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Scaling Back on AI, Crypto Cools & 3 Names to Buy 11/18/25
00:43:45
The Street starting to split on hyperscalers with Rothschild & Co Redburn downgrading Microsoft and Amazon, while Loop upgrades Alphabet. Bitcoin turns negative for the year. Plus, Victoria Greene's three stocks to buy in the pullback.
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Morgan Brennan
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Host/Announcer
Here's today's show.
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Morgan Brennan
Welcome to THE Exchange. I'm Morgan Brennan in for Kelly Evans. Stocks are lower once again today. The Dow and the S&P 500 both tracking for the fourth negative day in a row. This as concerns about the AI trade continue and are coming from some upper echelons. Alphabet Sundar Pichai says he's seeing elements of irrationality. Rothschild to see increasingly more issues with the AI narrative and they're downgrading two big players because of it, Amazon and Microsoft. The analyst behind that call, which is pressuring those stocks is going to join us to make his case. And it's coming on a day of another megadeal between Microsoft, Nvidia and this time Anthropic. We've got a lot to talk about and all of it raised raising the stakes for Nvidia to deliver tomorrow when it comes out with results. But what does that even look like at this point? We're going to dig into it with the stock down 10% so far this month. And the trade is where we're going to start. Rothschild downgrading Amazon and Microsoft this morning, saying that it's time to take more cautious stance on the hyperscalers. Now they warn the industry has been too trusting that Jenny is quote, just like Early Cloud 1.0. And that narrative is looking increasingly misplaced. So for more, let's bring in the analysts behind that call, Alex Heisel of Rothschild and Co redburned. Alex, it's great to have you on and let's start right there. Why downgrade these two names specifically?
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Alex Heisel
Because the market is still pricing in an overly optimistic scenario with regards to generative AI. I mean, our work really shows that for every CAPEX dollar spent on generative AI, the net present value is only 20 cent. Right. And for traditional cloud we have like a 6x higher number which is like 1.$4 on the dollar spent. The problem that we really see is that the market is still pricing in like an overly optimistic scenario because everyone is buying into this narrative. Hey, don't worry, alternative AI is just like the early days of the cloud and it simply is not okay.
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Morgan Brennan
So what did you find then? When you start comparing it and actually stripping it down to apples versus apples, what did you find then and what is the translation for margins, for free cash flow, for some of these other key metrics that investors need to be keyed in on?
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Alex Heisel
Yeah, I mean first of all, when we look at the early days of the cloud, you know the hyperscalers have been quite conservative with regards to like the server lifetime assumptions. We started off like with three years and now on the GPU side we have like five, six years server lifetime assumptions. So on the like for like comparison, the truth is the capital intensity is significantly higher. The other point we really want to flag here where the differences are through the cloud period, the hyperscalers have captured a lot of the software layering on top. When you talk about software layering is in particular the past layer, databases, etc. With generative AI you have the model builders like Anthropic and OpenAI. In fact they are the new platform so they capture much more of the value. And that unfortunately means for the hyperscaler they're operating in a lower part of the stack which is simply not as attractive in terms of like return profile.
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Morgan Brennan
You say in your note that you are not close to a bear case at this stage given the solid growth outlook, but that the growth is largely priced in. So if you see these stocks continue to sell off here, will you think about them a little bit differently?
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Alex Heisel
Yeah, I think what we want to see is, you know, that the growth versus like capex trajectory has to change because growth came in line with our expectations a little bit ahead of the street, but the capex figures are just too high. So I think what we really need to see is a capex slowdown and a sustainability of like growth because otherwise it just continues with growth figures being okay, but it's a very low value growth. So something has to change fast to be more constructive.
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Morgan Brennan
Now I'm just looking at your coverage universe here. You also cover Oracle. Oracle has their shareholder day right now. This is a stock that had a big run up and has just as quickly sold off it's actually sold off more aggressively than some of these hyperscaler names we're talking about too. Want to get your thoughts on that?
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Alex Heisel
Yeah, I remember I was on the show, I think end of September when we launched Oregon with a seller, and I think they are in a weaker position than the traditional hyperscalers. Fundamentally the problem is all of these GPU rentals from a hyperscaler perspective is there's not much value being created. But at least for the likes of Amazon and Microsoft, you know, they have a more diversified customer base. So we still see the SOC as relatively expensive. Oracle with the target price of $175, we think there's still more downside from here.
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Morgan Brennan
Okay, and if I just go back to Microsoft here since they do have their Ignite conference and they've been coming out with some news as well, the fact that they are striking deals with the likes of Anthropic now and historically they've always been tied to OpenAI. What does that signal?
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Alex Heisel
It signals that they also want to get more diversification, not only on Azure, but also within their own product suite. But it also shows you that the value sits within the model builders more so than the hyperscalers.
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Morgan Brennan
What do you think it's going to take to see more meaningful return on investment for the hyperscalers? With all of this money that's going in to the infrastructure build out, you.
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Alex Heisel
Would need to see enterprise adoption taking off. Right? I mean, that's the crux of it. When you look at the inferencing volumes and tokens, we estimate that between 30 and 40% of these inferencing tokens is only going towards enterprise usage, which you can measure. On the API side. The problem is it's quite narrow. So within the API side it's mainly driven by software development, which would benefit companies like Anthropic. But we haven't really seen a broadening of enterprise adoption. And that's what is needed for the hyperscaler economics really to improve when enterprises use their tools that are higher margins. We just haven't seen that. It's still quite narrow.
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Morgan Brennan
Okay. Alex Heisel, thank you for joining me. The shares of Microsoft down 3% right now and Amazon in the red as well. We've got a quick programming note. Microsoft CEO of Commercial Business, Judson Altoff will be on power lunch at 2pm Eastern. You don't want to miss that. We've got some breaking news in the media space. Meantime, Julie Boorstin has the story for us. Hi, Julia.
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Julia Boorstin
Hi, Morgan. That's right. Variety reporting that David Ellison's Paramount Skydance is preparing a $71 billion bid for Warner Brothers Discovery. This is sending the stocks moving and that he's preparing this bid, the report says with three Arab sovereign wealth funds, the funds of Saudi Arabia, Qatar and Abu Dhabi and that together they would be submitting the $71 billion bid for Warner Brothers Discovery. We have reached out to Warner to Paramount Skydance for comment. Have not heard back yet. But also just want to note here that this would be heavily relying on the Ellison family which which controls 100% of the voting shares of Paramount Skydance taking a look at that stock moving higher on this report. And we are awaiting comment from the companies.
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Morgan Brennan
Back over to you, Julia, Any sense on whether this could be something that's on the docket with the president meeting with MBS of Saudi Arabia today? I mean the timing just of this report seems very to me, timing is certainly very interesting.
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Julia Boorstin
I know that this has probably been a deal that David Ellison's team has been working on for some time. We know that they've been preparing their strategy to go back to Warner Brothers Discovery for more. We also know that Warner Brothers Discovery has been taking meetings with other potential buyers. So unclear exactly how it will play out with the president today. But we do know that the Ellison family is closely aligned with President Trump.
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Morgan Brennan
Okay, Julie Borison, thank you. With shares of Warner Brothers discovery now about 5%. Well Nvidia is set to report results after the bell tomorrow would see in the entire market. Every investor folks are focused on this one. Between today's new deal with Microsoft and Anthropic last month's GTC conference, what's left for video to surprise the street with? Well, Christina, parts Navalis is taking a closer look. And Christina, what are you finding?
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Christina Parts Navalis
Well, the setup right now just feels a little bit like the repeat of last quarter with some recent shakiness in investors confidence overall in the AI semi trade. And you can see that just in this week's sell off for example for Nvidia shares down about 4% week to date and the market once again looking to Nvidia to come and save the day and turn sentiment around. But shares really have barely budged since the August earnings report. You can see up almost 1% underperforming Broadcom, AMD intel, even the Sox ETF on your screen which is up almost 12%. So the fireworks just lighten be missing tomorrow afternoon. That's because at the end of October you brought up the GTC conference. Nvidia's CEO revealed at that conference $500 billion in cumulative chip orders stretching through the end of next year. The Stock actually hit $212 the next day on October 29th, an all time high. And now it's down roughly about 10% since that date. And that was unusually specific for Nvidia, breaking from the typical 1/4 at a time guidance instead providing a forecast through all of next year. There's another dynamic at play as well. If Nvidia's beat is for example, let's say it's $3 billion or more, it could amplify concerns that AI spending has just gotten excessive, which would feed into the bear narrative. But if it's just a modest beat, let's just say 2 billion investors might read that as growth normalizing faster than expected. So almost a Goldilocks scenario. And Wednesday's report really becomes more about validating what Nvidia CEO already said than revealing anything new. If though Nvidia can give investors more clarity on the longer term backlog the way competitors like AMD have and Broadcom, you know, talking about their multi year visibility AKA backlog, that could shift sentiment to the upside for shareholders.
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Morgan Brennan
Yeah, it's been really fascinating to realize that at least over the last couple of months Nvidia has been underperforming some of the other big chip names here. Is China going to factor into their forecasts or analyst estimates here or have we been completely de risked in terms of what that means for revenue?
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Christina Parts Navalis
China's completely taken out of the equation. It hasn't been modeled in with any of the sell side buy side research. I doubt at this point that China would even come up. Well, it'll come up, but I don't think it's going to be a revenue contributor. And in the near term, given the licenses issues we saw with AMD too, that they announced that they are working through their licenses, which should be a positive for Nvidia, but that takes time. There's a lot of red tape. Having said that, it's still quite impressive when you factor out a portion of the world that used to contribute, let's say 18 to 20% of total revenues. You take that out and Nvidia is still able to beat by $2 billion because they're seeking money elsewhere from either hyperscalers or sovereign AI. That's absolutely incredible. They're still able to do that. Having said that, the magnitude of the beats have come down and overall investors are starting to think what upside do I see in Nvidia shares right now? When I could turn to maybe AMD where the EPS growth might be higher, I can turn to Broadcom again where the EPS might be higher. And so that seems to be the sentiment going into this earnings print this time around.
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Morgan Brennan
Yeah, high stakes, especially not just for Nvidia, but for the overall trade here a little more than 24 hours from now. Christina parts and evolution. Thank you. Thanks. Well, meanwhile loop upgrading Alphabet to buy this morning saying quote, waves of enthusiasm enthusiasm have obliterated the wall of worry. They specifically say search concerns are no longer valid with traffic share to Gemini having doubled year on year. That was before Google came out with news on Gemini earlier today and Deirdre Bosa has more on all of it in today's tech check.
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Deirdre Bosa
Heidi hey Morgan, that's right, it was the Gemini 3.0 launch and Alphabet shares are higher today. So a bright spot amid sort of this larger anxiety rattling the AI trade. It's been volatile though because the market's not just tracking model quality or traffic anymore, is tracking CapEx, the rising role of debt circular financing plus the Gemini 3.0 launch. Excuse me, it has to compete with comments from Sundar Pichai to the BBC today where he says that the trillion dollar AI boom has elements of irrationality and he says no firm is immune if the bubble bursts. Alphabet has however, and this is what Morgan alluded to, outperformed the other big AI players over the past three months. It's at least climbed if not obliterated the wall of worry. Investors are finally appreciating this deep integration that Google has from its chips, its TPU's to models cloud ecosystem which also underpins this Gemini launch. Now this is another benchmark topping model and it ships Gemini at the scale of Google. That's how Senator Pichai put it, meaning that it'll be integrated into AI mode. And that's the default experience for most Google users, not just the ones that are seeking out AI chat bots. Meanwhile, the Gemini app for those that are seeking a chat bot, it does continue to close that gap between It's Self and OpenAI's Chat CBT. Pichai says the app now has 650 million monthly active users. OpenAI said in August that Chat CBT hits 700 million weekly users and then you've got third party data from similar web backing up that trend if it's not exactly apples to apples. So Morgan, a lot to contend with. Some good headlines for Google today, but is it enough to really scale the wall of worries in the air trade? That's another Question.
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Morgan Brennan
Yeah. And of course we've had the stock what trading near all time highs in part because Warren Buffett and Berkshire Hathaway disclose closed a big stake in the company too.
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Deirdre Bosa
Yeah, and not just that. I mean that was the latest just in the last few days but really over the past few months investors have come to appreciate sort of this whole AI system that Alphabet has. Right. You look at the model Release today, Gemini 3.0 and they can distribute it across potentially billions and billions of search users introducing bringing them into the AI fold. That's a strength. There's chatter that maybe 3.0 was developed using Google TPU's that's its custom chips. Couldn't confirm that from Google yet but if that is the case that would be a big moment. It's efficient as well. So Google just has this sort of full stack that the other players don't.
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Morgan Brennan
Yeah, I don't, I don't think we talk about those TPU's enough actually because that could be a real game changer and competitor to Nvidia. Right?
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Deirdre Bosa
Absolutely. I mean in the inference game. And that's why it would be significant if this model that you know, beats or ranks and in many cases beats a lot of the benchmarks was trained on TP's. That's a big deal.
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Morgan Brennan
All right, Georgia Bosa bringing us the latest on Alphabet. Thank you. Thanks. Well, coming up, Bitcoin back above 90,000 after dipping below that mark and touching its lowest level since April. After the break, we're going to speak with one crypto hedge fund partner about the next catalyst for the space and broader market implications too. Plus, all the major averages are down more than 1% in two days. Our next guest is staying bullish. He tells us where he's looking for opportunities right now. And here's the spoiler alert. It's not AI. The exchange is back after this. This is the exchange on cnbc. The heaviest metal credit card of all time, rumored to be one of only 18 in existence. Plated with the very same tungsten that forged the International Space Station and wielded at business din samurai sword. It's a classic corporate power move. But the real power move having end to end visibility on your most critical shipments. FedEx. The new power move.
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Morgan Brennan
Headed to our HBCUs that kind of.
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Morgan Brennan
Make It an ever expanding curriculum of career and income boosting online courses get 25% off all 2025 courses now go to CNBCmakeit.com courses special offer ends December 5th. Welcome back. We've got breaking news out of Washington. Eamon Jabers has the story. Hi, Eamon.
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Neil Hennessy
Hi.
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Morgan Brennan
That's right. President Trump just wrapping up a session in the Oval Office with Saudi Crown Prince Mohammed bin Salman. The president sort of jawboning bin Salman during the course of that Oval Office session to increase his commitment to investments in the United States from an announced $600 billion to a full $1 trillion. Interesting interplay between the two leaders there as they talked about how much the Saudis would ultimately end up investing. But Mohammed bin Salman expressing optimism about the opportunities economically inside the United States for Saudi investment funds. The president also was asked about the Federal Reserve, whether he's begun interviewing any candidates for that job. And he was harshly critical in the moment of Fed Chair Jay Powell. Take a listen to what he said.
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We are talking to various people and the, I mean, frankly, I'd love to get the guy currently in there out right now, but people are holding me back. He's done a terrible job hurting housing a little bit. The truth is we've been so successful, we've blown past his interest rate stupidity. He's been wrong. That's why I call him. Too late. He's too late. Jerome Tulay Powell.
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So the president there suggesting that he would like to remove Jay Powell, but people unnamed are holding him back from removing the Fed chair. The president also engaged in a bit of a, I guess a tricky exchange would be the way to describe it with a reporter in the Oval Office who asked him about Jeffrey Epstein and why he doesn't simply release Jeffrey Epstein material now of his own volition. Why wait for the House vote? The president took that opportunity to both criticize the reporter for asking the question and also to criticize Reid Hoffman, the venture capitalist. Larry Summers, the former treasury secretary, as having been far more close with Jeffrey Epstein, the convicted sex trafficker, than himself. The president really unhappy with the question. A difficult exchange there between the president and the reporter, but ultimately saying that the Democrats are more close with Jeffrey Epstein than he ever was in saying that his relationship with Epstein ended badly years ago. He simply didn't like the man. Guys, back over to you.
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Yeah, Eamon. I mean this is fascinating to me, especially given the fact this is supposed to be sort of a big deal, a deal briefing, I guess, if you will focus on technology and oil and defense products, including possibly F35 sales being announced, officially announced, the transfer of American nuclear technology. Any updates on any of those possibilities?
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Well, the President said he's open to the idea of a civil nuclear agreement between the United States and Saudi Arabia. Said that's being discussed. And we saw Mohammed Bin Salman talk about technology, AI materials, all sorts of other areas where they could come to an agreement, but none of that's been signed yet. The anticipation here is that we'll see a series of deal signings this afternoon and those details will become public. But the President seemed amenable to both that civil nuclear deal and selling F35s. He was asked if the F35s from Lockheed Martin that the United States will be selling will be technologically the equal of F35s that the US is sending to Israel. He didn't quite answer that question, but he said yes, we want them both to have top line equipment from the United States and so we want them to be to have parity. So clearly this is a President who is leaning forward in his relationship with Saudi Arabia, both in terms of the security agreement between the two countries, the regional peace talks that the President's been engaged in, and that investment piece here in the United States.
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Yeah, F35 sales to Saudi Arabia could mark potentially a massive shift in decades long policy for the Middle east and how the US views its weapons acquisitions to its allies. All right, image average. Keep us updated. Thank you.
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You bet.
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We're watching Bitcoin. It briefly dipped below 90k, but it's back around $93,000. It's down about 10% in just one week. Sound negative for the year. Is this the bottom or are we headed lower from here? Joining me now is Cosmo Jiang, General partner at Pantera Capital. Cosmo, it's great to have you on.
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Cosmo Jiang
Hi Morgan, thanks for having me.
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Morgan Brennan
Is this crypto winter coming early here?
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Cosmo Jiang
Look, we just had a long six month rally, so some consolidation I think is very reasonable. Crypto tends to have these characteristics of risk on assets. So it's also pulling back on macro action. And you guys have just talked about the large macro concerns like the Capex fear causing the equity pullback, the fears around credit, the fears around the Fed's plan for rate cuts. And because Bitcoin is a higher growth asset, it Also has higher downsides. I think to put it in context, you know, Bitcoin has seen multiple 30% drawdowns during any typical uptrend. Because of that higher volatility, I'd say it's too early to call whether we're entering a sustained downtrend, but certainly this would be in a, this would be relatively typical for any, any, any drawdown.
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Morgan Brennan
At what point as you do see these drawdowns in bitcoin and other crypto currencies right now, at what point does it become a broader issue? You just mentioned Mac ricochets across other margins due to margin calls and the like.
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Cosmo Jiang
So what we already saw is that a lot of the leverage has been taken out of the bitcoin ecosystem recently. Earlier in October, crypto had its own idiosyncratic issue with a large deleveraging event. And so we've already seen a lot of that pain has already happened with the deleveraging. Now naturally, as things go down, there is a little bit of negative reflexivity and certainly market sentiment that drives it. But we feel pretty strongly that especially now that 16% of Bitcoin is held by institutions, which is up from basically 0% lifecycle, we think Bitcoin is going to be increasingly less sensitive to and less likely to have volatility. And over time that, that, that, you know, a 30% drawdown is actually, it will become larger and larger, will feel larger and larger over time we'll see smaller and smaller drawdowns.
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Morgan Brennan
Yeah. To your point, just the fact that Harvard University's endowment fund is now holding Bitcoin exchange traded ETFs kind of says it all, doesn't it in terms of institutional flows into the asset space. How are you viewing this right now? Is this a viewing opportunity? Do you sit on your hands? I guess. What are you doing at your fund?
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Cosmo Jiang
Well, from our perspective, we're long term investors and true believers in digital assets ecosystem. To put it in perspective, our Bitcoin fund, which was the first institutional fund investing in blockchain assets assets, launched in 2013 and since then it's grown at nearly an 80% CAGR for the life of the fund. So that's pretty incredible. You don't really see a lot of assets that CAGR at 80% for over a decade. During that time we as a firm we've lived through four bull cycles, three bear cycles. If we're entering a bear market, now would be our fourth. But it does feel like, you know, if you, if this is an asset that continue to compound at A similar rate than it's done historically and we're getting a 30% pullback here. We do think it's a really interesting opportunity to start, you know, allocating in slowly.
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Morgan Brennan
Yeah, Bitcoin, Ether, stablecoins. I mean is there one or more than one that you think could outperform over the, I guess near to medium term here if we do start to see a rally take root again?
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Cosmo Jiang
Absolutely. We believe in a multi chain world and so there will be multiple blockchains that really succeed. There's Bitcoin, there's Ethereum and Solana has been one of our largest bets recently. We think Solana is the high performance blockchain that's seeing the highest amount of product market fit. The ETFs just launched for Solana. Fidelity just launched their Solana ETF today. So you can get access to Solana very easily and we think that, you know, the amount of growth potential here is massive. What we've typically seen after these large drawdowns is that while bitcoin is the most sturdy of all of them and has the least volatility as a result out of the gate, Bitcoin actually lags all these other tokens like a Solana. And so if we are getting a rebound here, which we think is somewhat probable given the very, very high degree of oversoldness we're seeing in the. But we're going to see these other assets like a Solana bounce a lot harder.
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Morgan Brennan
Okay. Cosmo Zhang of Pantera, thanks for joining me. Well, coming up, this tech stock is down 24% in about a month. It's on track for its first six week losing streak in more than three years. We're going to tell you what it is. Why are a trader is buying the dip here saying any balance sheet concern is overblown. Can you guess? We'll be right back. Join the CNBC Investing club with Jim Cramer's Best Deal of the Year. I started the club to make you a better investor.
- [25:45]
Host/Announcer
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- [25:47]
Morgan Brennan
Join the club now with Jim's Best Deal of the year@cnbc.com ClubBlackFriday terms and restrictions apply. Welcome back to the Exchange. The major averages are all lower right now but well off of session lows. You can see right there on your screen you got the dow down about 308 points here. The S&P is down 1/3 of 1 point. 66, 57, 52 is the level there. That's of course after the S and P closed below its 50 day moving average yesterday. First time since earlier this year, April, May time period. So those technicals are very much in focus. Nasdaq's also down 6. 10 of 1%. A lot of focus right now on the AI trade as we look to Nvidia earnings after the bell tomorrow and the strength or perhaps softening of AI given all the spending we've been seeing going in and whether it's actually resulting in return on investment. You're also seeing flight into safety right now. And that is very clear with what's happening in treasury yields with the 10 year treasury yields right now under pressure right now, 4.13% right there on your screen. Well, coming up, chip makers are among the worst performers in the NASDAQ 100 today. Names like Micron, Marvell, AMD, ARM holdings, those are all down about 3% right now. Up next, we're going to take a closer look at today's market landscape and some of the similarities from the 1980s. And we're watching shares of Metta. Those are lower by about 1% right now. They were as low as 3%. Paring those losses, though, after winning a case against the ofTC with a D.C. judge ruling that Metta does not have a social media monopoly. The FTC had claimed the company shouldn't have been allowed to buy Instagram or WhatsApp. Meta shares, as I mentioned, down about 1% right now, but a big win for that company in court today. The Exchange will be right back. Welcome back to the Exchange. Stocks are off their session lows, but still down for a third consecutive day. My next guest still sees plenty of bullish signals out there, though. Joining me now to discuss Neil Hennessy, chief market strategist at Hennessy Funds right here on set. Great to have you.
- [27:51]
Neil Hennessy
Thank you.
- [27:52]
Morgan Brennan
You know, I was just looking during the commercial break here and it's like, yeah, the major averages are all lower, but breadth is not so terrible here. Most of the sectors in the S and P are actually in the green. And, and you yourself seem to be pretty focused not just on AI and tech, but other parts of the market. Why?
- [28:07]
Neil Hennessy
Well, I think it's important to understand history, to understand what's happening today. If you go back to, say, 1980, I know it's a long time, but essentially in 1980, the 10 largest stocks in the S&P 500 represented 25% of the market. Okay, seven of those stocks were oil stocks. Today you have 40% of the market of the 10 largest companies in the S&P. So 40% is there, but seven of those are tech 1980 oil went to 35, $37 a barrel, all the way down to under $10. The whole thing collapsed. You had the same thing today, except you're using AI or tech or whatever. You have seven companies out of the 10 that now are starting to show cracks simply because they're not bad companies. Morgan either were the oil companies. They're just bad valuations. And there's a big difference between having a good company and a bad valuation.
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Morgan Brennan
It's interesting to hear you say that. Daniel Pinto over at JP Morgan at a conference in the last 24 hours basically said something similar. He said valuations and AI are due for a reassessment here. There could be potential opening for a correction out there. So you see it the same way. What would you be looking for to know that a correction is really taking root or are we seeing it already?
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Neil Hennessy
I think you're starting to see it. The volatility is going to be there because you have betters out there that aren't really investors. So you're seeing the cracks now. But when you talk about say the magnificent seven selling at 42 times earnings, the price of sales ratio or 17. So you're buying a dollar revenue for $17. Doesn't make any sense. Like I say, they're good companies. They cash flow, they make money. They do. That's different than the 90s in tech. In the 90s and the late 90s in tech, they didn't even have products, they didn't have revenue. They just had euphoria. You don't have that here.
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Morgan Brennan
So this doesn't feel like late 1990s tech bubble 2.0 to you.
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Neil Hennessy
It does. It does. But if you look at the other 493 companies in the S&P 500, they're good companies. Not all of them, but the majority of them. And you were just saying the breadth doesn't look like the correction. There's plenty of money sitting out there on the sidelines. I mean you can look at the biggest number you want to look at is $18 trillion in bank deposits. Deposits of which 4 or 5 trillion are in checking accounts. There's tons of money. Let alone the S and P have 7, 500 have $7 trillion of cash. Tons of money, tons of cash flow, tons of profit. It's just going to move and it's going to revolve around where the money's coming out of, which is going to be all this AI hype.
- [31:02]
Morgan Brennan
Yeah.
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Neil Hennessy
To good quality, high quality companies.
- [31:06]
Morgan Brennan
Like what? Like where would you be Putting some money to work right now.
- [31:08]
Neil Hennessy
I mean, you can look at, I mean, this might sound funny, but you look at Casey's General Stor, they're just in the Midwest. They look at, they operate in communities, 20,000 or less people, but they sold 63 million slices of pizza last year and 30 million pizzas. They make a ton of money. And you're buying a dollar of revenue for approximately a dollar. Or you can look at American Airlines. That whole industry is changing from the standpoint that they're getting away of maybe the low end shopper to the high end. And you can buy a dollar revenue, American Airlines for 10 cents on the dollar. Hmm, that's interesting. And then you talk about all the money that's going into say the AI buildout, right? And if you look at that, I was taught 45 years ago that if you're going to buy, you think pork's going to go up, don't buy the pig, buy the feed manufacturer. And so you can look at granite, you can look at all the $500 trillion billion dollars, I mean going into, into the, into the air space. But somebody has to build it. So granted. So would you just move in the money to a sector that's a different sector than where it is now?
- [32:21]
Morgan Brennan
Is what I should draw out of what you're seeing right now and some of these picks, specifically the fact that the economy is going to hang in there as you look to 20, 26.
- [32:28]
Neil Hennessy
Very much so. I mean the consumers resilient has always been resilient. Companies are resilient and they're doing very well in. Just because their earnings come down or they're flat doesn't mean they're not good companies in cash flow. Because you and I can't pay our bills off earnings, we can't pay them out of cash flow. And that's the most important thing to look at.
- [32:51]
Morgan Brennan
Okay. I think we've got to take extra care to look at the commentary from CEOs, I think of Home Depot this morning. There was a lot of nuance in those commentary, in those comments about consumers and what the others like Walmart and the like are going to say this week. It's great to have you here.
- [33:05]
Neil Hennessy
Well, thanks for having me. I appreciate it. All right, Morty.
- [33:08]
Morgan Brennan
Well, coming up, home builders eking out a gain today, but it's been a rough week for the group, down nearly 6%. And while there were more negative headlines in housing today, one corner of the commercial market might be starting to perk up. This may surprise you. We're going to get the read across real estate. That's next. Welcome back to the exchange. The nation's homebuilders are still feeling pretty negative about the state of their market. Diana Olik joins us with the latest numbers. Hi, Dai.
- [33:40]
J
Hey, Morgan. Homebuilder sentiment in November rose very slightly on the NHP survey, but it is still solidly in negative territory. It's also well below where it was last November. The builders cite market uncertainty exacerbated by the government shutdown, along with economic uncertainty stemming from tariffs and rising construction costs. So it's a lot now of the index's three components, current sales conditions and buyer traffic rose a little bit, although buyer traffic is still really low. Future sales expectations fell, but it is still just barely in positive territory. The only measure that is I guess that's the hope trade. Now, did mortgage rates help at all? Well, they're now lower than they were over the summer, but higher than the recent lows in October, builders say still a positive, but again, they think buyers are just just worried about job security and inflation. More builders are now using incentives to get deals closed, including lowering prices. 41% of builders reported cutting prices in November. That is a record high post Covid. And the first time this Measure has passed 40%. Morgan.
- [34:41]
Morgan Brennan
So if they're cutting prices, are they losing money on some of these deals or is it just that they're not as profitable as they once were?
- [34:48]
J
Well, look, they're downsizing some of the houses. They're taking out some of the big amenities. They are cutting some prices. They're also buying down mortgage rates, rates. And so is that affecting their margins? Absolutely.
- [34:58]
Morgan Brennan
Okay. Well, you've also got new insights into another beleaguered real estate sector office. An exclusive interview with the CEO of the nation's largest office REIT for this week's property play. What were the insights? What were the takeaways?
- [35:11]
J
Well, it was a lot, Morgan. Look, we're seeing some encouraging new stats nationally on office the office vacancy rate fell in Q3 year over year for the first time since the start of 2020. That according to CBRE, leasing activity was strong, driven by financial services and technology. And the construction pipeline is on track for the lowest annual total in over a decade. So I sat down with Owen Thomas, CEO of bxp, formerly Boston Properties, who told me what's driving all this.
- [35:40]
Morgan Brennan
I definitely think we hit bottom. I think we hit bottom in 2024. And there are lots of positive things that are going on. For part, not all of the office business so as I always say, our clients are businesses and leasing is driven really by two things, what's the health of our client? Are they growing their earnings? And two, are they using their space? And both of those trends are positive right now.
- [36:05]
J
Positive but not perfect. BXP has a major new office project in Manhattan and Thomas did not mince words on the mayor elect Zoran Mamdani.
- [36:16]
Morgan Brennan
If the city's not successful, we can't be either.
- [36:18]
J
So in your view, you do not see his election as the collapse of the commercial real estate market in New York City?
- [36:25]
Neil Hennessy
Yeah.
- [36:26]
Morgan Brennan
I'm not sitting here saying that I think it's necessarily going to be a positive, but I do think given the approval rights that the state has over many things and some of the early decisions I see him making, like reappointing the chief of police, I think some of those are making us feel constructive about what this outcome might look like.
- [36:48]
J
Now, Thomas did praise New York's tax incentives for office to residential conversions, but added while it is an answer to oversupply, it is not the answer. You can see the full interview. The link is in this week's Property Play newsletter. If you haven't signed up, please do cnbc.com propertyplay use that little QR code, Morgan.
- [37:07]
Morgan Brennan
And it is a great read and chock full of wonderful content. So definitely sign up. I'm curious, Diana. I mean, we've seen it, we've heard about it in places like San Francisco. But in New York, is AI having any impact on the office market?
- [37:20]
J
I think it's not just New York or the Bay Area. It's having an impact everywhere. And it's not just that you're seeing more hiring and things like legal and financial services because of AI, But AI employers say they like to have their people in the office much more than any other side of technology. So you're seeing them take in more office space, more leasing, because they want the people to be in the office.
- [37:41]
Morgan Brennan
All right, Diana Olek, thank you. Well, coming up, used car names bucking today's downtrend America's Car Mart, Group 1 Automotive and CarMax are among the best performers on retail ETF ticker XRT. We're going to get a check on some of today's other big movers and the exchange returns. Welcome back to the exchange markets. Right now, major averages are under pressure. The Dow, the S and P and the Nasdaq, but well off of session lows. Take a look at the Russell 2000, though, because we started this hour with the Russell in the red and it has done a big about face. It's now up almost 9, 10 of 1%. And that of course is as we look under the hood of this market, breadth is actually pretty solid here. You've got all but two sectors in the green for the S&P 500 despite that top line pressure you see right there on your screen. Well, here are some of the movers this hour. Energizer shares are plunging to a new all time low as the battery maker warns of a weak start to the new fiscal year. That's thanks to tariff costs. Company expects net sales to be flat to slightly up. That's while gross margins are expected to decline modestly. Those shares are having their worst day on record, down about 16 and a half percent right now. Cloudflare, that has pared its losses after getting hit with an outage that knocked out several major websites today including Chat, GPT, Shopify and X. Those shares are still on pace for a six day losing streak. They're down 18% in that time and currently down about 1.5% right now. On the flip side, some of the names hitting all time highs, Eli Lilly, Welltower, Ventus and Solstice Advanced Materials which was just recently spun out of Honeywell. Eli Lilly is now up 50% in three months closing in on a $1 trillion market cap for the first time ever. $1,057.77. That's the share price to watch there for that trillion dollar mark for Lilly as Tirzepatide continues to take market share and captivate investors here even as Novo continues to be out of favor. While still ahead, the tech wreck continues. Microsoft, Nvidia, Amazon shaving nearly 130 points off the NASDAQ 100. But our trader says this large cap tech name is looking fairly valued amid the sell off. It's our second mystery chart of the hour. Can you guess? We'll let you know on the other side of this break. Welcome back. More developments on Warner Bros. Discovery. Let's get back to Julia Boorstin.
- [40:39]
Julia Boorstin
Hi, Paramount Skydance responding to the Variety report that it is preparing a $71 billion bid with three Arab sovereign wealth funds. But Paramount shooting that down. Paramount Skydance saying, quote, the information Variety published is categorically inaccurate. This is a confidential process which we respect and as such will not be commenting until the process is over. Earlier we reported that Variety headline because Paramount Skydance shares were moving on the news. Now we see shares are still up about 1.8%. Back over to you.
- [41:10]
Morgan Brennan
All right, Julia Boorson. Thank you. The AI trade continues to collapse with tech one of the worst performing sectors today. CNBC's Mag7 index down about 6% so far this month. While investors await further insight from Nvidia's earnings tomorrow, our trader has one large cap name she says is looking reasonably valued for tech at least. Joining me now, Victoria Green, CIO at G Squared Private wealth and a CNBC contributor. Victoria, it's great to speak with you. The suspense, the suspense is killing me.
- [41:38]
Host/Announcer
What's the name in Oracle, my reasonably valued tech name, which you always have to say reasonable for tech because it is still a little bit expensive. But it's back down to trading at norms. It's no longer extended. RSI is now an oversold. It's holding above the 200 day moving average. It's down 30 plus percent from its highs. I look at this stock and I like it. And I understand there's been a lot of noise about Oracle, about the debt, about the open air margins. I look at that and I say they're still going to grow exponentially the next five years. I get the people are saying things, Financial Times came out being like, oh, but basically they're going to pay open air to, to work with them. I don't think their margins are quite that thin. And I think this company is well poised for all of AI. Their databases are set up for both public and private. They have access to everything. So not only are you getting Gemini Chat, gtp, lama access to those models, you also then can tie in your private data and keep your private data private. So as AI shifts from not just training but to actual inference and running AI, Oracle is, is poised to pick up growth here. And they've talked about it at their analyst day. They're talking about accelerating growth here from 15% compound growth to 20, 25% compound annual growth and especially from that database center. So I look at this stock, I think it's oversold. It's a buy for me. And I dug deep, I had a soul search moment on Oracle since we own it in portfolios. And I think for me, I see Oracle regaining its highs and I look at this stock and I think relatively cheap. Absolutely.
- [43:00]
Morgan Brennan
Interesting. And to your point, we do have an annual meeting of stockholders for this name right now and it has had a huge move over the past month to the downside retail earnings. This week you got tjx, Target, Lowe's, Walmart reporting. What do you think here, especially coming off of Home Depot this morning where they cut guidance.
- [43:18]
Host/Announcer
I know But Home Depot was a little specific to Home Depot and Home Repair both with the housing market being slow and lower disasters that actually dragged on their earnings. I love Wal Mart here. To me this is such a well run company that knows their consumer and when you think Walmart, you it's synonymous with value and that is what we've seen the consumer time and time again look for. They want value. Over 90% of the US population lives within 10 miles of a Sam's Club or a Wal Mart. They know how to price things. They know how to price Thanksgiving to make it affordable. Even if the basket's trading down. They understand our consumer may have to make choices, may have to make cuts. They still want to give them some type of Thanksgiving and holiday. They've done that time and again across retail, across E commerce. This is a well run company. I'm excited about the new CEO. He's been around Walmart since 1993. Was an hourly Lee associate. This guy understands the culture here and he can make Wal Mart run the next decade as consumers trade down. We've seen this be the place to be. And I really prefer Wal Mart right now over target.
- [44:14]
Morgan Brennan
Okay, how about Bitcoin? You got that? Touching its lowest level since April. It's bounced back a little bit here. But do you go anywhere near crypto currencies And I guess just as importantly, how does it reflect across the rest of the market?
- [44:26]
Host/Announcer
Look, I don't think it's necessarily the canary in the coal mine. I think maybe crypto had a little Icarus moment. It flew a little too close to the sun there at 125. I think you're going to have plenty of buyers coming in for Bitcoin. I don't see the institutional changing. Look at what Harvard did. You know, with I bet now being its largest single holding institutions, financials, family offices, endowments, they're going to start buying this asset class. I see that as a buy the dip moment. And that's why I like Coinbase. I think Coinbase is so well positioned because it's not just retail trading. I know that's what everybody thinks for Coinbase. But 43% of their revenues becomes from this, from services and from subscription revenue. And they have so much custodial revenue coming in. Almost all of the major ETFs for Ethereum and Bitcoin custody at Coinbase. I'm talking about your Bitwise as your Blackstone. Your ark funds they custody at Coinbase. So they've got that revenue coming in. They have transactional revenue coming in and if we have a bounce here on bitcoin, that's going to be great for Coinbase. But this is an everything shop. This is not just the crypto shop. They've talked about being the future of finance and I believe in them as a, a fintech platform and not just a crypto plating platform.
- [45:30]
Morgan Brennan
Okay, Victoria Green, thanks for joining me.
- [45:33]
Deirdre Bosa
Thanks, Morgan.
- [45:33]
Morgan Brennan
A lot of context there. Well, I will see you again on closing bell over time. That kicks off at 4pm Eastern. We're going to talk to the head of Swiss industrial giant abb. The company is trying to bring cleaner electricity to Europe to the US they're focused on industrial automation and they're having an investor day today. But that's going to do it for us here. Thank you for watching the Exchange. Parallel starts now. You've been listening to the Exchange.
- [45:55]
Christina Parts Navalis
Make sure you're subscribed to get each episode every day, same time, same place.
- [46:01]
Cosmo Jiang
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Morgan Brennan
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Neil Hennessy
Be on the floor.
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Morgan Brennan
I just can't believe I'm here.
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Cosmo Jiang
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