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Tesla Rallies, EA Goes Private and Government Shutdown Looms 9/29/25
00:41:20
Tesla hits a 10-month high, EA will be taken private in a $55B deal, and how a government shutdown could impact your money.
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A
Contact us. You're listening to the Exchange. Here's today's show.
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D
Thank you, Scott. Welcome to the Exchange. I'm Mike Santoli along with Melissa Lee. Stocks turning mix with most index is just slightly higher as the AI trade resumes with big tech bouncing back today. Nvidia leading the MAG7 names higher on pace for its third straight positive session. It is now up about 5% for September. Defense stocks on the move on reports that the Pentagon is pushing missile producers to increase production.
- [01:35]
A
China Tech we should mention also higher the KWeb China Internet ETF about 2%. Alibaba leading the gains there. Jefferies upping its price target on the stock from 178 to 230. The firm bullish on the company's AI efforts and President Trump and Israeli Prime Minister Benjamin Netanyahu are expected to hold a joint news conference in just a few moments from now. We'll bring you that as soon as it happens this as we are also keeping an eye on any developments from Capitol Hill to avoid a government government shutdown. Remember, Wednesday midnight. That deadline is approaching quickly, but you wouldn't know it from looking at the markets. As Mike had mentioned, we're holding fairly steady here. We've got the Nasdaq doing the best of the three, about half a percent here thanks to of course, the trade.
- [02:15]
D
Yes, look, it's taken a little bit of a break. There have been lots of chatter around whether it's kind of Gotten to extremes and has to take more of a pause. Really broad market just kind of hesitating, I would argue. Last week I think we were down a third of a percent. You're less than a percent off the highs and now the rotational action, you know, energy had a great bid, now it's down because oil is down. So look, we're in this mode right now where we think the basic premise of Fed cutting into a decent economy still prevails. And I guess basically until something comes along to dislodge that view.
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A
Yeah, and the jobs report which could come along and possibly dislodge it, that may not even happen on Friday because of the shutdown. So obviously that's the other an interesting.
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D
Test of whether no news is not bad.
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A
Right.
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D
Our next guest says we have arrived at an important cyclical turning point point and he sees the market broadening, though perhaps not booming from here. Joining us now, Michael Cantrow, it's chief investment strategist at Piper Sandler. Good to see you. Well, so broadening in what respect? I mean are we going to finally see sort of the earnings growth catch up from the average stock or is it just going to be kind of a rotation of flows? How do you see this playing out?
- [03:23]
E
I think it's more about a breadth story than a magnitude story. So both from a macro and micro perspective, you know, we've had these great three years in the market. You've seen housing data have this L shaped situation for the last two and a half years. Same thing with manufacturing. PMIs have just been stuck not going anywhere. And we see now we have the beginnings of a improvement in both the macro economy which should translate into a broader participation earnings to the upside in the market as well.
- [03:54]
D
What drives the broader economy in a better direction? I mean there is this reacceleration thesis, people putting the pieces together of, you know, you do have some of the tax provisions kicking in, I guess just kind of, you know, going that long without, you know, seeing much growth from housing and manufacturing. You're going to get a little bit of a benefit from just comparisons and things like that. But is there anything else going on?
- [04:17]
E
Well, it's been way long enough to hope for those easy comparisons. I think it's more than that. You know, I like to think about something changing as well. Why was it in a bad spot in the first place? And clearly interest rates were an issue for smaller businesses, for lower end consumers, for housing, for manufacturing, which was impacted by housing. So it's the fact that we've had rates that have been stable for two and a half years. Now everyone's been debating where the 10 years go. Hasn't gone anywhere. And we're at the low end of the range and The Fed's cut 125 basis points. So just the fact that we're not seeing rates go up and have stabilized and have now started to drift down makes all our anticipatory indicators pop up and look like a green shoot.
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A
What does a broadening market look like? Because when you say broadening, most people think, oh, some sort of a handoff from technology to other sectors. Does it necessarily have to be the case?
- [05:11]
E
Well, I think it's more joining. I don't see this as a big rotation out of tech. You know, large cap growth. The NASDAQ have dominated really for 10 years, not, not just the last two and a half, three years. So I think it's more, you know, the door is getting a little open, the bouncers letting some more people in into the party perhaps. And again, I think it's ironically due to the fact that we have a soft labor market which has allowed some of the inflation fears to come off and allowed interest rates to come down. The Fed to cut.
- [05:37]
D
Yeah, it's an interesting dynamic. I try to point this out. I mean, there was a time in like May or June when you had Powell saying, data dependent, wait and see, we're not ready to cut. And he was pointing to the unemployment rate right up. We're at our mandate there. We have to worry about it. And since then, because of the softening of the labor data, people are making the case, or at least have the impression that maybe that's overstating the weakness in the underlying economy and therefore giving the Fed room to cut without necessarily the pain of actually a downturn.
- [06:05]
E
Yeah, as long as it's balanced, I would argue it has been. It hasn't been a negative surprise, it hasn't been a swift move up in the unemployment rate. That's a really good backdrop. That's Goldilocks in a post inflation shock world. And you have to go back pretty far in history to see past periods where just like today, the unemployment rate and the stock market went up together, which they've been doing for the last two and a half years in terms.
- [06:28]
A
Of tariffs and sort of the uncertainty. Because Trump will say 100% tariffs on films not made in the United States, tariffs on furniture now. Yeah, it may not necessarily happen. Of course. These are sort of, you know, headlines that we're dealing with right now. But in terms of just market uncertainty, I mean, does that feed into it at all? Or are we just so inured to these threats of tariffs that it's fine, we look through them?
- [06:51]
E
There's just this huge, I think, diminishing impact of fear and the wall of worry. And you know, we've climbed the largest wall of worry in the history probably in the last five years. And so even something like the shutdown or these more industry specific tariff situations, I think investors have gotten to a point, whatever the fear is will show me first and then I'll react, which is generally, I think, how the market behaves. But it's even more clear, I think in the last couple of years, what.
- [07:20]
D
Would tell you that the market is now too relaxed? I mean, not at the moment, but eventually. I mean, you see where credit spreads, trade, right? Very, very compressed. You do have relatively benign volatility levels. I do know people keep pointing to professional investors feeling somewhat underinvested or at least neutral as opposed to being, you know, very much all in. So what would you look for to say, okay, the market is susceptible to a negative shock?
- [07:46]
E
Well, the market's always susceptible to a negative shock. To be fair. I wouldn't point out, I think the conventional wisdom is, well, the VIX is too low, credit cards are too low, valuations are high. You could have been saying that for a long time, over many periods. I believe in catalysts. And if we got rates to spike, inflation to spike, unemployment to spike irrespective of really anything that would cause a market downturn, a multiple compression backdrop. But you know, all this fear around valuation and all these metrics that are at all time highs, look at the index, all the fundamentals are at all time highs too. Interest coverage has never been higher, margins never been higher. So it's a reflection of the backdrop and I think it's appropriately priced. If we get one of those shocks I mentioned, yeah, we'll have a problem. And if we don't, things continue on and likely broaden out, which is our general view going forward.
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A
Time markets are at these levels partly because of the belief that the Fed is going to continue cutting rates when inflation remains high. I mean, it is stubbornly high still and so it could be pinned. Are you concerned that there's going to be that this disconnect will finally surface in the markets, that the markets will not get what it is banking on?
- [08:52]
E
I would say look at oil. And as long as oil is not a problem, it's really hard to get an inflation problem. Remember, in 21 into 22, everything went up. Oil was sharply higher, peaked in June 22 and really hasn't been a problem since. So if we can avoid that and you know, I think if we could go in a time machine and go back 10 years with today's inflation data set, yes, price levels are high. Would we be so obsessed with inflation? I don't think so. I think it's because the reference bias of the recent shock, which is making for the environment of soft employment, lowering rates and people seeing that as a bullish development.
- [09:27]
D
I mean, I think CPI since 1990s averaged high twos. Right. I mean it's not like it's always been a two.
- [09:32]
A
Yeah.
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D
So yeah. Michael, good to talk to you. Thank you.
- [09:35]
E
Thanks.
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A
A surprise on the upside for home sales, a late summer surge. Let's get to Diana. Olock has got the details. Hey, Diana.
- [09:41]
F
Hey, Melissa.
- [09:42]
A
Yeah.
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F
Pending home sales which are based on Signed contracts rose 4% in August from July and were nearly 4% higher year over year. The street was just looking for a flat. Now this read is a forward looking indicator of closed sales in September and October. And closings have been pretty weak for a while now. Mortgage rates in August when people are out signing these deals were slightly lower than they were in July but not nearly as low as they are now. Last week we saw a huge jump in August sales of newly built homes, which are also measured by these signed contracts.
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A
Contracts.
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F
And while most expect it to be revised lower, all agreed that the trajectory for sales overall is higher because of these falling interest rates. Now a survey of realtors showed 19% expect an increase in buyer traffic over the next three months. That's up from 16% last month. But fewer actually expect an increase in seller traffic compared with July. And we did see inventory in August fall for the first time since the start of this year. Sales did increase in three out of the four regions with just the Northeast dropping. Sales were strongest in the Midwest. That is where homes are cheapest. Builder stocks though are not moving much on this. Perhaps everyone's still waiting until the all important jobs report Friday. If it comes Friday, that could move the markets back to you guys.
- [10:54]
A
Since it declines that we saw, Diana, in mortgage rates, they have ticked higher. So is it assumed that we are going to see the pace slow in the various indicators next? You know we look months, yeah, we.
- [11:05]
F
Look at these moves, they're still lower than they were in August even though they ticked back up a bit after they came down really sharply just before the Fed cut its interest rates. So we're talking about really between six and a half and seven percent or six and a quarter and seven percent. That's where we've been over the last really two years. So it's not a big difference. It's more that emotional. Are the rates coming down? Is their trajectory lower? That might be juicing sales. So we'll see.
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A
Yep. Diana, thanks. Diana Olek. Coming up, Tesla touching a 10 month high and wrapping up its best month since November. Barclays calling it the return of the OG meme. Stonk seeing nearly 40% downside from here. The analyst joins us next to make his case.
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D
Plus, President Trump expected to meet with the top four congressional leaders today as lawmakers try to avoid a government shutdown. The details and sticking points to the deal ahead. The exchange is back after this. This is the exchange on cnbc.
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A
Welcome back to the Exchange. Tesla's big September rally has got one analyst reminiscing about the good old Meme stock days. In a new note this morning, Barclays credited the stock's run up to retail excitement surrounding the EV makers upcoming annual shareholder meeting. They say this rally feels similar to the bull run that took the stock to all time highs back in 2020 and 2021 Barclays. Dan Levy joins us now to break down his note. Dan, great to have you with us.
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H
Thank you so much for having me, Melissa.
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A
And Mike, you know, calling a stock a meme stock is almost like an insult that the implication being that there aren't any fundamentals behind what is moving the stock. Is that what you're trying to get across or just that the moves can be much sharp, wildly sharp and just suddenly, I mean I'm just trying to figure out if this is sort of an indictment of the stock or if this is actually a good thing.
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H
Well, there is more to the stock than, than the meme phenomenon but the reality is, as we put up point out the note, it is the so to speak OG meme stock.
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B
Right.
- [14:36]
H
There is a very robust retail following that is driving it in many ways. We've said the fundamentals just don't matter. That's why the stock trades at sort of a nonsensical P E multiple hundred eighty times twenty six earnings. Bitcoin is really what we say is just the better comp. And then there's other technical factors as well. They're driving it, you know mag7 relative performance, performance and also technicals such as option activity as well that are much more than the typical direction of fundamentals.
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I
Yeah.
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A
One of the fundamentals though is that Elon is back and he's as engaged as ever. And I wonder if you think if Tesla has left behind its sort of political issue in terms of being aligned with politics that, that not everybody necessarily agrees with that hurting market share, particularly overseas in Europe.
- [15:32]
H
Yeah, it's very hard to know how this will evolve. But I think what we are seeing is that at least for now there is a more engaged Elon Musk. We saw that with his open market purchase and really that's what the, the comp plan that the board is proposing and that will be voted on at the AGM on November 6th is really trying to get at is a more engaged Elon Musk to focus on really the things that will drive growth for Tesla. So there's no guarantee, but it really is a big step forward in guaranteeing Elon's engagement and focus with Tesla.
- [16:09]
D
I mean Dan, arguably the retention of Elon Musk or having him more engaged is most of value to kind of keep the story running and feed into the retail fan base. I mean there's $1 trillion in market cap of the, let's say 1.4 trillion that Tesla has right now, which, you know, is kind of about, hey, the future is going to be great and we're going to be a big part of it as opposed to what they're doing on the vehicle side.
- [16:35]
H
Yeah, I mean, this is an ultimate narrative stock.
- [16:37]
A
Right.
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H
It's again, the vehicle sales that the earnings power that you see today from vehicle sales is in many ways, you know, a fading story. The future growth that is there and that does underpin the view of bulls is something that people are getting excited about, but in many way is Tesla gets the credit for this today versus, you know, others that may not get the same credit because of the power of the narrative and the power of excitement around Elon Musk and what he's done for them.
- [17:10]
A
At the same time, delivery numbers matter, at least for now, while the vehicle business is still a big part of the business. And I want, you know, most on the street think that third quarter is going to be just fine because of so much demand, because of the last minute, you know, using that credit before it expires. But what happens after that, Dan, in your view?
- [17:28]
H
Yeah, there's going to be, you know, some impact on, on volume. Right. There's definitely a pull forward that we're seeing in the US and so US volumes could fall off after this quarter. I think the opportunity for them to at least keep volumes stable versus current levels, which is what we have, we actually have increased volumes in our model for next year is really the opportunity in other regions. So China, continued growth of EV volum, you know, Europe, even though they've lost a lot of share, there's an opportunity for continued growth of EV volumes. So that will help on, on the vehicle side. But clearly, you know, fundamentals have taken a hit in terms of, you know, the potential growth people once expected on the vehicle side. Also things like the reg credits, which had been a key source of earnings for them, that's obviously expectations around that have come down as well in terms.
- [18:26]
A
Of the long term narrative. Dana, I'm just curious, is there any thought that there will be some sort of a combination of the companies that Elon Musk currently runs? I mean, is that part of that bullish thesis? Longer term?
- [18:38]
H
You know, we've, we've heard this idea before, I think. Very hard to say how, how that plays out. You know, you saw in, in the AGM in the proxy statement that the board issued no recommendation on investing into authorizing the board to invest in xi. We certainly appreciate that that's the type of thing that would drive the narrative, but unclear how that actually plays out. Even without that, though, I think what the bulls would say is if you look at the targets that are laid out in that proxy, Right, this is the type of thing that if they can get it, and it's ultra, ultra ambitious, but if they can get, does underpin a tremendous amount of growth ahead, you know, in both Robotaxi, FSD and also on humanoid robots, as well as just overall earnings power. But, you know, they are ambitious, let's.
- [19:36]
A
Put it that way. Certainly are. Dan, thank you. Dan Levy of Barclays.
- [19:40]
H
Thank you.
- [19:41]
A
Well, even before this month's big rally, Tesla had been outperforming the traditional automakers over most of the past year. They are trading at very low multiples, single digit multiples. I mean, these are levels we haven't seen exactly a long time.
- [19:53]
D
It's almost, I mean, it's a totally separate category, essentially, is the traditional legacy carmakers. The market is essentially saying over the course of a cycle, they just want to earn a proper return on their capital. I mean, it's just kind of as simple as that. They have to make all these heavy investments. You have to care about usmca, you have to care about tariffs for Tesla. You just have to care about, is everybody going to own a robot in 20 years? Yeah, I mean, honestly. Of course they are, if that's right. Exactly. Or maybe, maybe two or five.
- [20:19]
A
I mean. Yeah. Depending on how good they are.
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D
Yeah. All right. Shares of both Etsy and Shopify spiking on the announcement that they're partnering with Chat GPT to launch Instant Checkout, allowing users to make single item purchases directly from merchants through Chat GPT. As of now, instant checkout is only available to US users and US Etsy sellers. But OpenAI says more than 1 million Shopify merchants, including Skims and Glossier, are coming soon. That's all you have to do. GPT, an announcement. Right. All right, Coming up, Robinhood on track to extend its record win streak to six straight months of gains, tripling over that time. We'll look at how the rally is reshaping financial the financial services landscape next.
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A
And we're awaiting President Trump's news conference with Israeli Prime Minister Benjamin Netanyahu. They're expected to hold a joint news conference. We'll bring that to you as soon as it happens. Back right after this.
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- [22:49]
A
Welcome back to the exchange. Markets right now holding fairly steady ahead of a looming government shutdown. The S&P 500 up by just a tenth of a percent. The NASDAQ is the one leading the charge here, though, higher by 0.4%, marked by strength in technology and in particular semiconductors. The SOX index is higher by 0.6 of a percent right now. We're also watching pharma companies. They're supposed to submit their plans to voluntarily lower drug prices to the Trump administration today. And while they've made a lot of domestic manufacturing commitments, details about direct action on prices have been scarce so far. Angelica People joins us here on Set to discuss what could come next. We're billing this as a deadline. It's here. What's happened?
- [23:25]
G
It is here. And we had not heard much. Hate to be the bearer of bad news, but really we've heard some comments from the companies. Everyone pretty much is saying we're still in negotiations, discussions with the administration, but we haven't seen a whole lot of concrete steps. We've seen a few announcements, a Lot of companies are talking about their direct to consumer programs that they're rolling out. So instead of going through your insurance company, you could just go directly through, through the pharmaceutical company and buy your drug. But even then, those have been relatively small announcements. Obviously it's hard to, you know, go and buy a cancer drug online. You'd probably want to see a doctor and that's what you have insurance for. But we have seen a few of these announcements and we've also seen some companies committing to this idea that they will launch their drugs in the UK at the same price that they have here in the U.S. so just today, AbbVie announcing that it will introduce its ovarian cancer drug, Eli, here in the UK at the same price as the US and also we saw that from Bristol Myers Squibb last week with their schizophrenia drug. And those are a little bit interesting because they've said that if the UK doesn't agree to those prices, they're willing to walk away. So maybe that's one area where you do see the prices overseas rise. But we haven't seen anyone saying, you know, we're going to lower the prices in the U.S. i think it's interesting.
- [24:41]
A
This notion that they will walk away from markets, which we haven't heard from before, to eliminate that lowest price benchmark in the world and just be here in the United States. Are there certain markets that are most vulnerable to that or is it really drug specific?
- [24:54]
G
Well, we've heard them all talking about Europe. Everybody says that Europe is the place where the drug prices are just far too low. They need to pay more, they need to step up. Obviously that's something that the President probably agrees with as well. And it's easy for companies to say we want drug prices elsewhere to be higher. So I think that's where you're seeing a lot of this alignment. But you're right, we might see companies just decide not to launch in markets overseas. And that is a risk. You know, how do they decide to, you know, navigate that?
- [25:22]
D
You mentioned the company's talking to the administration, negotiating. I mean, it seems as if what they're trying to find a path where they can show some kind of movement on some marquee products as opposed to sort of broadly saying we're going to match global price.
- [25:36]
G
Yeah, well, it's, it is really hard to go ahead and match those prices because particularly in Europe, they're very good at controlling the cost of drugs. You can't just go and jack up the price to whatever you want it to be. There are these systems in place that have these kinds of, that have these controls on the price of drugs. So it's a little bit difficult to go back retroactively and make those changes. And I think that's why you're going to see, especially on the launch prices, saying that, okay, fine, we will launch these drugs at the same price in the US and overseas. And if we don't, we are willing to walk away. Now, again, exactly how many products remains to be seen. And even on the DTC side as well, these tend to be, you know, so smaller drugs. So Bristol, for example, their drugs to take to. It's for psoriasis and it's really, it's a relatively new product. It's not that big of one for them at this point. So maybe you start to see some people saying, okay, we'll do this with a couple products here and there, but not the whole portfolio in terms of.
- [26:33]
A
Walking away from markets. The implication then on the revenue generated by any drug and blockbuster status, I would imagine that would have profound impacts on how you forecast a drug and how big the market actually is.
- [26:45]
G
Well, it depends. You know, I was actually on the phone with someone earlier, a drug pricing expert, and she talks about this idea that, you know, the US Is the most profitable market for drugs. And so what are you willing to give up, right? Are you willing to give up the US Market in exchange for the UK Market, which is much smaller? Japan and Germany she cited as two of the biggest markets out there right now. And so maybe, you know, those are some places where you're less willing to give it up. But even then, you know, it's kind of this whole game theory, if you will.
- [27:14]
A
Angelica. Thank you. Angelica Peebles. We are just moments away from a joint news conference with President Trump and Israeli Prime Minister Benjamin Netanyahu. We're also just two days away from a potential government shutdown. Let's talk about all of this with Raymond James, Washington policy analyst, Ed Mills. Ed, great to have you with us. We've got a lot of news to go through today, so we appreciate your time. Where do we stand on the shutdown? Do you see any movement on either side?
- [27:39]
B
Melissa? Is most likely that we are shutting down. There's not a lot of movement. We are going to have this meeting later this afternoon. Meetings are good. However, we have two sides that don't want to blink. Both sides think that they are to the benefit to shut this down. Republicans think Democrats will be blamed, and Democrats think that the Trump administration and congressional Republicans will be blamed. So we are more likely than not to. Republicans are saying that this clean CR is something that Democrats have supported in the past. So if we do avoid something, Melissa, it's because they're able to say let's keep it open maybe for a shorter time period than that was already past the House to get some more negotiations. Because certainly there are some downsides to these employees who are on furlough, potentially kind of out of work for a longer time because of the kind of rusvat memo out of Ombuds. So it's a tightrope. But we're more likely than not to shut down at this point.
- [28:35]
D
And you say that typically the party that you know is digging in its heels and is essentially causing a shutdown tends to get blamed. But I guess the question is blamed for what in particular this time around? Obviously, if there's permanent layoffs, that's probably not going to be popular. But in general, is there something you would look at to say here's going to be the knock on effect, or is it just kind of the general dissatisfaction with government that can't get things done?
- [29:00]
B
Yeah, Mike, you're right. So it's the general playbook has been the party that brings you into the shutdown gets blamed in the party who brings you into the shutdown gets nothing for the shutdown. The last shutdown, there was a poll out that showed that 90% of Americans had blamed Republicans. And it was quick after that that we work to reopen the government here in D.C. this would be the first shutdown that has been driven by Democrats in the last five. So that is where it could be different. But Mike, I know that you always look at the markets and that Raymond James names we ask the question what do markets do when the government shuts down? And on average The S&P 500 is up 3.2%. We see that in the kind of, you know, kind of small caps as well. So we do think that this is an event that provides a lot of headline risk. But we would say if there is a market reaction here, buy the shutdown.
- [29:50]
A
What time frames are you looking at it when you come up with that? Now, I'm just curious because there are varying degrees of shutdowns. The last complete shutdown, I think was, you know, more than a decade ago. If we're going to actually compare the actual extent and length of the shutdown to this one. And then also what I found interesting is your shutdown playbook where you identify sectors that will outperform during a shutdown.
- [30:12]
B
Yeah. So Melissa, what we did was we looked at what the market did in the week or 30 days leading up to a government shutdown, what they actually performed during the shutdown, and what was 30 days after. So we've had five shutdowns since 1995. The longest was 22 days. When we look at the market, you know, it's not a ton of kind of data here, but it was up on average that 3.2%. We have seen the 10 year sell off at times on average down 11 basis points. So we've seen some benefits to technology in the beginning, parts of a shutdown reversed and kind of having things like financials perform in the coming out of shutdown period, utilities doing well coming out of shutdowns. So a sector by sector analysis here, but also a market analysis because I always get concerned that from D.C. the news can always sound bad and it can always seem like a reason to kind of deviate from your plan. But at Raymond James, we want to say, all right, what is actually going to be the impact here? And the impact is not what I think a lot of people think it is. And so I think that's important part of the conversation.
- [31:15]
D
Melissa, what do you think the chances that are that there will actually be an effort to really cut the permanent size of the government payroll this time around? I mean, that's a fight that you'd have to wage over a pretty prolonged period of time.
- [31:30]
B
Yeah, Mike, I think if we shut down, they are absolutely going to try to do that and I think that they will follow through with it. However, I do think that that immediately becomes one of the things that Democrats demand for turning back on the government. And so when we're gaming this out with kind of different contacts in D.C. this is different. And we kind of add to things that Democrats might demand to turn back on the government. And so the concern is, is that going to be a longer shutdown? Is it going to be the longest shutdown? I mentioned that last Trump administration we had a 22 day shutdown. Is it going longer than that? Do we not get more economic data? Do we not have what the market usually trades on coming out of the government? If it is more of a fiscal drag, is it different this time? I think is really the debate because we don't have the normal playbook that forces it reopen and it actually adds to the things that would be asked for to get the Democrats to be on board.
- [32:26]
D
Yeah, I mean, it feels like we've been operating without the normal playbook in many respects for a while Ed, thank you very much. Appreciate it. Ed Mills from Raymond James. All right, coming up, Anthropic updating its AI agent, but China's Deep Sea is looking to keep up, releasing its own new model today as well. The latest in the arms race is next. As you head to a break, check out csx, the stock higher today after naming Steve angel its new chief executive. This after activist investor Ancora holdings pushed the railroad operator to pursue a deal with a rival or replace its top executive. Shares having their best day since mid July and hitting their highest level in a month. We're back at Anthropic is rolling out its latest AI model today, almost two months after rival OpenAI's long awaited GPT5 launched to mixed reviews. And as we're learning, China's Deep Sea is unveiling its own new model or Mackenzie Segalos has the details in today's tech check.
- [33:35]
I
Matt hey Mike. Schwanthropic is pitching its newest model as a meaningful step toward real world AI agents so systems that can operate independently and carry out tasks without constant human input. These autonomous assistants are the latest front in the AI model race with OpenAI just this hour announcing that it's switching on Instant checkout in ChatGPT so that users can buy directly in chat from Etsy and soon from Shopify. The move that's powered by its own agent tech have sent shares of Etsy and Shopify higher now. Instagram co founder Mike Krieger, now Anthropic's chief product officer, told me that this latest model is opening the door for businesses to build products that simply weren't possible a few months ago.
- [34:18]
D
We hear from companies all the time.
- [34:20]
E
That their product or their idea was.
- [34:22]
D
Not, not possible three months ago, six months ago with the previous models. But then something happens where the mod evolves to the point where all of a sudden it's now possible.
- [34:29]
C
The frontier is still moving and the.
- [34:31]
D
Gains are still significant.
- [34:33]
I
And the launch comes as the AI model race hits an inflection point. There's been this growing debate over whether innovation is slowing, with new releases feeling more incremental, less revelatory. Krieger pushed back on that, saying that rumors of a slowdown are greatly exaggerated. He also said their models are getting cheaper. This one is 1/5 the price of its model released last month. And speaking of price, that is where rivals like Deep Seek are pushing ahead. As part of a new model announcement this morning, the Chinese AI giant said that it's cutting the price of its software tools in half guys.
- [35:04]
A
MacKenzie, where does most of the cost savings come from? What is that driven by?
- [35:09]
I
When we think about cost saving with Deep seq, that's in the context of these open source models. That's why R1, that first released in January was so crucial to resetting expectations on the, the, you know, the race across players here in the US but with respect to the price that we're seeing come down with anthropic's model, this 1/5 the price of the Opus released last month, it really has to do with certain internal efficiencies and so this is better at coding and it's able to move faster. We also saw Chat cbt, the pricing in terms of enterprise come significantly down as well. When they had that release come out two months ago, they credited that with this routing system where they don't always have to go to the highest powered model, but they can downgrade to a lower model that doesn't cost as much to run with some of the easier queries. And that's how they were able to achieve price efficiency here.
- [35:55]
D
Mac, I know that there are these kind of third party metrics where they try to evaluate each of these models and try to grade, you know, their improvement and try to compare them. Are those, is that really the standard at this point? I know some of these models are really more tailored or suited to different uses. So it seems as if there's a little bit of distinction going on in teams in terms of what they're directed toward.
- [36:18]
I
It's an excellent point. So there's this sweet benchmark and that's considered one of the industry standards here. And on that you've got Anthropic latest model outperforming chat GPT5. But what's so key is that, you know, I've spoken to, spoken to a lot of coders here, especially from the wrapper company. So a Windsurf or cursor and the thought process is it's possible to game these benchmarking tests, you know what they need in order to hit certain landmarks. And to your point, Mike, there are such customized use cases. So whereas Anthropic really resonates with an insurance company, for example, AIG or some of those other names, there are others like a GROK that's better with social media. So they are very highly customized use cases when you think about where these LMS best perform.
- [37:01]
D
And then there's another piece of it which I've just picked up from people talking about them, almost the personality, so to speak, of each one and how they Interact with your queries. Maybe some, maybe it's just taste, maybe it's just, you know, kind of style points. But just this idea of just how cloying, you know, or how confrontational the models might be, well, that's been something.
- [37:23]
I
That OpenAI has been confronting this summer in the face of ongoing litigation. And so what they've done just this morning actually is announced new age gating parameters. So basically introducing these parental controls where the experience for a user, if they are a minor, will be significantly different than a general user. But it's separate to that. Any age group will notice that. With chat GPT5, what's so different here is less sycophancy. So that's where you're really looking to make this. I mean, they've consulted with dozens of psychologists around the world in order to better customize their answers to pander less to what users want to hear. And that's why some people, when they were talking about their reception to chat GPT5, you know, being strained, it was the fact that they felt like they lost their friend because they were looking. That was, you know, a direct change in the coding.
- [38:12]
D
It's remarkable. Great stuff, Mac. Thanks very much for covering all of it.
- [38:17]
A
I was thinking strange but remarkable, I.
- [38:19]
D
Would say all of it.
- [38:21]
B
Yeah.
- [38:21]
D
I mean, I. Look, I'm sure at the beginning people talked to the TV and thought that.
- [38:25]
A
People could hear them, and that's true. Same thing. All right, as we head to break, we were watching Novo Nordisk, Morgan Stanley downgrading it to underweight setting, limited visibility, downside catalysts and rising GLP1 competition. Shares are slightly lowered 6.10of a percent today, down nearly 9% over the past week. The exchange. Be right back. Shares of cannabis companies climbing today after President Trump said hemp derived cannabidiol or CBD could, quote, revolutionize senior health care and serve as an alternative to costly prescription drugs. Another area of the President's focus. This isn't Trump's first cannabis move. Back in the 2018 Farm Bill, hemp derived products like CBD were legalized. And then just last month, he hinted his administration would move to reclassify cannabis from a Schedule 1 narcotic, which places it alongside drugs like heroin and LSD, to a less dangerous Schedule 3, alongside steroids and Tylenol with codeine. That would easily criminal penalties lift tax burdens on companies. The rescheduling that makes its rounds here and there, no matter what the administration is, the stocks go up, the stocks go down. But this video that he posted about the benefits of cannabidiol is very interesting. It's a very professional looking video and basically it says, you know, you have an endocannabinoid system in you and as you age it breaks down and you're supposed to change your diet and take drugs but instead of that you can.
- [39:54]
D
Use CBD already a popular, you know, treatment or you know, supplement or whatever it is. I do think it just fits perfectly into this idea. It's like don't fight the Feds. It's no longer don't fight the Fed. Everything where there's a kind of a tacit or explicit endorsement of the federal government or an investment.
- [40:13]
A
Right.
- [40:13]
D
Just chase it. And in the short term it works. And this is an excitable group of stocks. Very low market cap. They run up and down constantly. But, but you know, it does sort of show you this new mode that we have to be in. If you short them, be aware you're one post away from them.
- [40:29]
A
Them surging on names like Tilray, Chronos or I mean these are stocks that we've been talking about for, for years. Years now. Excitable is a good word though.
- [40:38]
B
Yes.
- [40:39]
D
Yeah. All right. Coming up, a cash deal, crypto and coffee. All that and more in today's Rapid Fire. We'll be right back. This December, join the celebration in Times Square. CNBC opens its doors for an exclusive in person experience at the iconic NASDAQ market site in New York City. Fast Money LIVE trading the holidays. Join Melissa Lee and the team of traders live and on air for an all access celebration. Unwrapping trades, trends and tips to ring in the new year. Fast Money LIVE trading the holidays December 11th. Get your tickets now at CNBC events.com fast money.
- [41:27]
A
Welcome back to the Exchange. Let's catch you up on a few more stock stories that are on our radar. Time for Rapid Fire. First up, Electronic Art set to be taken private for $55 billion. A video game maker agreeing to be acquired by the public investment fund of Saudi Arabia, Silver Lake and Affinity Partners in an all cash deal. Electronic Art shares popped on rumors of the deal on Friday. They're up another 5% today. You're making a comment it's not really 55 billion.
- [41:51]
D
There's a little bit of debt already on the balance sheet to two and a half billion dollars. But it's still sizable. Yes, the existing Saudi investors rolling its 9.9% stake through it. So not as much money changing hands. It's a rich price though. I mean for the business. It's kind of slow growth. You know, it's a couple billion dollars in, you know, in net pre tax earnings or so. And so in other words, you put a lot of debt on it and it's probably not going to be like some massive score. But it's a strategic asset to the buyers. It feels they want to own things in this category.
- [42:21]
A
Yeah. I mean this particular company, they've had rounds of layoffs, they've been having difficulty in the free to play sort of arena competing against that. So it'll be interesting to see what they do with this basket for sure. Next up, the big tech battle between the US and China now branching out to visas. China's new K visa program starts starts this week and targets young STEM graduates and promises entry, residence and employment without a job offer. This as the Trump administration raises a fee on new H1B visas to $100,000. This is going to be interesting in terms of the race for global talent in order to secure the best and brightest minds. If they don't want to pay $100,000 to come here, they very well might go elsewhere. And it's not just China doing this. Australia, New Zealand, there are a lot of other countries trying to entice talent at this.
- [43:07]
D
And you know, as part of the program, as you mentioned before, India is by far the largest contributor of people taking advantage of it. The one piece of it you have to wonder about. I mean at least in theory, you come to America, you be hired by a tech company, you're getting stock, you know, in the company. There's this sort of perception of upside. If you really do, you know, succeed as I'm not sure that's going to be translatable elsewhere, but maybe that makes.
- [43:30]
A
That $100,000 have less sting. That is that upside. Topic three here. Tom Lee's a bit mine now owns more than 2% of the Ethereum token supply, making it the largest Etherium treasury company in the world. Bit mine up more than 60% over the past few years. And speaking of crypto Treasuries, Paypal's head of capital markets leaving the company to become, what else? CFO@ crypto treasury company Hyperion Defy. We certainly seen a wave of these, not just, you know, digital asset treasury companies.
- [44:00]
D
Dax Exactly. It's look, it's financial engineering seizing on obviously the kind of excitement around individual cryptos. What's interesting about the Ethereum piece is unlike Bitcoin, it's not finite forever. Right?
- [44:16]
A
That's true. It can but it does have a real use case.
- [44:19]
D
It does have a use case. Now the use cases even still are mostly trading. Leveraging the trading. Facilitating stablecoin. Yes, stablecoin, exactly. But again, it's sort of like an alternative, maybe wholesale payment network. I'm just skeptical about, about this particular way of like leveraging one sliver of a crypto and then having people in the public markets keep bidding it up.
- [44:41]
A
Right.
- [44:41]
D
There's a limit to it, by the way. Microstrategy now strategy stocks kind of rolled over.
- [44:45]
A
Yeah. The, the, the value, the premium has, has collapsed. Yeah. And finally, Coach hoping shoppers will pick up a purse with their pumpkin latte. Opening the third location of the Coach Coffee shop right here in New Jersey over the weekend. Coach CEO Todd Kahn telling CNBC.com they're targeting Gen Z customers who want, quote, a full experience. I don't know. Lattes are expensive, I guess. Why not a pocketbook too?
- [45:09]
D
Nice environment to have a. Yeah.
- [45:10]
A
CNBC.com has a full write up, by the way.
- [45:12]
D
All right, that's going to do it for us. Thank you for watching the Exchange. Power lunch starts right now.
- [45:18]
A
You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [45:26]
J
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