← The Exchange
The Exchange
Shutdown Wind-Down, Big Gains for Small Names? & a Top Tech Pick 11/11/25
00:43:55
The shutdown may be coming to and end, but its impact will last a while longer. We look at the ripples across the markets, travel, and holiday spending. Why you may want to skip large-caps in favor of smaller names. Plus, our tech watcher says stick with the sector and one name in particular.
Loading summary
Transcript68 lines
- [00:01]
A
Introducing Fidelity Trader plus, the next generation of advanced trading from Fidelity. Customize your tools and charts and access them seamlessly across desktop, web and mobile. For faster trades anywhere you go, try the all new Fidelity Trader Plus. Learn more about our most powerful trading platform yet@fidelity.com TraderPlus investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC Member NYSE SIPC hey there. It's Dr. Sanjay Gupta with some exciting news to share. CNN is now streaming. That means you can read, watch and stream everything in one subscription. You can watch news live 24. 7. You can also explore catch up videos and explainer videos. And you can also watch the library of CNN's originals, including my latest documentary, it doesn't have to hurt. Just go to CNN.com/All Access.
- [01:00]
B
You're listening to THE Exchange.
- [01:02]
A
Here's today's show.
- [01:06]
B
Welcome to THE Exchange. I'm Morgan Brennan in for Kelly Evans. Well, stocks mixed with tech. Tech once again leading the decline sets after the NASDAQ delivered its best day since May. We're at session highs for the dow though the MAG7 adding $585 billion in market cap in yesterday's session alone. Today, though, more concerns about the trade cor the latest company to deliver yet underwhelm investors. That stock is down about 13, almost 14% right now. Nvidia also lower as SoftBank sells its entire stake in the company down about 3%. And we're keeping an eye on AMD as that company's first investor day in three years is underway right now. And CEO Lisa Su is giving her keynote speech this hour. Those shares are down. Tech is where we start today with that trade once again under pressure. But my next guest remains constructive on the sector with Amazon his top pick from here. Joining me now, Mark Mahaney, head of Internet research at Evercore isi. Mark, it's great to have you on. It's interesting to me because we went into the earnings season and the narrative was you want to see all these hyperscalers increase their capex, increase their spending. That'll be a bullish sign. And now we're coming out the other side of earnings. They all did that and everybody's worried that they're spending too much. Your thoughts?
- [02:21]
A
Well, I guess it depends. It's company by company. So of the three MAG7 stocks that I cover, two of them did ramp up. All of them ramped up their capex spend, meta, Google and Amazon. But the market was partial and took up nicely the stocks of both Google and Amazon because I think there were other Parts of the story. And then they started really proving in the case, at least on Amazon, that yes, they're probably an AI winner because you got this 20% plus growth for AWS you can now sort of count on. It was very uncertain about a month ago, but now you can kind of count on it. So it depends. Look, AI spending, Capex spending is rising above for all, is rising materially for all the hyperscalers dollars. But these companies are also showing what I call roi Morgan. It's, you know, return on AI spend instead of return on investment, it's return on AI investments. And you can see that in their revenue per employee and their operating income per employee. That's really inflected up. There's a lot of different factors in that, but one of them certainly is productivity gains from AI. They can continue to show that. I think some of those stocks can continue to outperform. That's one of the reasons why Amazon's at the top of our list.
- [03:25]
B
Got it. Do you wait for a pullback here, which I guess you could argue we're getting right now because valuations are stretched, or do you actually see these companies growing so strongly that that the valuations aren't an issue here?
- [03:37]
A
Well, I throw a couple of things also by you. You know what? Some of the other takeaways that will affect AI companies too is consumer demand. But I look at consumer demand and one of the reasons Expedia is my number two pick is that consumer demand in what is probably the most discretionary of all categories, travel has actually remained pretty resilient. It snapped back from the June quarter where there's some softness to the September quarter. I'm not sure it's above trend line. I mean permanently, I don't believe that. But I think that demand is showing that a fair amount of resilience from consumer spend. That's really helpful to a category like I cover Internet, which is very heavily levered towards discretionary spend. So there's that element too. And then it depends on the product cycle and how big the investment cycle is that each of these companies are. So Meta is not one of my top picks in part because you need kind of a super catalyst for all of that money that they're putting into superintelligence. I think you'll get it, but I don't think that's going to. It's really hard to predict and I don't think that comes until sometime next year. So there are a few places where I think you kind of hold off a little bit.
- [04:35]
B
So in light of that, why, why is Amazon your top pick? What is it about Amazon specifically right now?
- [04:40]
A
Yeah, right. Specifically right now. You just got the unlock from us. You finally got this thing above 20% and that growth could get better than that next year. The demand across the industry is super strong. There's open air deal that they did. The capacity is really coming online. Amazon and then the rest of the business. Look, I've got my, what I call these amplification catalysts. Advertising revenue is still clicking well north of 20%. It's wonderful for Amazon's margins. The retail business is doing just fine at about 10, 11% growth. And those operating margins that have really gapped up for the, for the retail business the last couple of years, I think they continue to gap up. It's a reflection of automation, robotization, greater efficiencies in their retail business. And then I love some of the newer products that are coming out. Two in particular I'll highlight, one is Kuiper. We're going commercial satellite Internet for Amazon next year. I think Starlink has proven that this is a big opportunity. I think Amazon can participate too.
- [05:33]
B
Yeah, I think you're right. I think 2026 will be a very big year in terms of the satellite ambitions that are worth tens of billions of dollars of investment at Amazon. We haven't been talking about it enough. Well, perhaps other than me, the resident space lady here at cnbc, I want to get your thoughts on another name that's had a strong run this year but you think could go higher and that's Netflix.
- [05:56]
A
It's my number three pick. It's. I wish it was dislocated. It's not dislocated, you know, so it's hard to get super pumpy on the idea. And I guess Morgan, in all fairness, there's not that much dislocation in the space. I mean we're close to all time highs and a good number of the stocks, the high quality large cap Internet stocks that I look at and there's really, you know, or beginning of the year was Uber and then four or five months ago I thought your best DHQ candidate was Google. I don't really have a great candidate now. I think there's a little bit of rerating opportunity for an Amazon or for Expedia, Netflix. I don't think that multiple goes any higher. But there's two catalysts I really like. So this is kind of a momentum call with the catalyst twist. And the two catalyst twists are, I think they have a golden invitation to raise Prices, if they want their two biggest competitors are 50% higher. Disney's 50% more expensive than Netflix for its basic ad supported plan. I mean, and Netflix's content slate is super strong. So I think they have the ability to raise prices that will help. And I just think street numbers for next year when they give that guidance for 2016, I think street numbers are too conservative. So in the next three months, I got two capitalists on Netflix. Is it going to re rate dramatically from here? No. But can it compound and maybe re rate a little bit? Yes, that's why it's one of our top three picks.
- [07:07]
B
It's interesting because you mentioned that Expedia is your most out of consensus call and the fact that you see consumer demand remaining resilient here. If you would be focused on something like that right now, and it's contrarian, what would you be actually staying away from?
- [07:24]
A
Oh, okay. Well, we had two, I look at the space I look at had two stocks that gapped up a lot on earnings and I'm not sure I buy those moves. So we had a lot of stocks that traded off and some of them I agree with and some of them I don't. The two that traded up the most, my recall is one is Snap and I've forgotten the other. Oh, Lyft. Hmm. I'm not sure. I'm not sure I'm chasing those two names. Snap is, it's got the same problems that a Pinterest has if you're a second tier advertising asset in a space where Google and Meta just gave you accelerating ad revenue growth and Pinterest and Snap gave you decelerating. I think those things are correlated. So stock that gaps up a lot on a though they also gapped up on this perplexity deal. But you know, you can only pull so many strategic deals like that out of a hat. So I'm a little cautious on that move. And Lyft, you know, look, it's under better management. David Risher is a much better CEO than the people who, than the CEO that he replaced. I give him full credit for that. It's just I'd much rather buy Uber than buy Lyft. So I, I'm not, I'm not a big fan of following up on that Lyft move.
- [08:28]
B
Got it. Mark Mahaney, thank you. Lot of names for our viewers to consider. Evercore, isi, great to speak with you as always. Well, let's stay on tech. And I met his chief scientist, reportedly planning to depart the company to form his own startup. This is amid CEO Mark Zuckerberg's massive AI restructuring. Deirdre Brosa has more on what that exit could say about where Metta is in the air race. Heidi Meta spots always feels like it's always changing in the air race. But Yann Lecan, this is a really important departure because he is of course one of the most influential, one of the most respected names in his departure. It also follows a number of other senior AI researchers exiting Metta over the past year. So in their place leaving big product hires like Alexander Wang, Nat Friedman to run the show. The thing is though, Zuckerberg is leaning into he's chasing super intelligence and can he really reach that goal without Those white paper PhD researchers who built its AI foundation? Now look at where matter has been. It's been a bit of a roller coaster. It went from leading a key field of AI with Llama, one of the most capable open source models on the market when it launched, to now really just chasing the pack product launches, hiring sprees, newer Llama models that have fallen behind their Chinese counterparts. This is where we are now. And as a result investors are losing faith Meta shares over the past three months they have massively underperformed the other mega caps markets. They're rewarding players that are selling basic AI services today like a Google has really been able to show less bullish on companies that are chasing uncertain moonshots like superintelligence and ever higher spending that Zuckerberg now as for gain Lacan the FT reports that he will pursue his own venture following a pattern that we have seen of AI leaders leaving big companies to raise money on their own.
- [10:17]
A
Ilya Sutskever Miramoratti from OpenAI the key.
- [10:20]
B
Question here mor is can they also build products? So far little to show aside from those billions of dollars raised. But what we're seeing is really sort of a fragmentation away from these big companies like Metta and OpenAI researchers and other sort of AI minds doing it on their own because money is still so flush in the private markets. How much of this when you see some of these names that you just laid out exiting their companies to start their own things, how much of this is. Is because there's so much capital out there and there's so much excitement and they can get those ideas funded versus shifts in these bigger companies in the ideology around AI and the approach to it, which is a. Which is, you know, sort of. There's two different camps I would argue within the American AI scene these days. This is such a hallmark of how AI has developed over the last few years. Right. There's really different philosophies.
- [11:14]
A
You see like an anthropic come from.
- [11:16]
B
An open AI because they believed in responsible, more safe AI.
- [11:20]
A
We know that Yann Lecan had kind.
- [11:22]
B
Of had a different philosophy than where Mark Zuckerberg was heading. He was skeptical of the push to artificial superintelligence. I think we showed you that header that said that, you know, I still isn't as smart as a dog. So that put him at odds with.
- [11:35]
A
A Zuckerberg and then you put the.
- [11:37]
B
Cash on top of that. Morgan, as you mentioned, there is so much money available. You see billion dollar seed rounds for the folks that left OpenAI. That's an incredibly compelling proposition to again look on who by the way, has also sort of had to take a back seat when they brought in Alexander Wang, who is a product guy, he's not a researcher look, and had to report to him. So this isn't all that surprising. But what it means for matter in the long term, that's going to be really, really interesting because everyone I talk to says that you need these researchers to really develop if you, especially if.
- [12:09]
A
You want to get to ASI like Zuckerberg does.
- [12:12]
B
Okay. Deirdre Bosa, thank you. I want to mention that AMD CEO Lisa Su is making her keynote address right now. You can see that on your screen. It's the company's first investor day in three years. We're going to monitor that. Bring you any news. Shares of AMD are under pressure amid the broader pressure we're seeing selling pressure in tech right now. But the big thing in focus here is going to be that longer term forecast for artificial intelligence and what it means for amd, especially given the flurry of deals that they've announced in the last couple of weeks. Well, coming up we will head down to Washington where the longest government shutdown in history appears to be in its final days. Got a look at how quickly things could reopen and what the timing of it all means for consumer spending this holiday season. Plus earnings season is not over yet. But Citi's US Equity strategist says the bar is getting higher and higher. He's going to join us with his take on the market and where he sees things going into year end may surprise you. Stay with us. The exchange will be back after this.
- [13:17]
A
This is the Exchange on cnbc.
- [13:24]
B
Hey friends, this is Audie Cornish, host of CNN this morning. And the assignment. And guess what? Every story you care about, every angle you want unpacked is now streaming on cnn. That means you can catch my show or other CNN programming whenever you want on your favorite device. And a subscription also gets you access to exclusive video series and unlimited articles. So subscribe to CNN@CNN.com Subscription for 140 years, MultiCare has been in Washington prioritizing long term solutions, partnering with local communities and expanding access to care. Together, we're building a healthier future. Learn more at multicare.org@capella university. Learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the courseroom to the workplace. A different future is closer than you think with Capella University. Learn more at Capella Eduardo welcome back to the Exchange. The longest US Government shutdown in history could finally be on the verge of ending. And Emily Wilkins is in Washington with the latest. Hi Emily. Hey, Morgan. Well, yeah, the House members are heading back right now to Washington, D.C. where they are set to vote and the shutdown tomorrow afternoon. And look, most Democrats, Democratic leadership, they do oppose this bill, but nearly all Republicans are unified in supporting it. Even the fiscal hawks in the House, the Freedom Caucus, are calling the bill a huge win. Now, Trump has already declared victory today at an event with Speaker Mike Johnson.
- [15:01]
A
And congratulations to you and to John and to everybody on a very big victory. We're opening up our country.
- [15:08]
B
Should have never been closed. Should have never been closed. Once the government is reopened, federal employees are under law required to get their back pay as soon as possible. We're also expecting for some of that economic data to be released as well, although of course, because data collectors at the BLS were furloughed, other data might not come out or take a while or be based on retroactive data. Expecting to get some more clarity on that. Meanwhile, Congress is now turning their attention to whether they can extend those Affordable Care act tax credits before they run out at the end of the year. The credits helped keep costs low for millions of Americans when it comes to health care premiums. Democrats who voted to reopen the government are confident that it will help force Republicans to come to the table. But Republican senators that I spoke with yesterday are looking to make bigger changes to things like HSAs and FSAs, as well as changes to the Affordable Care act itself. The Senate is set to vote on a potential path forward in mid December. Morgan. So just in terms of the next couple of days, House potentially votes tomorrow. You get the government up and running, but by the week's end and then what, a few more days before things like air travel start, start to normalize. Yeah, Morgan. I mean, it is going to take some time for a few of these things that have really been impacted, like air traffic to really get back to more of a normal pace. But for a lot of the federal employees, we know that under the law they are expected to get their paychecks as soon as possible. So no waiting until the next pay period. And I think a hope that really in the next week or so you get things back to normal. Of course, a part of this bill will only fund the government until January 30th. And I think it is going to be something to watch to see if we get into a partial shutdown at that point. Oh boy, I hope there's no deja vu on that front. We'll have to see. We'll wait and see. Emily Wilkins in Washington. Thank you. Well, government paychecks could resume right before the Thanksgiving holidays you just heard Emily mention. And according to the latest report from the conference Board, that may come just in time with holiday spending plans, the lowest on record. Joining me for more is Steve Odland, president and CEO of the Conference Board. Steve, it's good to speak with you. And that that stat takes me by surprise, especially given the NRF stat. We saw where they suggested we could see the first trillion dollar Christmas or holiday season. What are you seeing in your data and why?
- [17:28]
A
Yeah, well, the NRF stat is a little narrower than ours. Ours is all holiday spending and travel on clothes, on parties, on food, the whole thing. And, and it's expected to be down a little bit. However, when you look at where that is, it's not among the wealthier consumers. It's not among the older consumers. It's among the younger consumers who are strapped. So the shutdown relief comes just in time for the Black Friday sales. When you look at where the younger people are going to spend, they're going to spend in, in November, not in December. And so they plan to necessarily not buy fewer things but to spend less on them because of all the deals. This should in turn pressure retail margins this season.
- [18:12]
B
Interesting. I mean, we have seen the ding to consumer sentiment and all of those types of readings, including your own, amid this government shutdown. Of course, this is the longest one on record now. So is the expectation that you start to see some of those sentiment readings recover from here?
- [18:29]
A
Yeah, the conference Board's consumer confidence index was down, but it's been, you know, roughly in a range here. People are waiting for the inflation to ameliorate. They're waiting for you know, the next step on the, the tariffs and the trade deals and everything. But it's all around jobs. And jobs are pretty secure here, even though there are layoffs. And from a, you know, from a company by company standpoint in the economy in total, jobs are pretty stable. Wages continue to go up. So there's still cash out there, there's still consumer debt available, even though that is at an all time high as well. So I think people are going to spend, they're going to buy the gifts that they're just going to be really selective on what they buy.
- [19:12]
B
Yeah, I mean, if promotions are going to be in focus and we don't have the same sort of promotional environment we've had in the past, maybe perhaps in part because of tariffs and leaner, meaner inventories at retailers, do we know how that ultimately results? Does that mean folks paying more than they intended to and maybe you have a quieter spending period coming into the beginning of 2026 or does it shake out a different way?
- [19:35]
A
Well, you know, people always say one thing and don't always do what they're going to say. So even though this survey says that they're going to spend a little less, they may not. I mean, you know, if they have cash, if it comes back, if they replenish, if they've got some debt, you know, they tend to get a little antsy and you know, want to buy a little bit more. I think you'll continue to see that pressure. Our consumer based economy wants to spend and then you'll see a little bit of a bump again when the sales start in January. The question is where does inflation go? Because the tariffs are impacting inflation. We project at the conference board by about 50 basis points here in the latter part of the year. If that starts to ease off, well, inflation comes down, that gives us some more breathing room and some more room for growth.
- [20:22]
B
Looking at these findings, 70% avoiding travel and staying close to home. And you say that similar to last year. Is that an inflation story as well or something else?
- [20:32]
A
Yeah, it's, well, it's partially inflation and partially because it's just awful to travel right now. You know, the, the elected officials are coming back to vote. I don't know if they're going to get here because everything's closed. It is just so hard. And I think people are going, yeah, I just don't want to go through that. So there's a little bit of, of that. But if that eases off and the air traffic controllers get back, it gets easier to Travel again. I think you'll see some spending.
- [20:56]
B
All right. Steve Odland will be watching. Thank you. Well, coming up, the trade has come under pressure lately and that's trickling down to some quantum computing names like IonQ. The shares are down more than 30% since last month's record high. We will speak exclusively with the CEO about the next catalyst for the company, what it all means for Quantum. And as we head to break, check out the Dow and S and P. Those are at session highs right now. The Dow's up 538 points, 1.1% as we've seen this rotation broaden out even as tech is under pressure with the Nasdaq down fractionally. We will look at some of today's biggest moves though. That's coming up after the break too. The Exchange will be right back.
- [21:46]
A
Think of your commute, your train, your car, maybe your walk. Even if you don't realize it, crypto and blockchain innovations are all around you on your way into the office. So why not learn about them on the way? From institutional custody solutions to 247 cross border payments with nearly real time settlements, crypto and blockchain are shaping flexibility and innovation for institutions all over the globe and your city. Join Ripple and host David Schwartz for crypto and blockchain conversations on Blockstars, the podcast it's happening with Ripple. Hey there, it's Dr. Sanjay Gupta with.
- [22:19]
B
Some exciting news to share.
- [22:21]
A
CNN is now streaming. That means you can read, watch and stream everything in one subscription. You can watch news live 24 7. You can also explore, catch up videos and explainer videos. And you can also watch the library of CNN's originals, including my latest documentary. It doesn't have to hurt, just go to CNN. Bitcoin.comAllAccess.
- [22:48]
B
Welcome back. The Dow and S and P are at session highs right now. The Nasdaq still in the red but well off its session low of nearly a percent. John Dom Chu has a look at the day's biggest movers.
- [22:58]
A
All right, so how about the biggest gain in the S and P? Those are shares of paramount Skydance, up 10% after the movie studio TV company made its first quarterly earnings report since its merger. Those results were disappointing compared to estimates, but investors like what they're focusing on in terms of plans for future cost cutting. Also job reductions. Also plans to raise prices for its Paramount streaming platform. Then you got shares of Rocket Lab higher by 3.5% after the space company reported a smaller than expected loss, better than expected revenues. The revenue metric, by the way, hit a record due in addition to several new launch contracts including initiatives from the government like the Golden Dome missile system. And we'll cap things off with a slate of different companies across various industries at&T, Disney, Freeport, McMoRan, Progressive and Amcor. So what do they all have in common? They're all being highlighted by B of A as potential opportunities for a trade buy rated stocks that are trading at a reasonable valuation and not directly tied. This is big to the AI trade, so keep an eye on those names. For more on those other top analyst calls of the day, just head over to CNBC.com/pro subscribers. Get all the access to detail around those big calls each day. Morgan, I'll send things back over to you.
- [24:02]
B
All right, Don Chu, thank you. Now let's turn to Sima Modi for a CNBC news update. Seema Morgan, Venezuela is deploying weapons and planning for a guerrilla style resistance in the event of a US Air or ground attack. That's according to a report from Reuters. This as the president sends the largest U.S. aircraft carrier to the Caribbean. Trump has floated the possibility of ground operations in the country following strikes on alleged drug trafficking vessels in the Caribbean. Bank of America CEO Brian Moynihan plans to ask for a meeting with New York City Mayor Elect Zorn Momdhani, Moynihan telling Fox News this morning he hopes Mamdani will engage with the company and that they have an obligation to try to make the city successful for bank of America's 16,000 employees in the area. And Cristiano Ronaldo said the 2026 FIFA World cup will definitely be his last as a player. The 41 year old Portuguese superstar who also plays for Saudi club Al Nasser, told CNN he expects to retire from soccer in one to two years. Portugal is expected to qualify in the coming days for the World cup that will be hosted by the U.S. canada and Mexico. Morgan, that is big news. Seema Modi, thank you. Well, coming up, despite the negative headlines surrounding valuations in the tech trade, the S and P is less than 2% away from a new all time high. How about that? What will it take to get there before the end of the year? We're going to ask Citi's Scott Kroner about that and where he sees the biggest opportunity in this market right now. Stay with us. Welcome back. Large cap stocks have led most of the way this year largely due to AI. But my next guest says smaller names are beginning to stand out with the roughly a quarter of the small and mid Cap companies that beat and raise this earnings season now being rewarded more than the large caps. So how can you play the space? Well, joining me Now, Scott Kronert, U.S. equity strategist at Citi. Scott, it's always great to speak with you and let's start right there. Especially in a day where the market seems to be pulling back from session lows here to to do an about face. You like the small and mid caps? Why?
- [26:11]
A
Well Morgan, I think there's a couple of things at work here. What we're arguing is that as we go into the end of this year the market is increasingly paying for 26 earnings growth expectations. We certainly going to get follow through out of the Magic 7 Air affected part of the market in the next year. I think that's pretty visible from our approach. But incrementally we think the setup here begin to get more constructive as you go down cap. If you look at consensus expectations right now, they are for essentially the small mid cap part of the market going from low single digit earnings growth this year to low double digit digit next year. And then importantly the teaser here to your point is as we've gone through the Q3 reporting period, those companies in the SPIT split space, they have delivered what we call a b and raise plus that is they've raised Q4 and 2026 guidance, have seen an outperformance dynamic even above that of the S&P 500. So the bottom line here is that we think the focus here is very clearly shifting to 26 earnings growth setups. Yes, large cap is going to have that, but the catch up fundamentally actually has a bit more of a downcap bias to it.
- [27:23]
B
Interesting. What, what spurs that earnings growth in these smaller stocks? What, what is I guess propelling the catch up here?
- [27:31]
A
Well first the compares. You're coming off of essentially two years of down earnings. So, so the small mid cap space has been in its own version of earnings recession which probably reflects the more traditional under underlying macro environment where that mag7ai component has been very differentiated. So now we're coming through a year of a lot of administration policy noise which to a certain degree should be behind us as we go into 26 at least on a relative basis we potentially get another Fed rate cut or two. So from, from a, from a rate sensitive component you begin to kick in. All told, what you're going to get with us SMID is a higher level of economic sensitivity versus large cap. And in so doing as we go through this period of policy indigestion leading to the other side of that, with some help from the Fed, the setup economically should at the margin be pretty good for the small mid cap space.
- [28:27]
B
Okay, that being said, let's Segway here to some of the bigger cap companies. There's obviously a lot of scrutiny now on the trade. What are your thoughts?
- [28:37]
A
So I look it, I think when we look at the spending dynamics under the surface for the trade, I think what we're talking about is two discussion points, persistence of the spend and the tailwind. And that persistence has pretty good line of sight for capex spending improvement out to the end of the decade. Then there's magnitude of spend. Right. And this is where you're going to get into how quickly do you spend, how quickly can you spend and how quickly can you for investors justify a return on that spending? What that's going to lead to is ongoing bouts of volatility. So the way we're thinking about this is there's no question the AI tailwind should persist next year. We want to have exposure to it, but we have to allow that. It probably gets increasingly idiosyncratic from a stock selection perspective. So we're still on page with overweights and semis and software. But for example, we had lowered comm services, the media component of it, to a market weight after two and a half year overweight. So we're getting a little bit more focused on where within the playbook we want to be. But what we still have ahead of us is all of the other companies that aren't directly associated with AI that are beginning to implement AI processes in their workflows. Ultimately what that does in terms of our structural bull case for US equities sets us up longer term for where we get higher level of productivity. Presumably we see higher margin structures, higher profitability, lesser earnings volatility and through a cycle we think investors end up paying a higher valuation for that.
- [30:12]
B
Interesting. So the takeaway here, whether it's within something like the S&P 500 or it's in small or mid cap stocks, is that we have a rally that's going to continue to broaden.
- [30:23]
A
Yeah, I think, I think this broadening notion is spot on, Morgan. Again, the starting point here is I think it's a bit premature to be coming out of that AI playbook. Yeah, it still has very good fundamental underpinnings and so we need that part of the market for any move higher in the index. The weight is sufficiently large that it's sort of a mission critical to indexes moving higher. But that to the degree that you get other sectors beginning to contribute to the index level price action, what that does is it gives you a broadening effect that gives you a bit more confidence in an underlying index trajectory that should still be up into the right next year.
- [31:00]
B
Got it. Scott Kronert of Citi, great to speak with you as always. Thank you.
- [31:04]
A
Thanks, Morgan.
- [31:05]
B
Well, coming up, airlines expected to cancel 6% of flights out of major cities today to comply with the FAA's recent mandate. And while the longest government shutdown ever might end this week, there could still be some lasting impacts across the travel industry. Hate to break it to you, but we're going to look at those and get a little more detail when the Exchange return. Welcome back to THE Exchange. The government shutdown may be ending soon, but its ripple effects on the travel sector will be felt a bit longer. Phil LeBeau has the latest on when things may go back to normal for flyers. And Contessa Brewer joins us with the impact on the hotel industry. Phil, let's kick it off with you.
- [31:50]
A
It's another rough day, Morgan, when you look at what's happening with flight cancellations and delays, not as bad as yesterday for a couple of reasons. One, fewer flights on Tuesdays and Wednesdays and Saturdays compared to the other days of the week. And that storm system that rolled through Chicago and into parts of the Northeast, that has essentially gone away. So you've got more than 1200 flights canceled, delays getting close to 1800. That's according to FlightAware. Here are the cancellation rates today, tomorrow, and for the rest of this week. And I know people are saying, well, once the government shutdown ends, everything snaps back, right? Not necessarily today and tomorrow. Six percent are the flights to the top 40 airports. Thursday, it'll be 8%. And the DOT is monitoring air traffic control staffing. In fact, Sean Duffy, the secretary of transportation, will be giving an update this afternoon in terms of what they're seeing and what they're expecting. They make the final decision in terms of telling the airlines, okay, let's go bring all the flights back as quickly as you can bring them back. But I've checked in with the airlines. They are planning to bring back flights as quickly as possible. But think of this like you would see a major storm hitting a couple of metropolitan areas. You just can't snap your fingers and everything goes back to normal. That's why as you take a look at the airline stocks, they're all under a little bit of pressure. Bottom line is this, Morgan. Let's say theoretically, the government shutdown officially ends Wednesday night. Thursday is still going to be probably a rough day in terms of cancellations because the airlines are already making their plans. Friday you start to see the flights coming back, but it's not going to be a full snapback. It would likely be into the weekend before you could say, ok, we're seeing the scheduling that we saw before the government shutdown.
- [33:29]
B
Okay, Phil LeBeau, thank you. Now let's get to Contessa Brewer and the shutdown impact on the hotel sector. Contessa. So Morgan, the continuing shutdown is really taking a toll on hotels here which have missed out on nearly 7 million room nights and $1.24 billion in lost revenue so far, according to OysterLink, which is a hotel industry platform. Now, the American Hotel and Lodging association at the outset of the shutdown estimated that hotels would lose $31 million a day across the nation. But that was before flights were getting canceled and travelers were getting stranded. On his third quarter earnings call, before all of this, Hyatt CEO said, look, it's naive to think air travel restrictions won't affect travel more generally. And Hilton's chief financial officer said that they've had to factor in the government shutdown into their fourth quarter estimates. They had trimmed expectations on revenue per available room for the full year. And Marriott CEO pointed out that government bookings last quarter were already down 15% year over year before the shutdown down because of DOGE budget cuts. Well, even with all signs pointing to the shutdown ending soon, a new flashpool from the hla. Again, that's the industry trade group for the hotel industry. It shows that the damage is done. Already 37% of adults said this has affected their future travel intentions. Now they're less likely to travel. Watch for those trickle down effects. If there's a silver lining, Morgan, it's that if you're stuck in, say, Chicago and you can't get out and get back home, well, you're booking a hotel. Got it. Is that okay? I guess that's a silver lining. So. So I guess the point here is that this is revenue that's lost and will never be regained in another way. Again. That being said, what is the outlook for holiday related travel and what that will mean for the hotels? Is there a way to sort of recoup some of it there? Yeah, I mean, I think that that all depends on how quickly we get back to business. Let me take you to Las Vegas, a city which I cover and I know really well they are looking forward to at the end of November to F1 being there. There's Thanksgiving, there is a Raiders home game, there's a UNLV home football game and then they go on Thanksgiving and have the rodeo. That all brings lots and lots of people to town. They want this to all be cleared out because they want all those people. Could there be pent up demand from people who had postponed or canceled trips during this shutdown because they didn't know about flying? Sure, maybe. But we'll have to wait and see how this all shakes out and we probably won't get a clearer picture for that until they report fourth quarter earnings in the new year. I think we should send you to the rodeo to cover that live on the ground for sure. Absolutely. Yeehaw. I'll come with you. All right. Contessa Brewer, thank you. Coming up, not just the travel sector under pressure from the shutdown, it's also impacting quantum stocks. Shares of Rigetti Computing falling after a revenue miss. Management attributing that in part to the expiration of a key quantum funding initiative. It's currently awaiting reauthorization from Congress. Ionq and D Wave are lower in sympathy. We're going to talk to IonQ's Niccolo DiMasi in a CNBC exclusive that is coming up next. Welcome back to the Exchange. The recent concerns are revaluations in the AI trade. It's not only impacted the big cap tech names, it's also taken down some of the names in the ecosystem. The energy names, nuclear names, Oklo, ge, Vernova, Vista, Constellation, all of those are off more than 15% from the 52 week highs. And then there are quantum stocks. Ionq, Rigetti, D Wave, those are all down more than 30% since their 52 week highs. So are the fears overblown? Well, let's ask one of the key players in the quantum space. Joining me now is Nicolo de Massi, chairman and CEO of quantum computing company IonQ. Niccolo, it's great to have you on. Welcome.
- [37:24]
A
Always a pleasure.
- [37:25]
B
So let's start right there because when you get into the trenches of generative AI, at some point quantum will enter the equation and equation in a meaningful way. So are the fears overblown?
- [37:37]
A
Well, we've had a spectacular quarter. IANQ has delivered a 37% revenue beat for Q3. We've raised guidance to $110 million of revenue for the year. At the high end, we've raised $3.5 billion of capital this year, $2 billion just in the last six weeks or so. And we continue to set the Pace for a sector that absolutely is the future of computing, networking and sensing. We achieved a number of firsts in the past quarter. We hit four nines of fidelity, 99.99% fidelity, which means we have an unfettered path to building a full fault tolerant machine, which we're aiming to do in the current Trump administration time horizon. And of course, we're the only company in history that has expanded to be not just the leader in computing, but also to do quantum networking and quantum sensing. And you're starting to see that all shine together and work in Symphony as we deliver Strong results in Q3. And we talk about no cyclicality as we move into Q4, let alone thinking about next year, which is going to be a healthy growth year on year as we've delivered the last five years since ipo.
- [38:42]
B
Okay, so just to dig a little deeper into that, I mean, the promise of Quantum has been there for a while. We've seen a number of milestones, including the one that you just laid out for IonQ specifically. When does the full realization of Quantum begin to take root outside of the lab and in corporate America?
- [39:02]
A
Well, I think we're the first company in history to have nine figures of quantum revenue. So we are the largest quantum company history by market capitalization, revenue, cash balance, employees, PhDs, patents. However you look at it in terms of accelerating growth and inflection, well, all of our product families are very much hitting their stride and we're starting to work together to sell complete solutions. And so we're the only quantum company in history that offers quantum solutions both in the ocean, under the ocean, on land, in the air, up in the sky. And I think not only markets are starting to notice that, but of course our customers are noticing that because we have more ways to land and expand than the Quantum company in history. And honestly, you're right. We're just getting started. You know, Quantum has a very exciting few years ahead vis A vis IonQ Solutions, customers and technical milestones that we keep over delivering on. But most of all, you're seeing us deliver on real revenue and real revenue from here that we've doubled every year since ipo and we show no signs of stopping.
- [40:05]
B
Yeah, and you've been acquisitive. Does that continue?
- [40:08]
A
Well, actually, you know, we entered into an agreement just recently to acquire a company called Skyloom. This is building on our investments in quantum networking and signals, both on the ground and in space. With Skyloom, our capella business, our ID Contiq business, we're ultimately building A platform for quantum key distribution not just on the ground, but also up into space with satellites. We launched a quantum network with the City of Geneva in partnership with Rolex just a week ago. We have a quantum network that's rolled out Electric Power Board of Tennessee and Chattanooga. And we just announced yesterday a quantum network and a computer are going at the University of Chicago. So we continue to really focus on building the ecosystem at IonQ. We want to be the market share leader in all things quantum, just like we're the technical leader and just like we've been the commercialization leader these last five years.
- [41:00]
B
Yeah. Skylum is a company I know well, and I don't think we talk. I talk about it quite a bit on Manifest Space, my podcast. But I don't know that people fully appreciate the role that space and space infrastructure and data from space is going to play in the future of compute. So if you could just break that down.
- [41:15]
A
Yeah, well, optical interconnects mean that in conjunction with our networking business, space business, computing business, sensing business, we can really build the whole kit and caboodle of the future of secure communications. Right. So if you think about what the quantum intranet means, it has been able to capture information on the ground and in space using quantum sensors. It's been able to use quantum computers to process that information and solve problems that, of course, are intractable for classical GPUs. And of course, it's been able to transmit that information and keep it unhackable, keep it secure. And so quantum key distribution, or quantum cybersecurity as we call it, not only are we doing this on the ground, but we can do it ground to space, space to space, and back down to the ground. And so really what you're seeing is we're following our customers, our bigger telco customers, our bigger financial institution customers. They know they need to be able to keep information secure, just like they need our computers to make sure they have advantages and how they're processing that financial information and data.
- [42:13]
B
Yeah. And finally, as a poised to have this longest government shutdown in history come to an end, how has it impacted IonQ?
- [42:22]
A
Well, IonQ is very fortunately positioned. I mean, our supply chain is very secure, it's very domestic. We have a fantastic cost advantage right over anyone else in the marketplace that that is five or 10 or 15 or 20 years behind us, typically in their technical roadmap. And as the government, of course, reopens, we're expecting a flurry of activity because, of course, we have moved forward into the darpa Phase B program. We're having fantastic conversations with allied nations and of course our federal government as well as state governments about how Quantum is now. IonQ is delivering quantum and they know they need to partner with the biggest and the leading company for that quantum ecosystem. The future of national security depends on IonQ. The future of national economic security depends on IonQ. And we very much want federal, state and commercial companies to be building solutions using their software and applications on IonQ hardware, software and the full stack.
- [43:16]
B
Well, Nicolo Damasi of IonQ, thanks for joining me.
- [43:19]
A
Great pleasure.
- [43:20]
B
And of course the stock started off with this interview in the red and is now up about half a percent. Well, still ahead, AMD one of the best performers in the SMH this year. Shares are nearly doubling in value, getting a pop as the company kicked off its first analyst day in three years. Back towards the flatline now with amd. We're going to head there live next. Welcome back to the Exchange. AMD CEO Lisa Su just delivered the keynote address at the company's first Analyst Day since 2022. Christina Parts Nevelis is at the Nasdaq for the highlights. Hi Christina, at the NASDAQ where the event is happening. So I just ran downstairs, but Lisa Su did finally announce a significantly increased company forecast for the total addressable market for AI to over $1 trillion by 2030 versus the 500 billion it outlined earlier this year. So that is the first bit of news. The stock though actually fell when she made that announcement maybe about 15 minutes ago, not because the number was expected. You saw some analysts saying 850 to $1 trillion, but because that $1 trillion figure includes not only AI chips, but also AMD's traditional CPU Central processing chips as well as networking products. The street may view that number as just too inclusive. However, it's also worth noting that Nvidia includes networking within its total addressable market, which has gone up since last March is gtc. And then Marvell, a custom chip maker also included a lot of data center products at its event. So it's just not apples to apples when you're comparing these large TAMs, as they call it. But Lisa Su did point out that CPU demand is actually accelerating because of AI. While I often requires advanced graphics chips, the GPUs we talk about, AI agents also need more just general purpose compute, which is where AMD CPUs actually come in. This stock, though, you can see it's not negative. It was down about 2% turned around when Lisa Su said she sees a clear path to over 50% growth in the server business and expects data center AI revenue to grow 80% annually just over the next five years. She also said AMD's next generation AI chips and racked scale systems are on track to deliver tens of billions of dollars in revenue by 2027. Those rack systems are how AMD can actually start moving up the entire data center stack and of course better compete with Nvidia. And I want to bring up just shares of intel because they actually dropped when AMD said that they saw a or Lisa Su said she saw a clear path to over 50% growth of server share. I just want to go back to that number you threw out there. One trillion by 2030. How did we get to a doubling of that so quickly? Well the primary thing primarily thing is that she's including CPUs in that mix so that the vast majority of their business but overall demand is that strong. That's the overarching arching theme from all of these companies. Right? Yeah, got it. And of course that's sending shares higher now fractionally. Christina parts and evolves. Thank you. Thanks. Well, AMD CEO Lisa Su will sit down with a Squawk box crew tomorrow for a first on CNBC interview. That's at 8am Eastern. You don't to want to miss that. And I will see you again on closing Bell overtime. We've got an exclusive interview with Cantor Fitzgerald Chairman Brandon Lutnick on where the markets are heading from here. Plus Riot CEO Jason Less on the future of the crypto space. That's going to do it for us here at the Exchange though. Power Lunch is going to start right now with a midday market rebound. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place. For 140 years MultiCare has been in Washington prioritizing long term solutions, partnering with local communities and expanding access to care. Together we're building a healthier future. Learn more at multicare. Org.