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Retail Sales Stall, Apple Bull Case, and Bitcoin Bottom in Sight? 2/10/26
00:38:51
It’s a big week for econ data, and we’re off to an ugly start with retail sales. Apple has quietly outperformed the rest of the Mag 7 this year, and our analyst says there are reasons to be bullish from here. Plus, why Bitcoin could be getting closer to a bottom.
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- [00:01]
Kelly Evans
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- [00:58]
Kelly Evans
You're listening to the Exchange. Here's today's show. Thank you very much, Scott. The software bounce, the memory price threat and finding a bottom for Bitcoin or not. Welcome to the Exchange. I'm Kelly Evans. Let's start with the Dow hitting another record high this morning. It's up 212points here even after a weaker than expected retail sales report that is weighing on sentiment to some extent and it certainly sent yields lower and they are staying there. The 10 year yield is under 415 right now. That's the lowest since before Warsh was named as Fed chair. NASDAQ fractionally higher. The S and P is about a tenth of a percent higher. So the Dow is really leading the way today. Now software is on the rebound and it's actually helping tech stocks. Datadog jumping 16% on earnings. You heard about that on our show. A number of people talking about how it could help the AI space more than be hindered by it. ServiceNow moving higher by 3%. DocuSign up as well, although there is some AI pressure on the brokerage space. We'll circle back to that a little later on. And while the chips are under pressure, Oracle is the exception. It's up 3% today, as you just heard, and on pace for its third straight gain. That's another bright spot in the kind of software data space area. It's now up more than 20% for its best three day period since September, helping to shake off some of those capital structure concerns. As well. But we begin with some breaking comments from the Fed this hour. Dallas Fed President Lori Logan speaking right now saying Policy is well positioned and she's more concerned about inflation than the labor market, so is content to keep rates on hold for now. It's slightly hawkish message in there, but Logan is a voting member this year. And in the last hour we heard from Cleveland Fed President Hammack who says Policy is also in a good place to stay on hold. She's a voter as well. And these comments come even after today's disappointing retail sales data and as we wait for the delayed jobs report tomorrow, which could be underwhelming to say the least in CPI on Friday. Let's bring in Gregory Dacko. He's the chief economist at EY Parthenon. The message here, Greg, welcome to you. Sarah, seems to be from these Fed officials at least that they're not going to overreact to weak labor market data by lowering rates. I don't know if they would pay more attention to retail sales. That was not that great this morning.
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Gregory Daco
Yeah, I think what we're seeing is a series of confusing messages when it comes to the underlying pace of the US Economy. But the key message that I'm reading is that essentially the benefits of growth are not falling equally across all different income groups and all different businesses. You're seeing a great degree of polarization and this morning's retail sales data is an exemplification of that. If you look at retail sales, they're trending at about a 2 1/2% clip. You adjust for the inflation, we're not seeing any volume growth. So essentially all of this is on the price front. And policymakers at the Fed are concerned about inflation still being above their target range. But I am paying very close attention to what's happening on the labor market where we're seeing a deep freeze which will feed into income and constrain consumers for the rest of the year.
- [03:56]
Kelly Evans
What were you saying about price versus volume in the retail sales, Greg?
- [04:00]
Gregory Daco
If you look at the nominal pace of retail sales, they're growing about a 2 1/2% clip. But if you factor out inflation from that, the real retail sales volume growth is actually slightly down, down 0.2% on a year to year basis. So that tells me that we're still seeing sales progress, but it's largely coming from the price side of the picture. And any consumer that is quite sensitive, which is the majority of consumers, are being much more judicious with their outlays in this high cost Environment.
- [04:31]
Kelly Evans
What's your GDP number? We have, wow, do I have whiplash from the GDP figures. And there's sort of the, the, the data, the momentum Atlanta Fed was at 5 and a half percent for a little while. That's come all the way down to fours, maybe even threes. Now Goldman had always been saying that was a little bit of, because of all these distortions from tariffs and trade, as I understand it. Correct me if I'm wrong, Goldman's number for Q4 is now at 1.6%. So we've gone from, from talking about how strong the economy is and the president himself referencing 15% GDP being possible to now talking about a 1.6% number. So what's going on here?
- [05:06]
Gregory Daco
Yeah, I think we may see a little bit stronger than that growth in the fourth quarter, around 3% likely given what we've seen in terms of the different determinants. But there's a lot of whiplash effects from different trade components, wild swings in imports that are swinging wildly. How GDP is evolving. The true underlying pace of the economy right now is around 2 1/2 percent. As we navigate through 2026, we're going to see that pace slow down because the main pillar of income growth, which is the labor market, is adding fewer jobs and because a lot of business leaders are concerned about controlling costs. Therefore they're lowering entry wages and they're being very careful with wage growth. That may be good from a profit margin perspective and from a cost control perspective, but for many consumers this means reduced income growth. So the momentum going into 2026 is going to be softer, notwithstanding the fact that we've seen rather healthy GDP prints in the second, third and likely in the fourth quarter of last year.
- [06:09]
Kelly Evans
Dissect these comments from Logan and Hammock for a minute. I just want to make sure that, that I've put the emphasis in the proper place. Do you. Where do you expect them to want to take policy this year?
- [06:19]
Gregory Daco
I think there is a group of policymakers that is putting more weight on the, the inflation side of the Fed mandates. And those policymakers are concerned, rightly so, that inflation is still above their 2% target. But there are another group of policymakers that are more focused on the employment side of the mandate and the downside risk to employment. I would tend to lean towards the downside risk to employment. Why? One, because we are seeing negative payroll growth over the last three months because a lot of consumers are concerned about job prospects. Because when you look at wage growth, it indicates weak labor market demand and Two, because this labor market is disinflationary, it's putting downward pressure on inflation and it is leading to more caution on the part of consumers that are seeing lower income growth. This is not the recessionary type of environment that we should panic about, but it is a slower pace of growth that I think would argue for the Fed getting a little bit closer to that 3% neutral rate than it currently stands at.375.
- [07:28]
Kelly Evans
All right. So all of this it feels like, and I read those, you know, Nancy Lazar obviously always read her stuff and she talks about how this capex boom is going to lead to a lot of hiring, which makes me think again of our Barry Bannister discussion yesterday, equity strategist point of view. He said, you know, he does think the market is going to be more cyclical. It just, it might go through a soft patch first. And as we look for consumer spending, kind of do a lot of the heavy lifting here throughout that transition. I think we're just reminded people are still kind of shell shocked post inflation. They don't have the rebates yet. They don't have some of these other stimulus. So how do we know whether we're transitioning from this like intensive capex moment to a moment where it might translate into more hiring and kind of stronger gdp and who knows what that means for rates with Marsh?
- [08:15]
Gregory Daco
Well, I think right now we're not likely to see that turnaround in terms of job growth rebound or rebounding or re accelerating rapidly. What we are seeing is essentially a polarization of the US Economy, not just in terms of consumers, but in terms of who benefits from the key drivers of growth in the US Economy. You've heard me talk about this in the past where I talk about the three pillars of growth, affluent consumers, investment and asset price appreciation. They're still forming a virtuous cycle that lifts growth. But growth is not shared evenly across all consumers. Those affluent consumers more dependent on wealth still doing quite well. Lower income and median income families, they're struggling with higher delinquencies and with less income growth. And on the business front, we're seeing the same thing. Large businesses focused on AI driving growth, smaller businesses struggling a little bit more.
- [09:06]
Kelly Evans
We need that hiring piece to kick in to help those who you cited in that consumer delinquency numbers were up this morning to kind of make sense, you know, similar lag we saw after the financial crisis. And this one back to Covid. Greg, thanks so much. Appreciate it today.
- [09:18]
Ed Engle
Thank you.
- [09:19]
Kelly Evans
Greg Daco with EY Parthenon Turning now to tech, Apple has been quietly outperforming the Mag 7 this month. Rest of it it's positive. While some of the other big names are deep in the red, our next guest just raised his price target, 340 from 325, citing a strong iPhone17 cycle. And that's despite rising memory prices which he says could drive iPhone prices up 15%. Joining us now is Mark Newman, senior analyst at Bernstein. Mark, welcome to you. 15% gain if people are insensitive means it could actually be a boon for Apple. But we have to see how they respond, I guess.
- [09:55]
Mark Newman
Yeah, that's right. I mean I think 15%, that's kind of where things are shaking out right now in terms of how much costs are going up based on the huge price increase from memory. And you know, we think Apple is going to pass those on to consumers. So some consumers may decide to delay the purchase. Some consumers may decide to perhaps based buy a slightly lower spec. So we've, we've kind of tried to assess like all of these impacts, but we still shake out, it's slightly higher estimates based on, you know, the strong iPhone 17 cycle. We think iPhone 18 is not going to have as much unit growth because of the higher price, but the higher price helps a lot. And so that's really where we're coming with a. Still tweaking up estimates today.
- [10:43]
Kelly Evans
Right. And you know, it's what we are just hearing about the pressure on the consumer. So it's hard to imagine that some people aren't going to bulk and say, you know, a phone that's 15% higher in price, I mean it's going up what, $150 something in that neighborhood. I mean that's, that's a big meaningful chunk.
- [11:01]
Mark Newman
Yeah, no, it is. And we, we assume that there's going to be a slight downward shift in mix because of that and also some unit growth. You know, we had assumed unit growth of 5 to 6% for 2027 fiscal year 27. And now we've got unit growth roughly flat because of that. And that's because of this. And that's, that's irrespective of what's going on the back that, you know, if you look back what's going on right now, one of the reasons iPhone 17 unit sales are so strong is because of the, this Covid cycle just, just lapping itself. You've got a lot of old phones four or five years old. And so I think that's going to help 18, the iPhone 18 cycle. But that you Know, we've just been a bit more conservative and assumes like you're saying some of these cost price pressures on consumers will hurt unit growth slightly.
- [12:01]
Kelly Evans
Yeah, it's still been one of those stocks that people feel a little bit more comfortable with amid the wars. And it's a bit ironic because they were blasted for not being in the race the past couple of years. Can they kind of stay on the sidelines and say look, while you guys duke it out, we're still, we're selling iPhones pretty well. You're using all of this new technology on our devices. I don't know if you need them to ramp up their capex much more and do different things with Siri in order to kind of maintain this position. They had that eight week losing streak earlier on. So have they put that behind them now?
- [12:33]
Mark Newman
I mean, I think this is what I wrote today in the note to investors today is this I actually think we did a lot of analysis on memory prices because that's a hot topic right now. Memory prices going up and what's the impact. And so a lot of our note today focuses on that. But saying that we, I still think actually a larger drive of the stock price this year is really going to be what happens with Apple intelligence or Siri 2.0. You know, they're two years late. This is the year that they've got to show something. They have announced that partnership with Google, Google Gemini and I'm pretty optimistic that we're going to see something pretty interesting, a meaningful step forward. I don't know saying it's going to solve all problems immediately, but I believe you're going to see a meaningful step forward this year and that's going to help. And I think there's upside to unit growth from Apple Intelligence because people are going to want to have the latest and greatest phone. There's upside also to services because Apple could actually monetize this with the Apple Intelligence. So I think that Apple Intelligence is actually the bigger driver for the stock this year which is, you know, we're positive on the stock and we just increased today as you mentioned.
- [13:50]
Kelly Evans
All right, Mark, thanks for joining us to break it down. Appreciate it today.
- [13:54]
Mark Newman
Thanks.
- [13:54]
Kelly Evans
Mark Newman with Burn.
- [13:55]
Gregory Daco
Thanks for having me.
- [13:56]
Kelly Evans
Coming up, we're looking beyond tech. Forget the Mag 7. Our market guest still sees attractive entry points in other parts of the world as the US Dramatically underperforms international to start the year. We'll tell you exactly where. But first, bitcoin back below the 70,000 mark and Michael Saylor's strategy is doubling down what he plans to do if the price keeps falling. That's next on the exchange.
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- [15:54]
Tim Seymour
We're not going to be selling. We're going to be buying Bitcoin. I expect we'll be buying bitcoin every quarter, forever. If Bitcoin falls 90% for the next four years, we'll refinance the debt.
- [16:08]
Kelly Evans
Refinance where, Michael?
- [16:10]
Tim Seymour
We'll just roll it forward. I mean, again.
- [16:13]
Kelly Evans
But you think banks would lend to you at that point?
- [16:17]
Tim Seymour
Yeah, because. Because the volatility of bitcoin is such that it's always going to be value. Look, you're at 68,000 right now. Literally has to fall to 8,000. Then we just refinance the debt. If you think it's going to zero, then we'll deal with that. But I don't think it's going to zero and I don't think it's going to 8,000 either. But the credit risk is de minimis at this point.
- [16:39]
Kelly Evans
That was a fascinating exchange with strategies Michael Saylor on Squawk Box this morning, doubling down on Bitcoin as it falls below 70,000 once again. My next guest thinks 55 could be the next move before the bottom is in. Let's bring in Ed Engle. He's senior research analyst at Compass Point a philosophical question, Ed, if I may. First, Michael Saylor is basically saying that he thinks banks will lend if Bitcoin falls that low because from their point of view it will be below its intrinsic value. In other words, there's value. But how do they know or understand or pinpoint an intrinsic value if it fell that low, by which they would feel comfortable making additional loans?
- [17:19]
Ed Engle
I think his point was that Microstrategy is so over collateralized on their Bitcoin loans where they've got about 40 to 50 billion dollars of Bitcoin versus 8 billion of debt. So you need to have pretty significant declines in the price of Bitcoin before you start to be underwater on those loans. I think that was his point there.
- [17:37]
Kelly Evans
Okay, so you see possibly 55,000 being a next point, even maybe a line in the sand.
- [17:44]
Ed Engle
I wouldn't say line the sand, but we are starting to see some signs that Bitcoin is in the early processes of finding a bottom. And so if I look at prior cycles, there's been pretty, pretty specific indicators that point to, hey, we're actually in this final stage of capitulation. One of those is just the amount of Bitcoin owned by what I call top buyers. So people that bought bitcoin above 110,000, the percent of bitcoin ownership is about 10% from that cohort that's actually cut in half over the past three months. So that's usually a pretty good sign that all these top buyers have kind of been flushed out already. And then in the derivatives markets you're seeing a lot of leverage has been flushed out in the system, whether that's futures markets or defined markets. And typically what you see is short start to get more aggressive in shorting Bitcoin. As you get to some of the low points, that often results in a short squeeze. And so typically we did see a pretty enormous short squeeze last Friday when after Bitcoin had reached that 60k level. That's usually a pretty good sign that things are starting to bottom out when the shorts get too aggressive.
- [18:48]
Kelly Evans
You also think that Bitcoin's average purchase price is now around 56,000 and it's converging with a 200 day moving average of around 58,000. So you think that's why it'd be harder to break below that area?
- [19:01]
Ed Engle
Yes, if I look at prior cycles, including the 2022 credit bust, Bitcoin did dip below those two indicators. And that was the average purchase price and 200 day moving average. Our view is that this cycle really doesn't feel nearly as bad as prior cycles. I mean, when I look around, we're seeing new institutional adoption almost every day. Despite volatility in the crypto markets, the industry is actually still pretty healthy. So we've yet to see any major exchanges or lending platforms actually go default. So again, the price obviously hasn't been great, but from an industry health perspective, things are actually holding in there. Okay. And so because of that, we don't think that we're going to break these levels, levels that we did temporarily break in prior cycles.
- [19:43]
Kelly Evans
I do wonder though, you know, I look at some of the big actors who are early in crypto. I'm thinking Mike Novogratz, the Winklevoss, you know, Novogratz, his company now does AI data centers. The Winklevoss company just had 25% of its staff laid off and is called Gemini Space Station. Does that tell you that those who are early to get into the game are the ones now thinking beyond it?
- [20:07]
Ed Engle
So I would say the Gemini spaceship is probably one of the smaller companies in the crypto industry. So I don't know if they're necessarily have that much of an impact. But I mean, if you talk to Novogratz, he is more bullish on crypto and bitcoin ever. I mean, they hold literally billions of dollars of crypto on the balance sheet. So even though their bitcoin mining business has shifted to HPC and there's some structural overhangs in the mining business within the crypto markets, overall, my understanding is that they're all doubling down.
- [20:36]
Kelly Evans
Right. So what would your final kind of. We've had a number of people, including analysts who specifically follow crypto coming on and talking about the price action. Still looking kind of weak. Like even yourself referencing 55,000. What would it take at this point to kind of find that level at which people start feeling like there's, you know, opportunity, excitement, hope and optimism again? Right. How much of that has been flushed out and how, how much do you think might come back if the price can get back up by 20, 30, 40%?
- [21:08]
Ed Engle
Yeah. Say one thing that's defined this cycle is you've had a lot less euphoric rallies, and those are typically driven by retail interest. This cycle has actually had a lot less retail interest than prior cycles. Now, say a lot of the price action is really driven by institutional demand, especially the Bitcoin ETFs. And so I think that alone is reducing bitcoin's volatility relative to prior cycles. And let's be honest, I mean bitcoin is a momentum asset, but when you start to see aggressive shorts leading to a squeeze that upward momentum can actually get a new cycle going again. So I Remember back in 2020-2023, similarly, Bitcoin was left for dead and then slowly but surely it started to gain momentum to the upside and then two years later it's, it's at new all time highs.
- [21:52]
Kelly Evans
I'll be curious what, what can drive it? What can be as powerful? Institutional adoption, you know, election that practically hangs on it. You know what, what will restart at this time around? I guess we'll see. Ed, thanks very much. Appreciate it. Today, Engle joining us from Compass Point. Coming up, Spotify soaring 14% on a big earnings beat and strong user growth. The shares are still down about 20% to start the year though. We'll break down the results and what it's telling us ahead. And as we head to break, check out shares of BP under pressure after suspending their share buyback plan. They're trading down about 6%. The board deciding to use the cash to quote accelerate, strengthening the balance sheet instead. On the flip side, Hasbro up about that much, nearly 8% now after reporting an earnings beat and announcing a billion dollar share buyb. Those shares are now at their highest level in more than four years. But not even this world is immune from AI disruption. Here's what the CEO told money movers about what AI could mean for the business.
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Kelly Evans
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- [25:02]
Kelly Evans
Welcome back. International markets are extending those gains from last year, driven by strong performance in emerging markets. A weaker dollar, some developed strength as well. Korea, Brazil, Japan, all outperforming the S and P year to date. The Nikkei closing at a record high today. The moves follow a big outperformance by international markets in 2025. And my next guest says you can stay there as the momentum continues with one area in particular. Let's bring in on Andres Garcia Amaya, the founder and CEO of Zoe Financial. Is that a Korea reference to the Korean markets or is it a broader out where you're looking?
- [25:33]
Andres Garcia Amaya
I think the Korean market is an example of you could still have a lot of that technology theme played out somewhere else outside of the United States, but with entry points valuation wise that are heavily discount to the United States.
- [25:48]
Kelly Evans
The Korean markets pe is, is it 14 Ford pe that right.
- [25:51]
Andres Garcia Amaya
It's in the teens.
- [25:52]
Kelly Evans
I mean, if Japan's at 25 and we're at what, 22. Right. And that's after we've seen these monster moves with SK Hynix and the rest.
- [25:58]
Andres Garcia Amaya
Of it and Samsung. Exactly right. So they are, they are the shovels for a lot of the trade, but they're not trading at the same valuations that we see here for technology companies.
- [26:08]
Kelly Evans
So that would be an area. I mean, I'm not trying to single them out. You Know too much. But people want to be with the winners. And if you think they can keep winning, do you just get direct exposure via an etf? Do you go with kind of a broad basket?
- [26:19]
Andres Garcia Amaya
Yeah. I mean you could dip your toe with, you know, on any EEM that already would include those winners. And I often kind of think of that as maybe if you have no exposure, that's a great starting place. If you do already and you feel more comfortable, sure. There are already more direct plays to what's happening in technology in countries like.
- [26:38]
Kelly Evans
South Korea, because, you know, Japan, if you're catching up with the narrative and thinking, you know, yeah, they're making some reforms there and some positive economic signs. Look at the election over the weekend. But again, that market, we were talking to Peter Bogvar about this yesterday looks kind of fully valued at this point.
- [26:52]
Andres Garcia Amaya
So a lot of these markets have been value traps for years. Right. So there was a lot to like, but there just was no momentum, no money flowing into those markets. And it's only been about year and a half, two years since that momentum has gone towards it. So think about how much, how many times here in the United States we thought it was done because valuation came back to historical averages. So the story is just beginning in those markets.
- [27:17]
Kelly Evans
Even for a Japan, Even for Japan.
- [27:19]
Andres Garcia Amaya
I think there's a lot more upside because now there is this rotation that is happening into those markets that was not happening in the past.
- [27:27]
Kelly Evans
Are people taking money out of the Mag 7 a lot of money that has been in that trade for a long time. Do you think that's where some of this cash will continue to come from?
- [27:34]
Andres Garcia Amaya
I think it will. I think, you know, we talked about this in the past. I'm not necessarily thinking that those companies are going to all of a sudden not work earnings wise is more that a lot of that is already baked in the valuation. So all they need is to miss a little bit their expectations for money to start chasing areas where there's a better entry point.
- [27:54]
Kelly Evans
Yeah. And where else would you be looking? So there's the Mag 7 again, down 2% this week, fractionally lower again today. I mean, investors in these stocks are getting a little frustrated.
- [28:02]
Andres Garcia Amaya
Yeah. One way to think about it is within the US Companies that cannot be replaced by AI. That was a lot of the meltdown reason. So for instance financials, industrials, they benefit from a lower interest rate environment, reassellation of growth and their earnings are delivering. Those look to me more appealing than the ones that at any given moment people could be worried that they're going to be replaced by rather than enhanced, which is.
- [28:26]
Kelly Evans
I forget who's had the phrase maybe Jim Reed at Deutsche Bank. The tech is eating itself. You know that the area of the market has been the most successful, has now created a product that is cannibalizing it to some extent. I mean you can agree with that or not. But it's interesting that you say investors are looking for safety and traditionally more cyclical parts the market maybe now just because they're going to do well, but also because they are just viewed as less disrupted by technology.
- [28:48]
Andres Garcia Amaya
Adams look safer than bits right now here in the United States.
- [28:52]
Kelly Evans
Well said. Do you worry about the economic cycle when we see things like the soft retail sales report, things like that?
- [28:58]
Andres Garcia Amaya
I think that if you look for instance the manufacturing ism numbers, if anything there is signs that there is some reacceleration. It's more of like rolling recoveries in different aspects of the economy which frankly for the market's okay as long as earnings continue to deliver and they have.
- [29:14]
Kelly Evans
So where, where else? I mean we have the dollar to contend with. I don't know if you worry about that one way or the other. Does it need to keep weakening to support the performance of international stocks, you know, or is that just a side issue?
- [29:25]
Andres Garcia Amaya
I think historically when you look at the regimes international outperformance is accompanied with a weaker dollar. But the most important part of the equation is earnings. And over the last call of 12 to 18 months you have seen earnings reaccelerate International in a way that was not happening in the prior years.
- [29:44]
Kelly Evans
So that is fundamentally driven. And then finally, just a question here about software. I mean did you look at the sell off that we've seen and say hey, this is a chance to pick up a sector after a throw everything out the window kind of move.
- [29:57]
Andres Garcia Amaya
I think there's some areas are overblown and that they're going to be replaced. Right. I don't pick individual stocks, but you look at like a Salesforce. No one's going to vive code Salesforce over the weekend. So I think there was some kind of overreaction. But the difference with international is that prices were high to begin with. Valuations did need a rerating. But going forward, if these companies continue to deliver in earnings, I think there will be some winners still there.
- [30:25]
Kelly Evans
So you would pick maybe would you pick the broad ETF for instance, as kind of bottom fishing or you would just have to know like this is a company with high conviction that it's.
- [30:31]
Andres Garcia Amaya
Not going to be disruptive hence why I think industrials and financials look more appealing is that you don't need to necessarily find the exact one that will continue to outperform in earnings because a lot was already baked in those valuations.
- [30:42]
Kelly Evans
All right, Andres, thanks. Appreciate it. Andres Garcia Amaya with Zoe Financial Coming up, US And Chinese markets are having very different reactions as they roll out out their latest and greatest AI models. And Schwab is another example of a name getting punished here today. We'll look at why, what it means for investors next. And as we head to break, here's another look at the markets losing steam. The Dow has pared its 380 point gain. It's only a 55 right now. Nasdaq down a quarter of a percent the 10 year right around 415. Western Digital is actually the worst performer in the Nasdaq 100 today. We're back after this. Welcome back to the Exchange. Call it a tale of two AI responses. While new AI models tend to wreak havoc or cause jitters in some park pockets of the market, today we have an example of the opposite effect in the Chinese space, acting as catalysts for broad rallies. Deirdre Dubosa has more on this and what it means, what it means to investors and what it means about the race in these two countries. Deirdre, yes, it kind of comes down.
- [31:53]
Deirdre Bosa
To Capex and a number of things. I'll get into that. But as you said, the market just gave us a perfect example of the split on the US Side. Brokerages they're selling off after a startup called Altruist launched an AI powered tax planning tool. Again, this is not going to replace Schwab anytime soon. But it is a real product doing in minutes what advisors charge thousands of dollars for. And that is all the market needs right now to reprice an entire sector. Over the last few weeks we've seen it happen in gaming, legal services. The software sector as a whole is getting decimated because every AI breakthrough here is being seen as a threat. So here's the paradox. In China, breakthroughs are being priced exactly the opposite as an opportunity. A new image and video model from bytedance just a few days ago it actually fueled a rally in media and gaming stocks. A similar announcement from Google a week earlier led to a sell off in gaming names here. Now part of the reason why this may be is a huge delta in spending. American big tech is on track to spend well over half a trillion dollars on the AI buildout this year while China's top public tech companies, they're on track to spend just a fraction of that $70 billion. And yet they are still shipping competitive models and they're going global. So the market Kelly is asking a very simple question here. What if you don't need to spend that much? And we may be about to find out what happens because at least five major model releases from Chinese labs, they're expected before Lunar New Year, which is just a week away. February 17th. Everyone over in China is trying to have its own deep seek moment and they're getting closer. They're catching up with their frontier models that our air giants are building.
- [33:30]
Kelly Evans
These new models that we hear about. Do we know. I apologize if you said I missed it. Are they using in video chips? Are they definitely not using Huawei chips? Because it feels like Nvidia can be deep seeked if they're building models using kind of cheaper technology that is proprietary or that they don't need to, you know, kind of pay up for Nvidia for I could see that collapsing once again. The trade, it seems like it's been more resilient to that lately.
- [33:54]
Deirdre Bosa
We did a whole piece on this, a deep dive on YouTube. It's called our tech check take on the Chinese hardware sort of playbook. And they're copying that deep Seq playbook. So yes, everyone wants to use Nvidia chips chips even if they're older generations. But there was this model called GLM Kelly that they say was built entirely on Huawei chips. So it's not there yet. But they're getting closer and closer. So my guess is it's probably a mix. Yes, you need American advanced chips, but the Chinese government is putting everything behind their chip ambitions to try and catch up. So it's happening on the hardware front, it's happening on the model front. And Chinese New Year is like, it's like the CS of China for I. Everyone wants to put out their new tech.
- [34:37]
Kelly Evans
I had no idea. But I guess you can use it, you know, have some time to experiment with it and play around with it and talk to each other about it. Kind of like Bitcoin network effects years ago. Anyway, going back to what's happening with Schwab, Deirdre, tell us more about this new AI model that. I mean yesterday it was like the insurance names. Before that it was the legal space. Today, why is it on the brokers?
- [34:58]
Deirdre Bosa
Because again, like I said, this startup I called Altruists, right? It created sort of this, this tool that, you know, can automate what people pay thousands of dollars to financial advisors to do and yes, there's a reason people like interacting with people, especially when it comes to financial services. But again, the point isn't that the startup is going to dispute Place Schwab, it's that it shows that these tools are becoming easier to use. They're becoming easier for non technical people to use and that is just a threat. We don't know what the second and third order effects of that are which is what you saw at software at large. Remember we've ecoded our own Monday.com it wasn't any good but it showed that it's possible. And someone who's not me who knows enterprise software super well and has been building it for years could plausibly come out same in financial services and create a tool that's cheaper. There's a huge debate over this by the way. Of course we're not. Yeah, obviously.
- [35:53]
Kelly Evans
I think even if it doesn't replace the just to what extent does it chip away a little bit of profitability here, a little bit of margin there.
- [35:58]
Deirdre Bosa
And these are the pricing power.
- [36:00]
Kelly Evans
Exactly. Big questions to be answered. Deirdre. Thanks very much. Deirdre Bosa. Coming up, another big week of earnings including this name our trader calls the best mega cap tech stock. That's not Google and he's a buyer. Earnings Exchange is next. Speaking of earnings, check out the home construction names moving higher after a big beat in a $2 billion share buyback by Masco. Those shares are hitting 13 month highs. Dreamfinders, Floor and Decor, Beezer Homes and Toll Brothers among the leaders today. We're back with more after this. Welcome back. Another big week of earnings is underway. We've got the action, the story and the trade. Today we're doing names including DraftKings, Robinhood and Cisco for ear exchange. Here with our trade this Tim Seymour, CIO of Seymour Asset Management and a CNBC contributor. It's always kind of fun to go stock by stock a little bit. Have to start with DraftKings after the Super Bowl. The shares are down 20% to start the year. They're flat ahead of Thursday's results. They just announced an agreement with crypto.com to broaden, you guessed it, their prediction market offerings. Analysts are looking for you know more about that promo spend any new media deals and you say the stock could get a boost from a couple of things coming up. Olympics, World Cup. Yeah, right.
- [37:15]
Tim Seymour
I think, I think they're going to talk in their investor day. Also the NBA partnership, I think there's, there's plenty of good news to talk about in terms of the markets there. And it's interesting because we'll talk about Hood in a second. But in DraftKings case, it's, it's not being helped by the prediction markets. It's seen as an overhang, it's seen as erosion of kind of their, their core audience. And while the addressable market in online sports betting continues to grow. I think that's an exciting story. I just, you know, I, there are better places to be exposed here. I also think it's not terribly cheap. But that investor day is going to have some good news and that's what investor days do. And I think strategic partnerships are a big part of what they're doing. I also think that the stock is priced in a lot of pain here.
- [37:57]
Kelly Evans
I wonder how much regulatory kind of clamping, clamp down, what's the word? Still mostly on the prediction markets front.
- [38:05]
Tim Seymour
Yeah, but it's, you know, more regulation is good. I think there are more people that, that frankly like the prediction markets. I do think there is less teeth to. There really is no regulation and ultimately it's a bit of the wild west. That's why market shares are being carved out here. But I think we'll see that those that have real market share are going to benefit and have enhancement in the multiple that comes from regulation.
- [38:30]
Kelly Evans
All right, let's pivot from that to Robinhood, which is kind of similar, frankly, but with a big crypto aspect to it. The stock is also down about 20% so far this year and that's really due to this sharp sell off that we've seen in Bitcoin and some of the other cryptos. Wall street still thinks there's still plenty to be positive on. Dan Dollar told us last week he sees some big catalysts ahead, including their growth in, yes, prediction markets. Prediction markets and adoption of international savings accounts in the uk. You think it's an opportunity here?
- [38:58]
Tim Seymour
I think I love their demographic, I love the base they have here. I do think that the crypto headwind is offset by the prediction tailwind. I just think the EPS growth here is real. I think, and frankly I think this is an opportunity to be nibbling into the stock. If you don't know, a lot of people wanted to own it. There's no question to me the growth that they're seeing. This is actually now, you know, 25 times 27 multiple. It's not expensive. Given the kind of growth that's here, where they are positioned in growth markets, it's not going to be simple. It's going to Be full of volatility. But if you don't believe that crypto markets exist, then that's you should not own this stock. If you believe that there's cyclicality and inherent volatility, this is an opportunity. And again, the valuation to me now makes some sense.
- [39:46]
Kelly Evans
That's a good way to put it. You know, for those, if there are those who are still worried or skeptical about crypto, okay, well then maybe, maybe there's elsewhere to go. In other words, okay, they shouldn't be here. They shouldn't be here. Exactly. Finally a name that was one of the last of kind of the old tech world to reach new highs. That was Cisco. This was the mystery chart we mentioned a little while ago. It's actually up nearly 20% over the past month. They unveiled some new AI networking chips that will go head to head with the likes of Nvidia and Broadcom. They report tomorrow. Citi says investors should definitely keep an eye on any new order trends. Also on some supply constraints, debt pricing issues they might face. But you say this is one of the best tech stocks over the past year, is that right?
- [40:26]
Tim Seymour
Well, it has been. It's up almost 40% on a rolling one year. I just think the Cisco is finally rerating. It's a bit ironic that we thought they would rerate on the back of a software business. There was a high margin business at a time when software has been not the place to rerate, it's been the place to derate. I still think Cisco's security software business is interesting. I think that they're in a kind of a unique position, dare I say an Nvidia kind of position on a much smaller scale but in terms of their ability to have kind of the campus enterprise refresh AI, switching a lot of the hardware around. AI means investment in Cisco's core business. A business that wasn't terribly sexy until it was about a year ago. But the software component also means that they are constantly in touch and I think it actually gives them an ability to actually handhold along the way. This is, you know, 18, 19 times expensive relative to the last 10 years. Obviously not back 20 years, but I think it deserves a higher multiple. And I think you're paying 20, 21 times. That makes it a 90 to $100 stock right here. And I think there's good news ahead.
- [41:33]
Kelly Evans
Pounding the table and Cisco. Tim, while you're here, I do want to just show the intraday of the Dow. We went from, what was it, a 300 point gain earlier on to now turning negative. And it had been the best performer of majors. I don't know if it's the comments at 1pm from the Fed officials. We did start to see a kind of steady sell off at that point. Both of them, Hammock and Logan kind of reiterated what I would describe as their hawkishness. Maybe I'm oversimplifying it. Do you think that's what's going on here?
- [41:57]
Tim Seymour
I think the market, and certainly in the case of the Dow, it's been great to see headlines on exciting new numbers there. But I think, I think you've had a lot of industrial stocks have a really strong run. I do think Fed sensitivity is high. I will say tomorrow bad news is bad news on labor. I want to see a good payroll number. I'm less worried about that for the Fed.
- [42:15]
Kelly Evans
All right, Tim Seymour, thank you very much. Appreciate it today. And that's it for us here on the Exchange. I'll join Brian Sullivan for Power Lunch right after this break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [42:33]
Deirdre Bosa
What do the steam engine, electricity and.
- [42:35]
Kelly Evans
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Deirdre Bosa
Where the Internet Lives is an award winning podcast from Google about the unseen.
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Kelly Evans
World of data centers. This season we're going inside the AI revolution. From farmers using AI to analyze soil.
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Deirdre Bosa
Data to researchers discovering new medicines, a.
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Kelly Evans
New era of AI innovation is here.
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Deirdre Bosa
Listen to where the Internet lives.
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Kelly Evans
Wherever you get your podcasts.