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The AI Economy, Shutdown hits Housing & Potential Earnings Winners 10/7/25
00:43:49
Box CEO Aaron Levie on partnering with OpenAI. Real estate gets hit by the government shutdown. Plus, three non-AI names that could pop on earnings.
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You're listening to the Exchange.
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Here's today's show. Thanks very much, Scott. Welcome to the Exchange. I'm Dominic Chewing for Kelly Evans. Today, stocks are lower across the board as the AI trade takes a bit of a breather and the government shutdown goes on. Now in its seventh day that is sending in investors more into risk averse assets. Gold hitting another record high, surpassing the $4,000 for the first time ever. Billionaire hedge fund manager Ray Dalio telling CNBC a short while ago that he believes gold should be as much as 15% of investor portfolios. 15, half 30. And on the flip side, Bitcoin, down 3% today, but up 10% in just the last month alone. But let's begin with the latest on AI and the deals that are happening there. IBM agreeing to a strategic partnership with Anthropic to use its AI models and in IBM software, IBM shares are up roughly 3% on the news. This comes just one day after the Open Air Developers Conference where the company highlighted the massive amount of partnerships it now has. And that includes our next guest company, box an early launch partner of Open Air Agents. Shares of that stock, up nearly 3% upon yesterday's close and up 26% since partnering with Open Air more than two years ago. By recent standards, that's a relatively conservative climb. But for more on that story, let's bring in Aaron Levy, the CEO and CO FOUNDER OF BOX Aaron, thank you very much for being here with us. Let's start right off the bat with this entire ecosystem trade that's going on. You are part of this ecosystem effect. Has it been beneficial to you to the degree that you thought it would when you first came into that ecosystem a couple years ago?
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D
Yeah. So maybe stock aside for a second, the general transition to an AI and agentic future in the enterprise is continuing to pick up massive amount of steam. We really forcefully went in all in on this a couple of years ago with this idea that inside of Box you have some of the most important enterprise data that enterprises entrust with us within our platform. So this could be financial documents, contracts, marketing assets, research data. And the power of AI is that you can begin to interact with that data in a completely different way and at a completely different scale. So ask any question of all of your data. Be able to use agents to automate workflows with that content, pull out the critical information, be able to produce new content. So we're all in on AI and we were super excited yesterday to partner with AI OpenAI on their new agent builder platform to let customers take the full power of the documents and content inbox and be able to build agents around that content within the OpenAI ecosystem. So we're very excited about that partnership. We're seeing a lot of great momentum with OpenAI right now as well as the rest of our ecosystem partners.
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B
Aaron, I mean, the big talk of the developers conference yesterday was around kind of this idea that they have a platform in place now for developers to start kind of building some of the tools and applications around ChatGPT, around the AI infrastructure that they have. Monetization has come up as a big question or concern for many of the investors that are looking at some of these companies. Can you take us through what you learned from yesterday's developer conference and what exactly you are going to do at Box or other of your peers and competitors to work around the monetization game of what's generative AI now? But to your point, where will be agentic AI in the future?
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D
Yeah, maybe if I could take that in reverse order, I'll just start with the monetization. So for companies like Box, and I would include Maybe companies like ServiceNow or Workday or Salesforce in this category. So, you know, software companies, existing SaaS, platforms, they have workflows, they have data already in the platform. AI agents really offer a new monetization vector for our technology. So traditionally we sell seats of software into an organization based on the number of users that are using the platform. AI agents now allow us to go and solve all new use cases and workflows, which really have a kind of unbounded upside because they're no longer limited by the number of employees inside the company. So you're going to see this element of consumption based billing or volume based billing for the use of AI agents on a lot of these existing or even new SaaS platforms or software platforms. We are still early this year, this was the first year that we're actually monetizing that, but it's actually going quite well. It's produced some outpaced growth in the first half of this year within our platform. So we're really happy about the results we're seeing there. And I think you're going to see that across the board when you look at companies like Cursor or Claude Code. These are heavy volume use cases where agents are coding lots of software. And so again, a completely new business model of software where you're not paying by the seat, you're paying by the usage. And the usage really has no particular limit given the characteristics of what you can do with these platforms. Yesterday, OpenAI announced a number of new capabilities to let you either build agents or deploy applications within the ChatGPT ecosystem, really acting as a new distribution channel for Agentix software. So I would think about yesterday's announcements really as another set of tools to let AI builders and software providers get even more scale with their technology and solve all new use cases. And you know, generally if you're providing value for your customers, there's multiple ways to monetize. So I think that yesterday was just another great example of the new kinds of platform capabilities that are emerging in this space. Very akin to the iOS type app store that launched in the early days of the iPhone platform.
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B
Well, part of the value proposition that your firm in particular brings to its customers to maybe even their roles within the AI ecosystem is the idea of kind of managing around the data, managing around the capabilities for data management that these customers might have. It seems like it's custom made for an agentic type role going forward. One of the biggest concerns I've heard from numerous industries is the security aspect of agentic AI. When AI agents are interacting with each other, that cybersecurity element is something that you are keenly aware of as well. So how exactly does securing data and data management factor into that cybersecurity, agentic AI conversation?
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D
Yeah, it's a super important part. So as you just kind of Explained. You know, there's, you know, first of all, there's these amazing benefits of AI. AI is going to let us drive more output, drive more efficiency, you know, get more productivity gains. But there's a little bit of a catch, which is you have to make sure that your data and your infrastructure is organized in a way to let you safely take advantage of AI agents. So you can kind of very easily imagine a problem where if you have lots of data in an enterprise, but there's many different permutations of who should have access to what information. Well, an AI agent is only going to, they're only going to respect the permissions that they have access to, assuming that you put them in place in an appropriate way. So you don't want an AI agent pulling the payroll data from somebody and giving it to the wrong person or HR information or financial documents about a deal that maybe somebody shouldn't know about. So you have to make sure that you have the infrastructure and platform components in, you know, set up in a way that is robust, that is secure, and that importantly makes, manages those permissions and access controls for the humans. So that way when you add agents into the mix, they're not revealing information to the wrong people. So for Box in particular, we've been spending decades making sure that we get that part of the technology right. We serve over 120,000 customers and our job is to manage their information securely and ensure that only the right people have access to the right data. And so agents now have to respect those boundaries inside their organization. And so we're imagining a future where you might have 100 times more agents than you have people, which means you really have to get the security right in that agentic future.
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B
All right, Aaron, and before we let you go, I want to kind of go a little bit bigger picture on this. We've spoken a lot over the last couple of days about the ecosystem effect when it comes to the AMD and Open Air deal, one that now includes an equity component as a co founder, as a CEO that has to worry about things like funding and capex. Do you believe as though this AMD deal with Open Air now becomes a template or blueprint? Are we going to see more kind of equity exchanges or equity sweat equity type deals in the Open Air or AI ecosystem in general?
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D
Yeah, that's a super tough one. Obviously you're seeing a bunch of kind of bespoke, unique one off type type situations in this, in the upper echelon of this ecosystem. When you look at, you know, anthropic or OpenAI or a couple other players. So it's hard for me to extrapolate simply because if you'd asked me two days ago, I certainly wouldn't predict that deal. But I think we have an environment where everybody is recognizing how strategic these core control points are. Right now we are in the defining period that might last for decades and decades of economic value creation. And so you can see how important it is to be in one of those positions, whether that's the hyperscalers building out the infrastructure, the chip providers that are clearly in the driver's seat given the supply chain dynamics of chip production or the AI model and foundation players. So I think those are three important slots and there's only going to be a few players for each of them. So you can see that there's a lot of room for these very kind of one off creative types of transactions and partnerships because of how important the role is going to be for the Next could be 100 years going forward. And so, you know, hard for me to generalize or extrapolate other than I think we're going to continue to be surprised by how dynamic this space is and you know, maybe who we thought was, was on top, you know, you know, a year ago might, might get toppled and we're going to see a lot of movement in this space. But it's super exciting and we're just happy to be building on top of that infrastructure.
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B
All right, dynamic and evolving relationships for sure. Aaron Levy over at Box, thank you very much. Please come and see us again soon. All right, our next guest now says she's still trying to figure out everybody is the significance of AMD's partnership with OpenAI and the implications on the overall artificial intelligence trade. So let's bring in Karen Feinerman, co founder and CEO of Metropolitan Capital Advisors, a CNBC contributor and often a fast money mainstay. So it's great to have you in our HQ facility as opposed to me visiting you guys.
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E
I'm glad you asked your home. Thank you for having me.
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B
All right, so you heard the conversation with Aaron Levy and this is not to say that you necessarily are a box investor or aren't a box investor, but the points he brings up are interesting in context around what's happening with AMD and Open Air. As a tech investor with a slight value tilt, do you feel as though this kind of a deal is indicative of what we'll see going forward?
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E
Well, I think we will see creative deals going forward. This is certainly a creative deal. I've Spent some more time thinking about it. What it seems to me to be is essentially a discount on AMD for OpenAI if they meet certain milestones, purchases. So they actually. Much talk has been about this warrant struck at a penny, but they actually can exercise it by just giving more warrants. So basically a cashless exercise where they can just basically get cash back. So that's sort of a, also a discount rate of rebate for spending more. It is an enormous deal. One thing we look at again and again is okay, how, how can they actually get to these milestones of building 6 gigawatts, it's this, you know, one next year, I guess one every following year. So we see this again and again. And the frenzy, it does feel just very frenetic right now. It does feel like very much of a frenzy. I have no doubt about AI being enormous for our lives for a long time. What I am not so comfortable with anymore is the valuations and how to think about them and, and this land grab, meaning somebody is going to be left without some land.
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B
We know that many of our viewers and listeners know that you do have a value tilt, you don't go for anything at all costs. But some, some traders have explained to me, at least in their mind, that the kind of valuation construct that we have now cannot be accurately compared to what we've seen over the course of the past 10, 20, 30, 40 years. Do you buy into that argument that these valuations, elevated as they are, are just the new normal?
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E
I think for some of they are the new normal. So for me, as you said, the value 10 but value take. But I also have been in video for a long time as it gotten actually a little bit cheaper over the last, I don't know, 18 months or so as the expectations of the earnings go higher. So you know, all kinds of comparisons to 1999 and 2000, that was a whole other level of expensive. But I think also my, my sort of threshold for what is value has somewhat changed and I think some things are expensive and they're worth it. So could be, it could be an Nvidia, could be a Netflix, but I'm a little concerned now with the frothiness of the whole space and have started to take some off of the AI space.
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B
So it hasn't just been AI and tech that's been kind of frothy. You can also argue that two other parts of the market, specifically when it comes to cryptocurrency and gold prices, which just topped $4,000 a troy ounce for the first time ever are also in stages where they are elevated in terms of their relative valuation. Historically speaking, when it comes to gold and bitcoin, are there any concerns that you have about the price action of both of those? Are you buying into one or both? What do you think?
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I've been in bitcoin since 2017 and what's happening now with I think gold and with bitcoin is the idea of, you know, deficits as far as the eye can see, printing money, the devaluation of the dollar. If you add in a little bit of concern about the independence of the Fed, you're sort of getting to a use case. I mean, you get to a case where I think of bitcoin as digital gold, I prefer it over gold and I know it's hard to, you know, on a, on a DCF model. How do you think about it? That sort of, you know, doesn't compute. But I do think when you add in all of those same macro conditions that exist for both bitcoin and gold, but when you add in an administration that is so decidedly pro crypto, to me, that makes crypto more interesting. And I don't have gold and I do have crypto and I've had it for a long time.
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B
All right, so the other part of the market right now that you can do a discounted cash flow analysis on involves many of the companies that will be reporting earnings this season. We're on the cusp of another earnings cycle. What exactly would you be looking out for right now and are there attractive parts of the market you think that you would want to trade around in terms of the earnings season coming up?
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E
Well, I'm long banks, I'm long JP Morgan, I'm long Citibank, I'm long some regional banks. I think that this is a really great time for banking. The only thing I don't like about it is how much they've run up into earnings. But I think we're looking at an environment where at the moment credit quality is, is still very good. We're seeing capital markets that are just really very active and I think that's going to be the way it is for a while. So that's very good for the big money center banks, you know, M and a advisory that's excellent. Capital markets is excellent. Asset wealth management also a really important part of their businesses that's doing well. So there's a lot to like as well as deregulation likely on the horizon. All of those are very good things for banks.
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All right, so that's the earnings season preview from you. Now, Karen, before you go, you are going to be part of, of course, a very big fast money program, Fast MONEY LIVE trading the holidays December 11th as the @ the NASDAQ markets side. Now, our viewers can scan that QR code that you see on your screen right there or just go to cnbc.com fastmoney to get your tickets. So what exactly are you looking forward to the most for this event? And how exactly has your Trading the Holidays playbook evolved just in the last couple of months?
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E
Oh, you know, it's such a burden on us, but it's exciting and it's fun, but we really take it seriously. What is our acronym going to be, that kind of thing? What is the trade for next year? But the thing that's really the most fun for us is getting to meet the people who we know. They're fans out there, but these are ones that are big enough fans to want to come and see us. And, you know, it's, it's sort of a fun night where we really get a kick out of meeting them. They challenge us a little bit and we get to interact with them. And it's fun. And I hope everyone has a good time. That's been the way in the past. I think it'll be fun.
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B
I can vouch for that because having been a part of some of these live events at cnbc, the best part really is just meeting in person, all the fans out there. All right, Karen, thank you so much for joining us here at CNBC hq. Karen feineman, Metropolitan Capital Advisors And a quick programming note. You can catch Jim Cramer's interview with Nvidia CEO Jensen Huang today at 4:00pm Eastern Time as part of the Kramer Investing Club. To sign up, just go to cnbc.com/monthly meeting, a very big must watch interview, especially given all the AI news as of late. Well, coming up on the show, we've talked a lot about AI, but what about the non AI names poised for a breakout this earnings season? This is one of the names our trader is targeting, down 28% this year, but already up more than 50% off its recent lows. That mystery chart revealed. But first, real estate mogul Don Peebles will join us with his take on the housing market and the cities where he's seeing the most opportunity in real estate right now. The exchange is back after this.
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Julia Boorstin sits down with Thrive Global.
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Founder and CEO Arianna Huffington.
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What advice would you give to young people now trying to navigate this crazy world?
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My advice is to pick a time at the end of the day that you declare as the end of your working day. Because let's face it, there is no end to our working day.
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Julia Boorstin hosts CNBC Changemakers and power players.
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Listen now, wherever you get your podcasts. Welcome back to the Exchange Homebuilder Stocks under Pressure After Evercore ISI downgraded the entire industry, saying the Trump administration's housing policies are hurting the builders. At the same time, there's a major shift underway among home buyers in this marketplace. Diana Olik has all the details. Diana?
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Well, Dom, real estate investors, that is both individual and institutional, bought one third of all single family rental properties sold in the second quarter of this year. That is the highest share in the last five years, according to a new report from C.J. patrick Company, which is using numbers from batch data. Now, last year, investors accounted for just under 26% of residential sales. Their share of sales is higher, but the raw numbers are actually lower because the overall market is weaker due to high home prices, higher mortgage rates and uncertainty in the economy. Investors continue to own about 20% of the 86 million single family homes in the country. And while investors are now net buyers, they are still selling over 100,000 homes in the second quarter, with 45% of those sales going to traditional home buyers. So they're actually providing more supply to the market. Now let's talk about the big institutional names that always get all the attention. I'm talking Invitation Homes and American Homes for Rent. They are still a very small share of the market, just 2%, and are currently actually selling more homes than they're buying. That's because they're moving more into the build for rent market, which is where they build entire new rental communities that are easier and cheaper to manage. Stocks of those REITs are down year to date as the entire market really weakens. Now looking regionally, the states with the highest percentage share of investor to own homes are Hawaii, Alaska, Montana and Maine. You ask why? These are heavy tourism states. That's why you see so many rentals now. For more on this story and a look at how the government shutdown is hitting commercial real estate, please make sure to sign up for the Property Play newsletter out today, cnbc.com propertyplay and yes, yet another barcode for you to use to sign up, Dom.
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B
They are easy in the age of smartphones. Diana Oleg, thank you very much for that. The Property Play Our next guest says the government shutdown is hitting one real estate market in particular, driving up costs and creating some delays. For more on that story, let's bring in Don Peebles. He's the founder, chairman and CEO of the Peebles Corporation, one of the country's most active privately held national real estate investment and development companies. Don, thank you very much for being here. You just heard Diana's report on some of the impact that we are seeing from investors and their sale and purchases of homes. Also, the looming government shutdown. What exactly is the shutdown doing in your mind to the real estate market.
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In America, bringing a lot of instability to the marketplace. The market's already struggling because of high interest rates and also excessive vacancy rates for commercial office buildings around the country and also lack of affordability in housing markets that are supply constrained and not enough inventory. So that combination of things is making it very difficult. And the government shutdown adds uncertainty and the inability to produce new housing. And I think those two things are are really hurting the housing market. In addition to the other elements, in.
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B
Addition to those, are there specific areas, whether it be geographies or parts of the real estate market that you think will be more severely impacted on a relative basis given the shutdown dynamic?
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C
Oh yeah, number one, Washington, D.C. the Washington, D.C. metro area, especially Washington, D.C. it's proper, is going to be devastated. It's already struggling with vacancy rates well into the 20s for commercial office buildings. Crime and cost of living and diminished quality of life has pushed people out of Washington, D.C. in terms of the housing market. And so you have higher vacancy rates and the housing market and prices on the downside there and then. And then the other element is Washington, D.C. has really relied so heavily on it being the nation's capital without expanding its marketplace in terms of attractiveness for businesses and entrepreneurs and then a regressive tax policy. Those elements combined have made Washington D.C. less attractive. You look at Northern Virginia is being hit by the government shutdown because so many of the people who live in Northern Virginia work for the government. In addition to that, the government, contractors, consultants and so forth, who are consuming office space. So that's also hurting that marketplace. But Northern Virginia is much more resilient because it's got better fundamentals, half the income tax rate that Washington D.C. has, and a much higher level of public safety and quality of life. And so I would say, though, those are the two hardest hit.
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B
One of the other places that's being played out right now in terms of a tug of war in the real estate dynamic on the residential and commercial side is the state of Florida. There are a lot of questions right now about just how sustainable the real estate dynamic is down there, given the extremely high end real estate that happens down there that Robert Frank often reports on. 10, 20, 30, $50 million estates in Florida versus some of the other types of properties, maybe more dated condominium type complexes, and then you throw in the cost for insurance and everything else. How exactly does the Florida dynamic shape up in your mind? And is there at least a bull case for still being in Florida right now?
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C
Well, I think you've got to look at Florida regionally. So South Florida, which is pretty much what your, what your monologue was about, is South Florida, South Florida, that's where you're finding the 30, 50, 75, $100 million estates. And so if you look at Miami, Miami beach in particular, it's Miami beach is almost the Monte Carlo or the south of France or Aspen of Florida or the US and, and so what you have is it's very attractive for high income earners, good quality of life, zero personal income taxes, zero estate taxes, and a very pro business environment. And so you're seeing high net worth individuals, large businesses that are beginning to relocate a bit down there as well because of their economic and tax policies and quality of life. But you also have a, a declining inventory of new construction. That market for new construction of luxury condominiums is extremely supply constrained. On the flip side, you have existing buildings that are 15, 20 years, 25 years old and older. And those are being, you're devastated by the marketplace. The market's rejecting them because of the exposure to, you know, major repairs and high assessments and high fees to cover that. Then you add the insurance cost for those kinds of buildings and it makes it almost impossible for Anyone to make sense to buy them. And I think the threat to South Florida in terms of growth, of the housing supply is to our insurance. Now, Ron DeSantis did something pretty smart. He created what's called Live Work, which allows and incentivizes zoning where there is a 40% affordable or workforce housing component to address the desperate need of workforce housing. And I think that's one of the threats to slowing down South Florida. Now the rest of the part of Florida, central Florida, like Tampa, in the Tampa Bay area, that's doing really well, slowed down but still affordable. Jacksonville, still affordable. Daytona beach, still affordable. West Palm Beach, Steve Ross is building an entire community there, is doing a great job there and attracting businesses and entrepreneurs and young people. And I think you'll see some growth there and that's still affordable. So Florida's got a mixed bag now.
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B
Don, we showed a map. You have a heavy presence in Florida as well as the Atlantic coast. Mid Atlantic for sure. They're also in California. From your perspective, for an aspiring or even established real estate investor, where do you think the opportunities are best positioned for the coming months?
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C
The best place to do business, I think in the coming months for opportunity plays, I think Washington, D.C. because it's so down, it's going to get even more depressed. But it's the nation's capital, the most powerful nation in the world. It'll cycle out of this in the government. The federal government will step in and take control at some point. So I say Washington D.C. proper, San Francisco, on the upswing. New mayor. He's doing some exciting things. They're addressing public safety, quality of life. It's the one bright spot in the state of California. I'd stay out of Los Angeles and I think Florida, I think South Florida developers who can address and take advantage of the live local land use and develop mixed income housing. I think there is a tremendous opportunity there because there's such a great demand for that. And then I look at Charlotte, North Carolina, down right now, but good opportunity. Atlanta, good opportunity is down right now too. And so I think where an investor ought to be looking is buying where the environment's pretty depressed and where you've got some good fundamentals to turn things around. And I also like Northern Virginia bit, a quite, quite a bit. And I love Texas. I think the best place probably right now outside of San Francisco for opportunities would be Dallas, Texas. And I think Fort Worth, Texas and Austin, Texas have tremendous opportunity, lots of wind in their sails and because they've got incredible fundamentals.
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B
All right, we've covered a lot of ground. Don Peebles, thank you very much for taking the time to join us. We'll see you soon, sir.
- [30:18]
C
Thank you.
- [30:19]
B
All right. Coming up on the show, Oracle shares are paring their losses after falling as much as 7% on new concerns around its cloud computing business. The details and what it says about the potential risks for a bubble. That story ahead, what made you confident.
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That you could do something that hadn't been done before? I have no fear of failure.
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Trailblazing women, changing the game.
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One of my favorite pieces of advice.
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Think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just got.
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To think big to accomplish big things.
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Julia Boorstin hosts CNBC Changemakers and Power Players.
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New episodes every Tuesday, wherever you get your podcasts. All right. Welcome back to the exchange markets. Right now you can see they're down by about a third of a percent to a half a percent across the board for the major indices, not at session lows, but kind of bumping just slightly above them. So we'll keep an eye on how that market dynamic shapes up going into the closing bell today. Now let's send it over to Courtney Reagan for a CNBC news update. Good afternoon, Courtney.
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G
Hi, Dom. Attorney General Pam Bondi defended herself against criticism from members of the Senate Judiciary Committee today and several tense exchanges with the committee's Democratic members. Bondi said she believes she upheld her promise to not politicize the Justice Department. Bondi also refused to say whether she was consulted by the White House about deploying National Guard members to a number of US cities, including Chicago. Power use in the US will hit record highs this year and in 2026. In its short term outlook today, the Energy Information Administration said it projects power demand to rise to 4,191 billion kilowatt hours this year and 4,305 billion next year. The IA said the rising demand was coming from data centers for artificial intelligence and cryptocurrency, as well as increasing electrification in homes and businesses. And American Airlines is getting rid of those contraptions that measure how big your carry on is at the airport gates. The airline will instead leave it up to gate agents and passengers to determine if bags meet the airline's requirements. The carrier says the change will speed up the boarding process. Will it then become subjective at the gate? Don, back over to you.
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I found the perfect size bag to fit all of those things.
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Courtney, Times they don't believe you even when you know it fits.
- [32:39]
B
There you go, Courtney. Thank you very much for that. Coming up on the show here, a final look at today's mystery chart. One of the non AI names, Non AI, our trader says could see a big breakout on its earnings. But is the bottom in for the stock which is already down 28% so far this year, will reveal that mystery chart coming up next. Welcome back. Earnings season is fast approaching and while the AI trade continues to dominate the headlines and fuel much of the market's momentum, our next guest is homing in on the three non AI names she says could pop on earnings results. Joining me now is G Squared Private Wealth's Victoria Green. She's also a CNBC contributor. Victoria, I want to start off first with the mystery chart that we've shown viewers and given to listeners here over the last half hour. What exactly is this beaten up name that you think could be poised for a bounce around earnings season?
- [33:36]
H
It's UnitedHealth. Right. It's the behemoth that's been beaten down for the last 12 months. And what we're looking for is this is the turnaround quarter and we're really excited to see if they can actually execute. It's on them to finally execute on their plan. They can't just talk about it. And what we need to see is not just cost cutting, but we need to see revenue growth driven by a better medical loss ratio. That means that they price their plans correctly. Already came out with some great news on their set. 78% of their plans are rated four star or better, which makes them much more eligible for bonuses, enhanced rebates. The stock has the potential if they execute, could see a really nice pop because you're going to see more and more investors pile in. It's a cheap stock, 15 times price earnings. I think you're going to see if you have good news, possibly even a raise. But definitely, hey, we know how to price our insurance plans. The stock could really move and could.
- [34:25]
B
Be one that powers the Dow as well. It's one of the more heavily weighted members of the Dow Jones Industrial Index. Speaking of another Dow component, it's also going to be big bank earnings season coming up relatively shortly. One of the big names that you are focused on right now is a bank, but it's not JP Morgan. Which one is it?
- [34:42]
H
It's Goldman Sachs. Goldman's done such a great job of going back to the Goldman Sachs of old. They're deal making. They're killing it on trading. And they're a huge beneficiary of regulatory and tax reform. And we've seen comments recently from saying this regulatory, Tory reform, it's real. It's a massive headwind. If they have a better stress test, they're a little bit more balanced, they can plan better. I expect to see, and I'm hoping to hear a lot about increased buybacks. That'll be number one. I want to see them crush it on trading. I want to see a lower realized tax rate or anticipation of a lower realized tax rate next year. I mean, they averaged about 24% taxes last year and so we'd love to see that tailwind there. And we really think that Goldman is executing on multiple cylinders. Not only wealth management, they have that partnership with T Rowe Price. And I'd love to hear updates on that. Is that going to drive more and more sales for their alternative investments? Is that going to push them into retail without them having to have a retail arm? Great potential there with that partnership. So I think you have some great catalysts under the hood. We also just think that that dealmaking's heated up, trading's heated up. Those two things benefit Goldman.
- [35:44]
B
All right, so that's the Goldman trade. Unh, Goldman, a couple of Dow components. Your final one is not a Dow component at all, but it's gotten a lot of attention as of late because of the cryptocurrency trade. Take us through what you think is going to be a pop on earnings. Right.
- [35:59]
H
I love Coinbase right now. I think it's a great play to be in because it has so much exposure to cryptocurrencies and Bitcoin. Its correlation with Bitcoin is very, very high. When Bitcoin trades higher, it's R squared over the last year is 0.62. You know, so that's saying it's very highly positively correlated. We've all seen what's happened with bitcoin. Crypto is becoming more and more mainstream, but it's beyond just the retail traders. It's the stablecoins story. So for us, Coinbase has multiple verticals. They've got their subscription revenue, they've got their trading revenue. We know trading heats up when bitcoin price moves like it has. And so I look at that, that's a huge catalyst for when they also are rolling out the AMEX crypto. Coinbase one credit card. To me, that's fascinating. They're pushing into that. So I'd love to hear more details on that. So if they crush it on trading revenue, increase subscription revenue and what's coming down the pipe with Amex stablecoins. And they're embracing the fact that finance is modernizing, finances, trading and a lot of the modernization of how payments are being processed is going through Coinbase and Coinbase's platforms. So I think it's a place you want to be.
- [37:00]
B
Victoria Green's stock picks, UnitedHealth, Goldman Sachs and Coinbase. Thank you very much. Victoria Green at Private Wealth. We'll see you later on. Coming up on the show, Oracle up nearly 18% since posting that monster backlog number in its first quarter earnings report last month. But shares are under pressure today on reported margin concerns. Are cracks starting to form in its open air partnership? That story explored when we come up next. The Exchange is back after this. Welcome back. Shares of Oracle are lower today on a report that says the cloud provider is struggling to make money renting out Nvidia chips. That story from the information. Seema Modi has the details in today's Tech check. Sima, what can you tell us about this report that is driving a lot of the downside today?
- [37:47]
A
Yeah, the stock is down right now after that big run up we saw last month. Dom, if you read the report, it basically alleges that while Oracle's cloud business is growing exponentially, it has quote, razor thin gross profit margins and lower than what Wall street had initially anticipated due in part to the rising cost of power and labor to run data centers. Here's what we know right now. Oracle as we know is quickly becoming a key enabler in the build out of artificial intelligence data centers renting out Nvidia chips to big partners like OpenAI. That was made clear when it reported earnings last month and revealed this huge black clog of backlog of cloud contracts, also known as remaining performance obligations, which jumped 359% in a year. But even then at that time, analysts including Brad Sills at Bank of America cautioned that visibility around longer term profitability is still not clear. He at that time though did reiterate that this is a company that has a good track record. It has a history of being a leading software software platform and that should translate to building value for workloads. One of the questions that has emerged is around margins, how much margins will be impacted in the short term as they put more money into capex is a six months, is a 12 months. That's what the market seems to be trying to suss out right now with the stock down nearly 6%. And is there a better deal economics that they can get from Nvidia if they continue to buy so many of these high performing AI chips. We are less than a week away till Oracle World kicks off in Las Vegas next week where we're expecting the co presidents and founder Larry Ellison to take the stage and provide some more information about the growth trajectory of this company.
- [39:20]
B
It's interesting because Oracle AI World is what it's going to be. But this is the same conference as the old Oracle Cloud World. So it kind of shows you the evolution. What exactly then are say investors, people in the industry going to focus on? Because this is not just a developer's conference. This is for the entire, this is for customers, this is for businesses that use them, this is for everybody in that kind of Oracle World, what exactly are we going to expect there?
- [39:46]
A
To your point, this is the big event for Oracle. It's where management will take the stage and talk about the company's ability to play a more powerful role in the build out of artificial intelligence. We're expecting management to talk about potentially some new products within Cloud. But even more importantly, I would, I would add DOM is Later in the week is the analyst day where cover analysts who cover the stock will likely ask some more financially motivated questions right around the revenue and profitability implications of AI. What does the deal with open air look like over the next five to 10 years? How quickly can revenue continue to rise in the coming quarters? And whether there's a learning curve around the data center build out that allows them to become more cost efficient over time? Yes, power may be a big expense right now. Does that improve in the coming quarters as a number of these companies try to build out relationships with utilities and nuclear power becomes a bigger opportunity.
- [40:36]
B
All right, Oracle AI World in Las Vegas next week. Thank you very much, Simon. With today's tech check coming up on the show, the Intercontinental Exchange ICE committing to invest $2 billion in Poly Market. We're going to dig into what the owner of the New York Stock Exchange wants from a crypto based predictions market coming up next. All right, welcome back. Time now for a little show and tell where we show you a chart and tell you a story. Shares of Intercontinental Exchange or ICE higher today after announcing a $2 billion stake in Polymarket valuing the crypto based prediction markets platform roughly $8 billion in total value. And while sports betting is getting a lot of attention after rival Kalshi implemented contracts its Polymarket's tokenization capabilities that ICE's CEO Jeffrey Sprecher sees as the biggest opportunity, here is what Sprecher told Squawkbox just this morning.
- [41:36]
D
And what I see the tokenization doing is really, you know, rewiring the flow of the banking system. We have exchanges all around the world. They operate during, you know, the local banking hours. And the tokenization that we're working on I think will be able to allow capital to flow freely anywhere in the world anytime. Anybody that wants to make a market on anything, which is what chain is.
- [42:01]
B
Building.
- [42:04]
D
That'S a macro trend that I know is here to stay.
- [42:07]
B
Alright. So that deal between ICE and Polymarkets weighing on shares of DraftKings and FanDuel parent company Flutter sports betting stocks perhaps seen as susceptible to the rise of prediction markets. DraftKings is now down 24% in the last two weeks and hitting its lowest level since early June. Well, coming up on the show, cars, carriers and question marks on the docket in today's Rapid Fire that's coming up next. The exchange will be back right after this. Welcome back to THE exchange. Let's catch you up on a few more of these stock stories that are on our radar this afternoon. It's time for Rapid fire. And joining me for today's Transportation edition is our own Phil LaBeau. Now, Phil, we've got a lot of ground to cover. First up, more than $900 billion in travel spending has been lost since the government shutdown nearly a week ago according to at least one trade group. And for now, it's also costing flyers time, shares of the big three carriers lower as FAA and TSA staffing issues continue to cause some major delays at certain airports. Phil, how big of a deal is this?
- [43:15]
I
Depends on the airport, depends on the time and depends on your definition of major. We didn't hear about many delays, Dom, until yesterday. And that's when the secretary of transportation, Sean Duffy, held a press conference in Newark and he said we're seeing a slight uptick in sick calls. There were delays yesterday in Denver and Newark. The Burbank tower was briefly unmanned, so they had to cancel and delay flights at that airport. It's not a huge airport, but it's emblematic of a fragile air traffic control system. We reached out, by the way, to the air traffic controllers union regarding the staffing issues. The union said in response it is normal for a few air traffic controllers to call in sick on any given day. And this is the latest example of how fragile our aviation system is in the midst of a national shortage of these critical safety professionals. They go on to say a number of other things, pretty much what you would expect. Let's get this resolved in Washington. Bottom line is this, Dom, the longer this goes, the greater the likelihood is that you will see more air traffic controllers or TSA agents, others not coming into their job or calling in sick if they're going without pay. The longer it goes, the more likely it is that you will see fewer people reporting to work.
- [44:29]
B
All right, road warriors beware there. Keep an eye on that. Next up, Phil, we got Tesla shares lower on the day. The company is going to unveil the latest version of its full self driving technology earlier. But it's a clip that Elon Musk posted over the weekend that's got investors attention. Featuring a spinning component with the Tesla logo as you're seeing there. Phil, we've heard that Tesla could unveil a lower priced Model Y SUV to make up for the loss of EV tax credits. Will that lower cost and the price make a difference?
- [44:59]
I
It could. I mean, it depends on how much lower the price is. Look, it starts right now at $44,990. That's the base model. And let's be clear, very few people buy a base model vehicle. But that's the base price. If they can bring that down under 40,000, there's the potential to increase sales that would be lost because there's no $7,500 federal tax credit. Remember the Model Y, it is huge, not just for Tesla, but for EVs overall. One out of every four EVs sold in the US not just Tesla's EVs sold in the third quarter here in the US was a Model Y.
- [45:34]
B
All right. And Phil, finally speaking of cars, the used car market is staying strong. Cox Automotive raising their full year sales outlook, saying tariffs have actually led to a stronger used car market. But also warning of a potential slowdown in the fourth quarter due to supply shifts, higher costs and rising interest rates. What's the dynamic there?
- [45:52]
I
Right. Remember what drives the used car market is the new car market tariffs pushing prices up because the automakers have eaten some of this with their margins being hit. But generally speaking, we see new vehicle prices at an all time high. So what does that mean? More people go into the used market. More people go into the used market. That pushes up prices up 2% compared to the same quarter of last year. And then you look at in terms of prices being down compared to August, that's fractional. Luxury models were driving most of the sales because there's so much demand right now for EVs. Bottom line is this, Dom. The used market is more elevated in terms of pricing than we usually see. This time of year. Let's see what happens with the new vehicle supply that drives the used market.
- [46:38]
B
Rapid Fire Transportation edition with Phil LaBeau. Thank you very much for that. That does it for us here on the Exchange. Thanks for watching. Power Lunch with Sullivan starts right now.
- [46:47]
H
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- [46:51]
B
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G
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A
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B
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