underdog. Right. So they don't have the benefit of being like underdog player in a lot of ways. But at the same time, like if they tried to, I think they've been on a trajectory of trying to get too big to fail, which is again, it's a strategy. It's just not necessarily a strategy that is going to kind of topple the world order and effectively the most leverage from AI.
- [11:30]
Scott Wapner
Yeah. Well said gentlemen. Thanks. We'll leave it there for now today. Appreciate it. Sam Lesson, Adrian Cox on some of this rotation we've been seeing and we'll get the Mag 7 and the memory stocks in next week's results. Perfect timing to kind of shed some light on this. Metta, Microsoft, Apple, Sandisk, Western Digital, they're all on deck. The memory names have been outperforming the Mag 7 by about 6% points this week. So which group is the better buy? Let's ask Victoria Green, G Squared Private Wealth CIO and a CNBC contributor. Victoria, let's start with Apple, which wasn't part of that conversation but has been down for eight weeks in a row. Some of these high memory prices and others could hurt them down the road this year as consumers bulk. What do you do with the shares here?
- [12:08]
Victoria Greene
I actually still like Apple a ton. I think it's a great tech and I play without getting into the hyperscalers and massive debt load. And I think they sold a ton of phones in Q4 and so we're looking at that. Their services growth, their phones growth, they can continue to increase prices. I think that's a very elastic thing that they continue to do. I mean we all know what the iPhone 17 Pro sells for and so that's going to continue to drive margins and kind of offset the memory chip price increase. Yes, we're aware. I think that's going to, the memory is going to get a little bit more expensive but I think Apple is going to do a very good job of offsetting that as well as their services continue to become more and more important, their wearables are more important. Yes, it's still all about the all important iPhone, but it's a well diversified company and I love what they're doing with Google. You know, if you can't build it, well, buy it. And they finally acknowledge that Siri is falling well behind. They had a bad strategy, they ripped the band aid off and I'm really excited about what they might do in 26.
- [13:01]
Scott Wapner
Again. Speaking of the incumbents winning in AI, these were literally the two that owned the search on the iPhone trade of the past decade and now they're going to own Siri on the iPhone as well. We'll circle back to the memory names but quickly. On Microsoft, it's been down 10% in the past three months but showing some life today. What do you do with this one?
- [13:16]
Victoria Greene
Yeah, I've been trimming it and it's a salon. I'm sitting out. You know, if you don't own it, I'm not sure I'd buy it pre earnings. I'm very concerned about Azure growth being crimped because of the supply. Strange. So it's not necessarily demand. I think they're still going to have massive hyperscaler demand because of their deals with anthropic and open AI. But the supply constraint is a really big thing for them and their capex may continue to expand and explode because of those huge deals. Right. So you have these massive deals, you have to do these huge build outs. That's going to hurt Capex. And if there's one thing investors are getting very tired of right now is increased Capex drag on these stocks. So for me, if you don't own it, I might set it out. If you own it, we've been trimming it back a little bit, taking some profits.
- [13:54]
Scott Wapner
And you think with Metta which also reports that if they walk back on Capex then you would be a buyer?
- [13:59]
Victoria Greene
Oh, absolutely. I'm hoping, I'm hoping Zuckerberg sees the light here and we've had some good news coming out of that. Right. Reality Labs got cut back 10%. We're thinking if they're a little more reasonable on CapEx met as a wonderful stock and so. But it's all going to come down to what is that capex number? Because if he comes out being like it's still an arms right. They come out above expectations. I think the stock's just going to get hurt. We're hold here on matter I think it's quality name they, they dominate the ads and social media likely driving higher ad prices because of the target of social media. But Llama's behind, you know, so they also have that they're losing a little bit of ground for pure play search because LOM is really not doing what Gemini and and everybody else is.
- [14:36]
Scott Wapner
Yeah, we heard a bull case for that earlier this week from Brent Bell. He thinks maybe on the Enterprise side it'll make some more inroads. But what about the memory names Sandisk and Micron report? Are they at risk of getting Intel'd?
- [14:47]
Victoria Greene
We're getting until they are but for me, I'm bullish on these right now because if you look at all of their spending, I think you're going to see that the hardware constraints are what's going to continue to drive pricing here. And I think a lot of them have great transparency. They in huge demand. The data center build out. I know there's some narrative that that's slowing down but there's still a huge ramp up for them. And I think it's like Western Digital sells about 80% of the revenues to the hyperscalers. And so for me, I say this is a very secure revenue source. They're still building out even if AI is this narrative and it's maybe going to have some headwinds. The build out is there and it goes in everything. It's in the, it's in the servers, it's in your smartphones, it's in your computers. You know, everything we're touching, everything that's getting updated. If you look at it and say I don't really love the software trade, the hardware trade, these new names might where you want to be and they're kind of running a little bit more than the, than the chips and the semis. Maybe you want to look a little.
- [15:38]
Scott Wapner
More at memory hardware is the new software. That is the headline. What a sea change that is. Victoria, thanks as always. Appreciate it.
- [15:46]
Victoria Greene
Thanks, Kelly.
- [15:46]
Scott Wapner
Victoria Greene with G Squared. Western Digital CEO Irving Todd will also be joining us exclusively on the Exchange next week to discuss these quarterly results. We'll talk about expansion and what it all means for some of the shortages we're experiencing again next Friday at 1:00pm Coming up, 200 million Americans across more than a dozen states are preparing for a massive winter storm. Alaska Air CEO Ben Minicucci joins us exclusively with some of his thoughts. Their shares, by the way, are up 6% today on strong earnings. Plus our market guest says fight the FOMO and focus on value. What does that mean for semis and for software names we were just describing? We'll look at the growing divide within tech stocks ahead.
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Kelly Evans
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Scott Wapner
Natural gas prices, which are famously volatile, are still set to see their biggest weekly gain on record, spiking 70% pretty much since Monday as half the country prepares for a massive snow and ice storm that's set to hit this weekend. Accuweather's Bernie Rano is here with the latest and you know, feel free to dwell overly on kind of Northern New Jersey, Bernie and giving your report welcome.
- [18:25]
Kelly Evans
Solid 6 to 12 inches Northern New Jersey Kelly Some spots I think will get over a foot and even New York City has the potential of a foot. But as far as the Northeast, just part of the large area this storm is going to impact, 200 million impacted and AccuWeather believes air travel will be completely shut down Sunday into Monday with lingering impacts in the middle part of the week. Because of this freezing rain, hundreds of thousands may be left in the dark for days, if not weeks across the southern tier of the United States and the heavy snow from the Southern plains all the way toward the Northeast. In fact, this will be the biggest ice and snowstorm that many have seen in about five years. And then you have the cold, widespread and intense. Just take a look at high temperatures tomorrow. These areas in the pinks and purples barely above zero. And it's a large part of the country big enough that this could compromise the power grid across the country, including in Texas. And they made all those advances since 2021. Let's talk about the ice. It begins tonight and it continues into tomorrow across Texas and all the way in the mid south where you see that dark pink shading, Dallas toward Shreveport, the icing could be extensive. Then Saturday night into Sunday, it goes across the Mid Atlantic and includes the Carolinas, Raleigh, Charlotte toward Columbia and Atlanta. You could have almost a quarter of an inch of ice and that will shut down travel there as well. The snow widespread, we begin Saturday into Saturday night in the Southern Plains. And this is going to impact I 35, I 46 to 12 inches. Wichita, Oklahoma City toward Kentucky and in the northern parts of Tennessee, 3 to 6 inches including Nashville. That'll be Saturday, Saturday night and then Saturday night into Sunday across the Mid Atlantic and Northeast. This dark blue shading is where we believe there's 12 to 18 inches. We have an AccuWeather Local Storm Axe of 30 inches within this blue area. South central Pennsylvania in the parts of New England, we could easily see over two feet of snow. Some specific snow totals for you. Washington, D.C. baltimore, Philadelphia, 6 to 10 inches heavy snow going over to sleet. But it could be all snow. If it is, it could be a foot. We could see a foot in New York City, Boston as well. And by the way, snowfall totals 1 to 2 inches per hour. That's going to cause major problems on all the roadways.
- [20:57]
Scott Wapner
We appreciate that, Bernie. I'm hoping it's more powdery than icy. You know, got to get people out there playing in the snow. But we're about to speak with Alaska Airlines CEO, so we'll talk to him about this. Thank you, Bernie. Bernie Raina, we appreciate it. For more on the travel implications, let's bring in the CEO of Alaska Air, Ben Minicucci, also on the heels of their earnings, has the shares up nicely today. He joins us alongside Phil LeBeau. Welcome to both of you. Phil, kick it off.
- [21:20]
Kelly Evans
Thank you, Kelly. Ben, look, you had your earnings after the bell yesterday. You beat the street. But your guidance for 2026, you set it at a pretty wide parameter, I think between 350 and 650 a share. What's your outlook in terms of demand in the first quarter and then for the rest of the year?
- [21:38]
Ben Minicucci
Hey, good to be with you, Phil and Kelly. Yeah, you know What, Phil, for 26 we did have a wider range, and that's just based on the experience we we saw in 2025 with macroeconomic volatility. We had a lot of fuel volatility here on the west coast. So the range really captures the possibility of some of that volatility that we could see right now, you know, we're getting to the middle of the range, around $5 and usually just coming out of gain in 2026, just like everyone else. We're seeing really strong bookings, super strong bookings, in fact, record bookings in our history. So we feel pretty good so far starting 2026. But we have that cautious optimism about things that could happen that drive the volatility that we saw in 25.
- [22:24]
Kelly Evans
Ben, you mentioned the volatility when it comes to the jet fuel that you get on the West Coast. They've had refinery issues out there. So it's more expensive than, let's say, if you were fueling up in other parts of the country. Do you expect that to drag out into the spring?
- [22:39]
Ben Minicucci
Gosh, I hope not, Phil. We've seen it now for at least almost two years. And a key root issue is in California, the refinery factories not staying online and drying fuel prices up. And not just for flyers, but for, you know, people all across the West Coast. It's an issue. We've got to keep these refineries working for the industry and for Americans. And so I hope it stabilizes. But that is a big risk for us going forward for west coast fuel. And Phil, just like a little number is 10 cents per gallon of fuel higher than everyone else, represents 75 cents of EPS. And that's the reason for our expanded range.
- [23:23]
Kelly Evans
What about the IT issues that you saw in the fourth quarter? You're obviously making the investment to avoid those in the future. Will that investment, how long do you expect that to stretch out over the next couple of years?
- [23:36]
Ben Minicucci
You know, Phil, the way we think about that and those IT outages were painful for our guests, our financial results and our and our employees. But the way we think about those investments are short term investments. You know, we had experts come in and it wasn't so much for a lack of investment, but where the investment was being made and how we were configuring our hardware and our infrastructure. So we're making those investments right now. They've already, some of them are already in place. More is coming on. Short term, hardware configuring, infrastructure investments, longer term, whether we move into the cloud, that's more of a longer term investment that we're working on. That decision will happen towards the back half of the year. But so far, you know, our goal is to provide the most resilience for IT infrastructure. I feel like we're in a good place right now, but we got a lot of Eyes on it. A lot of people just focused on and making sure we stay up 100% of the time.
- [24:28]
Scott Wapner
I feel the consultants like licking their lips thinking we can help them with that. But regardless, Ben, just a quick one for me and I appreciate it. Our meteorologist just said he thinks that air travel is going to be ground to a halt for the next week. Is that true? What's going on behind the scenes to prepare for this storm?
- [24:45]
Ben Minicucci
Well, you know, and Bernie said one thing that always puts shivers down my spine when he said about ice. And I will tell you, being an operator for over three decades, airplanes and ice just don't mix. And when you're talking about a quarter inch of ice, it is so difficult to de ice airplanes that have that much ice on them. It takes so long. And I think that's what airlines do. For us to operate safely, the throughput out of an airport just comes to almost a grinding halt and you have to really meter the departures out. And I think the best thing airlines can do is really cancel ahead of time to give travelers an idea of what they can expect. So based on, based on those weather predictions, yes, you're going to see a lot of reductions and closer in you'll see everyone kind of dial in exactly what needs to happen to provide the most assurances for travelers. But it's going to be ugly. We're taking down our schedule to the now, fortunately, we're on the west coast, the bulk of our operations, but we got pounded with rain and you know, all that stuff. So we had our stuff as well. But I'm hoping it's not going to be as bad as it is, but it looks pretty dire right now.
- [25:54]
Kelly Evans
Hey, Ben, what's your exposure in terms of your route network on the eastern half of the United States? Because clearly, as you mentioned, you do have flights into New York, into other cities in the East Coast. What's your exposure percentage wise of your domestic routes?
- [26:08]
Ben Minicucci
You know, we probably, and Phil, I'm just going by memory, but at least 20% of our operations head east. So it's quite a bit. You know, even though we're a West coast base, we have 20% of our network that flies east on transcon flights. So it's going to be impactful for us as well. Not to the same extent as the east coast based airlines, but we got to take our schedule down as well.
- [26:33]
Kelly Evans
Ben, we appreciate the time today. Coming off of earnings report last night. Ben Minicucci, CEO of Alaska Airlines, joining us. Kelly, we'll send it back to you.
- [26:41]
Scott Wapner
Yeah. Give us some good perspective on what we're facing here. Thank you both. Coming up, shares of intel are plunging after weak guidance and warning of supply shortages. Even with today's drop though, the stock trades at 82 times forward earnings. We'll have all the details next.
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Matt Miskin
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Kelly Evans
Tommy Don Underwear is designed for a.
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Matt Miskin
Perfect fit that stays put all day.
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Kelly Evans
There's zero chafe thanks to four times more stretch than competing brands and their innovative horizontal Quick Draw Fly is a game changer.
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With over 30 million pairs sold, there.
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Kelly Evans
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Don't settle for less.
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- [28:30]
Scott Wapner
Welcome back. We are seeing mostly a down day. Well at least for the Dow for the S and P. Although look at the S and P. It's only it could turn positive as we're talking. The Nasdaq is now up 4.10of1% and the underperformers, the small caps which have been on an incredible run. This would end there I think. 14 days of outperformance relative to the major averages. AMD is also continuing its run. It's on pace for its ninth straight day of gains, its longest win streak since November of 2019. AMD shares are up 27% in that time. Flip side of the chip trade. Intel plunging 17% on pace for its worst day in 16 months after disappointing guidance and warning of shortages. Let's bring in Christina Parts Nevillis to.
- [29:08]
Deirdre Bosa
Explain Christina intel is really having a rough day right now but that's after a massive run up. The stock has more than doubled up over 130% in the past six months on lifelines from the government, Nvidia Softbank and these turnaround hopes. But this quarter was a reminder that the turnaround is still a work in progress. The immediate issue is a weak first quarter revenue guide Kelly that you mentioned. Intel essentially got caught flat footed by AI server demand. CFO Dave Zisner essentially admitted that on the call saying the company quote was directionally wasn't managing the supply to expectations so now they're out of inventory and capacity constrained on older manufacturing processes they won't invest more in. Three forces are driving that supply crunch. Hyperscaler demand continues to soar for all of the AI data center buildout. TSMC is only meeting about 80% of that wafer demand and then agentic AI. You know the the bots that are fueling the answers to your questions is is fueling what CEO Lip Bhutan called a CPU explosion. Tan said hyperscalers told them this demand isn't just for a few quarters. They expect it to last a few years. So that's good news for intel and also bodes very well for intel expects supply to improve by the end of Q1 and into Q2 and shifted capex guidance from down to flat so that's a signal it's preparing for new Foundry customers. But Intel CFO told me not to expect announcements until the second half at the earliest of this year which was maybe disappointing. Wall street which had been pricing in faster progress with new customers. The demand though is real but Intel's ability to capitalize it remains the question. For now the market is reconsidering what it paid for that turnaround story or one note I just read from a Zuho saying look at this, it's just momentum traders that got into the name. It's not trading on fundamentals and that's why it's down 17% today.
- [31:01]
Scott Wapner
Yeah I know Stacey Ratsgun was pretty frustrated as well. We'll talk to him next hour. Christina, we'll see you then for more Christina Parts and Evolis. Let's get to Pippa Stevens now for the CNBC news update. Hi Pippa.
- [31:11]
Deirdre Bosa
Hey Kelly. No signs of compromise yet but trilateral talks were being held today in Abu Dhabi where Russian, Ukrainian and US negotiators are meeting to discuss just terms of ending the war. Talks come after meetings between President Trump and Ukraine's Volodymyr Zelinsky this week, along with a trip to Moscow by US Envoys Steve Witkoff and Jared Kushner to meet with Vladimir Putin, according to TechCrunch Matter today, suspending teen access to its AI characters worldwide as it looks to develop a special version just for teenagers. Moves come ahead of court proceedings in New Mexico, where the social media giant is accused of not sufficiently protecting kids kids from sexual exploitation on its apps. And the city of Philadelphia has sued the Department of the Interior after the National Park Service on Thursday removed an exhibit on slavery to comply with President Trump's executive order to, quote, restore truth and sanity to American history. The president signed the order last March in which he blamed the Biden administration for advancing a corrosive ideology at the country's historic sites.
- [32:15]
Scott Wapner
Kelly? All right, Pippa, thanks. And check out the Nasdaq, which is clawing its way back into positive territory for the week with today's small gain. This is a big deal. Keep an eye on it. And with the framework of a deal in place for Greenland now, can geopolitics move to the back burner so investors can focus squarely on earnings? We'll talk about that and the volatility we're seeing. Do not trade geopolitical headlines. That's the insistence of our next guest on the back of this volatility we've seen all week. Although it's been a straight line hire for the metals trade. Gold on pace for its best week in nearly six years. Silver above $100 an ounce today for the first time. So what should investors do now? With us is Matt Miskin, the co chief investment strategist at Manulife John Hancock. Matt, it's good to see you. And I mean, where would you have us start? It sounds to me like you're backing a little bit away from the Mag 7 and looking more to the value side of things. Is that right?
- [33:13]
Matt Miskin
Yeah, Kelly. Quality value is our mantra right now. Industrials are our favorite sector as we're starting to see higher return on equity. Good solid companies seeing a pull through a demand. Earnings estimates into 2026 look rich to us on the tech space. They're looking for like 20 to 30% earnings growth on top of 20% last year. Industrials looking for 16% earnings growth. We think that's legit after a tougher year. This year here we're seeing industrial companies likely of the biggest beneficiary from the one big beautiful bill, accelerated depreciation. It's going to Spur some tech capex and what you're seeing, the aerospace and defense industry is really humming along here.
- [33:52]
Ivan Zarini
Yeah.
- [33:52]
Matt Miskin
Ready to take flight.
- [33:53]
Scott Wapner
So defense, listen, we were just about to put that. Maybe they can put it back on the screen. Boeing is up 40% since November. Defense stocks have outperformed all. But about the memory trade part of AI, I mean it's almost as if instead of if you're saying investors shouldn't trade geopolitical headlines almost like you say just own geopolitical risk in the form of defense stocks and I guess in the form of the metals.
- [34:18]
Ivan Zarini
Right.
- [34:18]
Matt Miskin
You know, in the metals right now one of the other big lessons we're trying to instill in investors is to not get the case of the fomo. So fear missing out right now is what we're seeing in the metals. I'm cautious there. I think that actually trimming into strength it might be a better idea. But in terms of the industrial space, you know, this is a part of the market that has been relatively quiet for years. It's not been the hype of the AI but it's, it's more so, you know, it is the data center build out that is part of it but it's got other things. Aerospace and defense demand is still strong. We're seeing on shoring capex. The Midwest is booming with manufacturing renaissance still here. Right in America.
- [34:59]
Scott Wapner
You like the industrials, you like the mid caps have had some audience members say they're glad to see the mid caps participating. They don't love it when the Russell's outperforming. I think everyone's harping on the Russell a little too much. I like to see the small caps up there in the mid cap. Maybe they're low quality, maybe it just is a sign that there's possibly earnings momentum elsewhere and not just in mega cap tech.
- [35:21]
Ben Minicucci
Yeah.
- [35:21]
Matt Miskin
And so amidst the small and mid cap trades, the biggest difference you get is it's more industrials and middle and in small it's more regional banks and regional banks actually coming in strong here. So they're growing earnings at double digits. You're seeing nice M and A activity, steeper yield curve. The wealth management business is doing well but the problem is is that you can get these headline risks. You can get things like regulation, you can get things like just the markets are so sensitive to it. So regional banks having a tougher day today. We think industrials given the pipeline of demand, given the capex and everything else that I already referenced might be a better spot.
- [35:59]
Scott Wapner
So it's coming you know, you mentioned those results coming in. What about the whole idea of the run it hot trade? You know, what does that tell you? I mean, is that also you mentioned a lot of this is FOMO in the metals, but do you think that's what's happening here is true to the administration's word? They're just running it a little hot.
- [36:14]
Matt Miskin
Right now, you know, isn't. I think it's, it's warm and up here in Massachusetts, outside of Boston, I'll tell you, we would take some warmth and a lot less snow than we're about to get. But what we're seeing here is good growth with less inflation. This is the opposite of stagflation. I heard so much stagflation at the end of last year in terms of the economy heading into January, it's accelerating, but not like too hot like the PMI and the ISM might hit just above 50.
- [36:43]
Ivan Zarini
That's good.
- [36:44]
Matt Miskin
And then inflation is staying in check. Housing is actually modest growth. Housing prices are moderating, energy prices, they're up. Get the oils up today. But all things considered, not that bad. Wage growth into 2026, we think moderates. Our biggest non consensus call is inflation moderates into 2026. That's actually a pretty bullish thing.
- [37:04]
Scott Wapner
Wow, that would be extremely bullish. That would be very, very good news. I know like you said, a lot of people are getting more concerned about it, but you're saying it's more, it's warm, not lukewarm. That's not good. We want it just nice and warm. Matt, thanks. Appreciate it. Today, Matt Miskins joining us. Thank you from Manulife. Coming up, brace yourselves. There's another big shift underway in AI and it could be even more, more lucrative than chat bots. We'll reveal that next on the Exchange. OpenAI might be under a lot of pressure lately, but Sam Altman is putting the spotlight on a fast growing part of the business separate from Chad GPT. As the race for AI maybe moves beyond chat bots, Deirdre Bosa has more in today's tech check. Deirdre.
- [37:47]
Deirdre Bosa
Hey, Kelly. So the race is moving from what we see and prompt as chatbot users to what powers the back end for enterprises and developers. The metric which you're going to start hearing a lot more about is API usage. So the software talks directly to the model. One system sends a request, the AI sends back an answer. When a company uses an AI API, the model that could be ChatGPT or Gemini or Claude, it's running inside. It could Be inside enterprise software, drug discovery tools, scientific simulations, anything else. So, so OpenAI, Google and anthropic, they all charge for API usage. That is what makes up revenue streams like enterprise. But as that side of the business grows, OpenAI CFO Sarah Fryer, she floated the idea of a value exchange model as another opportunity. In other words, OpenAI could take a cut of its customers. AI aided discoveries. Now, some of the immediate feedback pointed to the irony of OpenAI scraping vast amounts of copyrighted data to train its models and then turning around and asking for a share of the value created on top of that intelligence. But another way of looking at it, Kelly, is that this is exactly how frontier technology gets funded at scale, that is by tying the economics of the model to the breakthroughs that it helps unlock. Now it all does raise a bigger question about AI economics. Who owns the inputs, who gets paid for the outcomes, not to mention the mechanics of actually executing this kind of a revenue share model. Seen together though, you had ads earlier this week and now this. It really shows the pressure on open air to find revenue streams that are big enough to support OpenAI's commitments. More than $1 trillion worth of them that are already locked in.
- [39:29]
Scott Wapner
I mean, people have a lot of questions about how it would work for them to take a cut of things you create with. I mean, I'd never use it again if I thought that was a real issue.
- [39:38]
Deirdre Bosa
Right. But I don't think it's for people like you or I don't think they're going to want a cut of my evade O meter if I use that with Codex, you know, Chatbots, AI coding assistant. This is probably meant for large corporations. And what Sarah Fryer floated was the idea of working with big drug discovery companies or pharmaceuticals and creating some kind of structure that would be beneficial to both. But your skepticism, Kelly, is probably like the prevailing narrative around this at the moment. I talked about the irony of them scraping data and turning around and charging for that data that they, they scrape. But I mean, they would argue that they've done something.
- [40:12]
Scott Wapner
I kind of understand where they're coming from.
- [40:14]
Deirdre Bosa
They can charge for it.
- [40:15]
Scott Wapner
Yeah, like I take their point that look, if we're going to help in this, we should get a cut. But unfortunately it's a dog eat dog world. If the other platforms are available to use and they're not making the same demands, why, why would you agree to theirs?
- [40:27]
Deirdre Bosa
I'm so glad you picked up on that. I didn't want to add that other layer, but that's exactly right. And it could be, you know, a case for open source models which wouldn't be able to have that kind of structure. They may not be able to make money, but they wouldn't have that kind of structure. And we know that they're becoming just as good as some of the most competitive frontier models.
- [40:43]
Scott Wapner
And from China, no less. So you can really see where that would be going. Yes.
- [40:47]
Deirdre Bosa
Yeah.
- [40:48]
Scott Wapner
Deirdre. Thanks. Deirdre Bosa coming up, American TikTok users rejoice the deal to keep your social media service available in the US looks to be closing at the 11th hour, but the cyber expert who helped shape the original ban still has concerns and we will share them and talk about whether user data can be truly secured after this. It always seems to end with a whimper. Social media stocks are slightly higher today after the deal to keep Tick Tock in the US Was finalized yesterday. Let's bring in Julia Borson to tell us how it's going to work. What are the details? Hi Julia.
- [41:26]
Deirdre Bosa
Hi Kelly. That's right, the TikTok app on your phone has new owners in the US and its algorithm is being ripped retrained on US data now. The new company's majority owners are Oracle, Silver Lake and Abu Dhabi based MGX, with 19% still owned by ByteDance. And the the app's 200 million US based users will not have to download a new version of the app now. The threat of being shut down may be gone for TikTok, but plenty of challenges still remain. It's unclear how this new version of TikTok will be different for users and if the return on investment will be the same or worse for advertisers now that the app is run on a license of the Chinese algorithm retrained on US Data, with the US Company deciding what kind of content is allowed. Uncertainty about TikTok's future was seen as a benefit for rivals. Meta, Snap, YouTube and Pinterest brands may still hedge and wait to move dollars back to TikTok until its new return on investment is clear. A key risk for TikTok now is the threat from Instagram's reels, which is on the rise. In the US average time spent per user on TikTok has fallen from one hour per day in 2023 to 52 minutes this year, according to eMarketer, while Instagram's time spent has risen from 33 minutes to 36 now. On the flip side, an area poised for growth now is TikTok shop. The company is expected to aggressively ramp amp its E commerce business which could challenge players from Sheehan to Sephora. E marketer projects that TikTok shop will top $20 billion in U.S. sales this year, growing to 37 billion by 2029.
- [43:07]
Scott Wapner
Kelly, I think you're right about Instagram. Sully and I were talking about this yesterday. I give them a lot of credit. The algorithm, I don't know if it's AI, has really gotten a lot better and I seem to hear more and more about that. Julia, thanks very much. Julia Boorstin. In any case, this TikTok deal is already under scrutiny from lawmakers. Democratic Senator Ed Markey of Massachusetts is calling for Congress to investigate the deal, saying in a statement more details from the White House are needed, quote, including whether TikTok's algorithm is truly free of Chinese influence. My next guest is one of the key experts who testified before Congress recommending a sale or Ban of TikTok nearly two years ago. Let's bring back Ivan Zarini, the CEO of Cyber Cybersecurity company Farroot. Ivan, it's great to see you. It's been a little while. What's your reaction to the deal?
- [43:51]
Ivan Zarini
Thank you for having me. First of all, it's great and amazing news for all of the TikTok's users that the app, it will be still in business and everyone will be enjoying it moving forward. And one of the main concerns is definitely taking care of such as governance of privacy and security of Americans. Data is now in the hands of American executive indicators.
- [44:12]
Scott Wapner
You sure about that? You know that's what they're all saying. I want to know what you think. Is that definitely the case? Is there still how exactly is this going to work? And more importantly, should I finally download TikTok on my phone and feel completely fine about it that I'm not helping to train AI algorithms and in models back in China?
- [44:30]
Ivan Zarini
Yeah, Kelly, really interesting question. I'm not going to endorse either way to install the app or not. But from security experts concerns and point of view, there's definitely one concern that kind of stood out from the announcement and the news. And one of them is that Biden's global arm will still have management and access to TikTok's e commerce, advertising and marketing capabilities and tools. And why this is important is the data that that is collected for by marketing tools is not going to be used for surveillance. It's buying Americans. Just like we raised the concern two years ago where we found that TikTok was collecting data on Americans that have never even used the app. So this is still a concern to be addressed.
- [45:25]
Scott Wapner
The E commerce is specifically the concern for you now.
- [45:29]
Ivan Zarini
Yeah, E commerce also advertising and marketing. Because what's happening in a privacy and a security of world is that commercial tools do collect data, real time information on all of us and then that data can be used for dual purpose, obviously for commercial and business purpose, but also for surveillance on us. And why that is important because we're in the air race.
- [45:55]
Scott Wapner
Right, but are you saying that the same data, it's just use it. What am I looking at? Right, you're saying that in order to collect advertising information. Basically what I'm looking at could still be something that the Chinese have access to.
- [46:08]
Ivan Zarini
Yeah, you're spot on. I'm glad you picked it up. Picked on that. And so what is really important for from marketing and advertising point of view is that the same data that watches what you do, what you see, what websites you're visiting, what you're doing on your phone can still be used for training, for example, AI and Chinese AI tools and AI models. Models. And that gives them real time competitive advantage over any of the American.
- [46:34]
Scott Wapner
So what's the difference? If they can still do that, what is it that they can no longer do?
- [46:39]
Ivan Zarini
Well, that's important question. Very likely they're no longer able to use the data that is collected within the app itself when you are using the TikTok app in the US but the data that is collected outside of the app, we don't know if that data is going to be governed by the new TikTok entity in the US or it's still going to be governed and accessed through China.
- [47:01]
Scott Wapner
Got it. Well then we'll have them. I'm getting to the point where I'm just going to download it. I don't know anymore. I can't. But no, Instagram has been plenty. Fine. In the meantime, I appreciate you spelling out those concerns more clearly, Ivan, as lawmakers will turn more attention to it and we'll see if they can alter this to address them. Ivan, Serena Farou, thanks so much. Appreciate it today. And that's it for us. Thanks for watching the exchange. I'll head over to join Dom Chu for Power Lunch right after this break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [47:37]
Kelly Evans
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