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The Bank of Nvidia, Metal Momentum and Freight's State 10/8/25
00:43:59
Nvidia lending billions to OpenAI, xAI and CoreWeave...is the company now propping up demand for its own products? The trade on precious metals as gold and silver both hit new highs. Plus, the state of freight is not that great.
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Hmm. That's music to my ears.
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I can only talk. Investing involves risk, including risk of loss. Zero account fees apply to retail brokerage accounts only. $0 commission applies to online US equity trades and ETFs and retail fidelity accounts. Sell order assessment fee not included. Some account types and securities excluded. Details@fidelity.com commissions Fidelity Brokerage Services LLC. Member NYSE SIPC I'm no tech genius, but I knew if I wanted my business to crush it, I needed a website. Now, thankfully, Bluehost made it easy. I customized, optimized and monetized everything exactly how I wanted with AI. In minutes my site was up. I couldn't believe it. The search engine tools even helped me get more site visitors. Whatever your passion project is, you can set it up with Bluehost with their 30 day money back guarantee. What have you got to lose? Head to bluehost.com to start now.
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A
You're listening to the Exchange. Here's today's show. Well, thanks, Scott. Welcome to the Exchange. I'm Morgan Brennan in for Kelly Evans. Stocks are higher. The S&P 500 hitting an all time intraday high just a few moments ago. Joining the NASDAQ 100. This is the government shutdown continues with another Senate vote underway as I speak. We will keep an eye on that. And we're watching yields with 10 year notes up for auction. We're going to see what demand is. The trade is back on today after taking a breather yesterday amid a report questioning Oracle's margins. Nvidia up nearly 2%. Jensen Huang telling CNBC computing demand is up, quote, substantially. This as Nvidia now has $1 trillion worth of partnerships, including with X AI. We've got more on that in just a moment. And gold hitting another record high, holding above $4,000 an ounce. It's not the only metal. Having a moment though. We're going to dig into that broader commodities trade and and let's begin with Nvidia increasingly becoming a banker to AI companies in its orbit. Christina Parsonavilis is here at the desk. She has the story. Hi, Christina. Hi Morgan. Well, Nvidia may actually be the most valuable company in the world. You talked about that. But it's also becoming the industry's preferred lender. Bloomberg reported the company plans to invest $2 billion in Elon Musk XI as part of a $20 billion funding round. Under the deal, 12 and a half billion dollars will be raised as debt through a special purpose vehicle that buys Nvidia processors, which Xi then rents out for five years. You can chart Nvidia CEO Jensen Wong told CNBC this morning about the importance of investing in the entire ecosystem.
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B
Listening the only regret I have about Xi, we're an investor already, the only regret I have is I didn't give him more money. We've made some really terrific investments and, and largely my only regret is that we didn't invest more.
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A
And that confidence that you are seeing from him is backed of course by Serious capital between $100 billion commitment to open air, $6.3 billion cloud service services purchased from Corey, where it also holds a 7% stake in Corvee and then venture bets in over 100 AI startups. Nvidia has really amassed over $100 billion in exposure across the AI system. But there is a pattern in these investments. And let's see, with Core Weave alone, Nvidia plays four conflicting roles. Supplier of chips, equity investor with a 7% stake, financier with buyback guarantees for excess capacity and then customer purchasing $6.3 billion in cloud services with XAI. Nvidia is again both investor and supplier financing a company that will buy its own products. And that's why you can see on your screen the circular nature of all of this. But the XAI deal really introduces what amounts to chip backed debt, asset backed securities where the collateral is depreciating GPU compute capacity. You can argue that maybe it'll depreciate over six years, five years, three years. The question is no longer whether Nvidia dominates AI hardware, it's whether the company is using its huge CA flow to prop up demand for its own products. I mean asset backed lending has been a thing for a while. It's gotten hotter in the last couple of years. The idea that they're doing it using chips. I know Core Weave has been very active in doing this over the last couple of years, but is this sort of a new concept? 100%. 100% is a new concept when you're applying some of this hardware to it. And the concern is that some of the companies are applying different depreciation cycles. So Corve, they had said it six years. Right. And I'm not sure what the case will be for Xi, but the assumption is they're going to be around the same time frame. I think if it's lambda, they're not publicly traded. But I read one report that their depreciation cycle is a lot shorter. Right. And then you have Jensen Huang, the CEO of Nvidia, almost saying that Hopper and the old architecture for the GPUs is, you know, somewhat obsolete. And if they're going to be coming out with new chips every single year, how do you maintain a cycle like that for six years when there's constantly newer, greater, better, you know, more power efficient things coming out? And so then that lowers the value of the assets backing said loans and then raises all kinds of concerns. So this is why we have this conversation about this being circular, even if it's not maybe technically circular. And why there's all this concern that maybe an AI bubble is inflating or at least part of the reason. Yeah. And I guess at the beginning or the center of this AI bubble is two companies. One publicly traded, the largest in the world, four and a half trillion dollar market cap in video. And then the other one is this private company worth 500 billion and it's open air and OpenAI, which Jensen Huang even this morning said is not making any money. Right. So they're going to have to raise a lot of debt to continue building out all this infrastructure, Stargate included, across the United States. And so how do they get that debt? And you know, the appetite is there. No doubt. Oracle has said that the appetite is there for their debt and we know that they have a negative free cash flow. So just how does, how long does this last? And our patience we talk about building. These are going to be built for several years. So investors are rewarding it now. But how long will you stay in the market if this isn't coming out within the next year or two? All right, Christina, parts navalis. That was a great breakdown. Thank you. Your color coordinated. We noticed it's Christmas early or something. All right, Christina, thank you. So if Nvidia is becoming part bank to a lot of other tech companies, what does that mean for this AI trade? Well, with us now is Dan Niles, founder and portfolio manager at Niles Investment Management. Dan, it's great to have you on the show. Welcome.
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B
Thank you.
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A
We'll start right there. What do you think of this?
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B
Well, you have to separate it into pieces. So if you're asking what do I think about the stocks of the AI companies, I think they're going to go up a lot for one simple reason. The Fed's cutting rates after being on hold for nine months. You're going to get another probably three cuts between now and January and then you're probably going to get Steven Myron being the new head of the Federal Reserve in May, and he wants rates about a percent and a half lower than everybody else. So in an environment of easy money, you're going to be able to fund a lot of cash burning businesses and have these everybody be treated like everyone's going to win. So from a stock perspective, that's how I'm thinking about it now. If you want to look out several years from now, or maybe at the end of 2026 when rate cuts are done and you go, all right, are people going to get more discerning about these circular investments and are you going to figure out, well, which AI companies are actually going to win versus the ones that are going to be sort of left behind? Then I think you're going to have, you're going to start to see some problems. But in the near term, I think these stocks go up for one simple reason. Easy money funds a lot of cash burning AI businesses.
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A
I just got to take a little divergence here because you just mentioned Steve Myron as the possible next Fed chair. Why do you think that? I think just today he batted down rumors that he was even considering it or in conversations about it.
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Well, I mean, let me put you this way. There's a reason he's out. If you look at the Fed dot plots, he wanted 125 more basis points of cuts between now and the end of the year. So that would mean one cut of 75, one cut of 50. President Trump, as we all know, gets to appoint the new Fed chair. And as last I saw, Myron was still part of the White House administration while he's on the Fed at the same time, which has not happened in a very long time. Right. Usually you resign your prior post. So we'll see, we'll see how this works out. But I think it's pretty clear that the Fed, much like in 2021, where I didn't think they, I thought they should have been raising rates, they convinced themselves inflation was transitory. They kept rates on hold and the S and P finished the year up 27%. And so I think right now the Fed wants to cut regardless of what inflation being above target for four years. And the White House wants rates down. Whoever gets appointed, let's say it's not Myron, it's somebody else. It's going to be somebody that wants to relocate rates a lot. So easy money drives everything up. And that includes stocks, Bitcoin, gold, wine, art, you name it. Just like it did in 2021. And that's what's going to happen again. And in that environment, every company is treated like a winner because every company can get capital.
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A
Hmm. If I go back to air, is it still infrastructure stocks where you should be putting your money to work here right now? Especially as I would argue, Quite a few CEOs in corporate America are saying, both publicly and privately, that at least for now, at this moment in time, the rhetoric and the reality in terms of the capabilities of ARA are diverging.
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B
Oh, they completely are diverging. But again, that's two separate questions, right? Because if you think about it, you go, okay, you've invested between the five biggest spenders out there, so Google, Amazon, Microsoft, three hyperscalers. You throw in Meta and Oracle over the past three calendar years, including this one, you will have spent $800 billion from just those five guys in CapEx. The industry at total will be about 1.2 trillion. OpenAI this year is expected to produce 13 billion in revenues. The entire AI native. So companies that don't have other businesses like Microsoft, Google, Amazon, etc. Just the AI native, companies like OpenAI, Anthropic Perplexity, etc. In total are going to generate about 20 billion in revenues this year. With 13 billion out of open air. That's against 800 billion in investments. So at a certain point, yes, you're investing all of this, but somebody has to be willing to pay for all of this infrastructure. In the near term. Nobody cares because stocks are going up, everybody's going to win. But are you going to get a massive shakeout at some point when the easy money stops? I think the answer is absolutely yes. At this point, my brain is on thinking that this is 98, 99, where you have easy money through whoever the next Fed chair is. Could markets be up 20% this year and up even more next year to start? Sure. And then could you have much more discernment and then a massive meltdown after that? Sure. But in the near term you want to stay positive because you go back to the late 90s, right? 1998, Nasdaq was up 40%. 1999, Nasdaq was up 86%. Then the first part of 2000, the first two months and change, it was up 24% to start. Then of course we know what happened, but it was a six year build to get to that. Sorry, six year build to get to that point from when you had the introduction of the first mass Internet browser, Netscape Navigator at the end of 94 until you got to that peak in 2000.
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A
So. So maybe you ride the wave for now. What would you be watching for to start to feel like maybe a correction is coming or something more severe?
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B
Well, it's what is when do you get the first round of data? But then how does the market react to it? So I'll give you an example of that. When, you know, I saw that AMD deal with OpenAI, my first thought is, and I posted this, I'm so dead. Because my Nvidia, Nvidia is just going to get crushed. I'm like, wow, Nvidia is down just a percent. And then you see everybody coming out and saying, oh, everybody can win because the demand is so huge and so everybody's going to do great. Now if that happens and you have a bigger issue, then you go, huh, well that's interesting. Or you look at and you say, okay, this company is trying to raise money but they can't get the money raised. How does the market react to that? Or some special purpose vehicle blows up because they're depreciating GPUs over five to six years. But as Jensen Long has told us, you know, every year he's introducing new gpu. Every year it makes the old GPU obsolete. So how are you depreciating these assets and doing asset backed lending for six years now? It's just like with the housing bubble, right? It went on for several years longer than I ever thought it would and, and then it blew up. But these things, there's a reason the phrase is the market can stay irrational longer than you can remain solvent. And I think that's just the way you need to think about it. So for me, I don't want the message to get lost, which is if you're looking to invest, I think it's wildly bullish right now because of easy money. But what I'm just, I'm trying to give people a way to think about this ultimately, which is at a certain point you need to have cash generation to make this work. If Nvidia wants to invest in companies, they're going to generate something like 240 billion in cash flow this year. Next year, OpenAI, by their own projections is expected to burn 115 billion in cash between now and 2029. Those are two very different types of investors. Right? Nvidia is going to have no problems funding the commitments they made. Open Air has got to go out and get that money raised. Obviously an incredibly impressive company, but they still have to go raise that money for all these commitments. They're making. So you want to keep all of that in mind.
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A
Yeah. Could also help explain why Open AI is not yet public or at least we don't know if those plans yet to go public. Dan Niles, great conversation. Thanks for kicking off the hour with me. Much more on AI tonight on Mad Money with the CEO of Core Weave. That's at 6pm Eastern with Jim Cramer. Don't miss that. Ten year notes are up for auction. Rick Santelli is tracking the action at the cme. Hi, Rick.
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B
Hi, Morgan. Indeed, as we look at the charts, you're looking at yields moving up, which normally means the auction went, you know, so, so isn't necessarily the case. We had 39 billion reopened tents, meaning we're adding to a primary auction that was held in August. So this is the second time we're adding into it the Yield at this 39 billion reopened 10 year 4.117. The 1 issued market was a smidge lower. So higher yield, lower price. The government's a seller. It already gets a few demerits for not pricing aggressively. And if we look at all the metrics in general, the bid to cover was a bit light, 2.48, meaning $2.48, chasing every dollar's worth of securities available. One of the bright side was the dealer takedown at 9.1% was very aggressive, but all in all, I gave it a B minus. But yields are moving a bit higher. And what that really does demonstrate is just because an auction goes B minus doesn't mean that you're going to see prices move up and yields move down necessarily. It seems to me today that if it wasn't for the auction, yields might have crept up a bit anyway, for the most part, it seems as though the market's in a bit of a range from about 402 to 404 to around for 20. And considering that tomorrow we have 30 year bonds, we want to pay very close attention because 30 year bond yields on the high yield intraday over the last several weeks have been bumping up right under 480. It settled at 477 last year. So that gives you a hint that we are bumping up against resistance, at least in the longest maturity on the curve. We want to continue to monitor the auctions because obviously we're void of other ways to monitor markets like the data. I find it fascinating that no matter whether the government's closed or not, we have to have these auctions. You have to bring in some money because of course, we spend it pretty much every minute of the day, even when the government's closed. Morgan, back to you.
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It is true. All right, we'll see you here same time, same place tomorrow for that 30 year auction. Rick Santelli, thank you. Coming up, the S and P hitting another all time high after snapping its longest win streak since May. But Wells Fargo says the trade is losing moment and that could spell trouble for the broader market. We're going to ask our next guest where they're moving their money next. Plus, Freeport McMoRan getting some love from Wall street this morning. Shares now up more than 20% in less than two weeks, pushing the VanEck Copper Miners ETF to its first all time high since 2011. We'll look at the rest of the commodities landscape ahead. Exchange is back after this.
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This is the exchange on C. I'm no tech genius, but I knew if I wanted my business to crush it, I needed a website. Now, thankfully, Bluehost made it easy. I customized, optimized and monetized everything exactly how I wanted with AI. In minutes, my site was up. I couldn't believe it. The search engine tools even helped me get more site visitors. Whatever your passion project is, you can set it up with Bluehost. With their 30 day money back guarantee, what have you got to lose? Head to bluehost.com to start now.
- [18:27]
A
What made you confident that you could do something that hadn't been done before? I have no fear of failure. Trailblazing women, changing the game. One of my favorite pieces of advice, 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 gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and power players. New episodes every Tuesday, wherever you get your podcasts. Welcome back. Stocks rallying after Nvidia CEO Jensen Huang told CNBC computing demand has gone up substantially in the last six months, easing doubts about the sustainability of the AI trade. But my next guest says momentum is slowing and he's trimming exposure to AI. Joining me now is Paul Christopher, head of Global Investment Strategy at Wells Fargo Investment Institute. Paul, it's great to have you on and let's start right there. What are you looking at that indicates that momentum is slowing?
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B
Yeah, thanks. No, we're starting to see the gains be a little bit less than they were in previous days. A little bit like throwing a ball in the air where as it gets to its peak, its rate of of increase or its rate of climb gets less. And then you get the ball falling. So could the market fall here? Yes, absolutely. As we saw in January, it would only take one sort of piece of unexpected news to wrong foot a rally like this and then all of a sudden you're looking at a pullback. Now we don't think it's the end of the trend, not by any means, but we just think that there's ways to diversify our exposure to that trend. Happy to talk about those if you like.
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A
Yeah, let's do that. How would you diversify?
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B
So, okay, in the first place, earlier this year we were long, we were overweight, I should say both communication services and information technology, two sectors in the S&P 500. After we got to the peak or started running at a good rate of clip in May, we pulled off comm services. So we only have one overweight among the hyperscalers. What else could we do? Well, there's other ways to play AI. There's the data center angle on all of that. So we eventually went in long and overweight utilities and industrials. That's where we are right now. And if you notice on a day to day basis, those are right around the borderline of outperforming or not outperforming the overall composite index. So these are two indices that probably have some ways to go further before they get overvalued. Okay, so that's an alternative way to play here. Buy something that's cheap but that aligns, that's related to that, that overall AI trend. And then a third way is to look for other trends in the market that are reliable. We think one of the best and most reliable trends here is that we think short term interest rates are going to fall. Probably two more Fed rate cuts this year, two more rate cuts next year. We've already seen the curve, the maturity curve, the yield curve, steepen from the short end, short end falling, long end rising or staying the same. Who's that going to help? Banks. Banks pay deposits on the short end of the curve. Those rates are falling, bank costs are falling. But on the long end of the maturity spectrum you've got steady to higher yields. And those are the rates that banks charge for loans. So it figures, costs go down, revenues go up. We like financials. This is another trend that you can play so that your money isn't completely locked up in one basket. That could have a pullback or a correction.
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A
Do you stay domestic? And I asked that looking at the fact that today is a six month anniversary of the tariff crash low after Liberation Day, the S&P is now up more than 35% since then on.
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B
Yeah, we're going to stay domestic. Look, the in the early part of the year, the international markets outperformed. But since that low, the US has maintained itself with those markets staying neck and neck with them. Why would we stay with the US Then? Well, because we think the fundamentals are better here. We think growth improves next year while interest rates are falling. That's not a usual combination to see growth improving while interest rates fall, usually see rates rise. So that's a really great combination for mergers and acquisitions. It could help business development companies. It could help any number of alternative investments as well. So we like the US not just because it has those positive fundamentals, but because we're starting to see some real strains overseas. You look at the electoral problem, the political problems in France and in the UK Both of those are related to debt. That seems unsustainable. So those bond yields are going up. We don't want any part of that right now. We see some risks still in China. We're underweight emerging markets. We would rather stay home and just try to diversify. So again, all of our eggs aren't in just one thematic basket.
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A
Okay, Paul, quickly then. Do you go anywhere near fixed income?
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B
Yeah, absolutely. Take a bullet strategy here. I said before, short rates are falling, long rates are kind of volatile up and down. Let's stick with those maturities. Three to seven years, call that intermediate range. The yields are almost like what they are in 10 years, but you don't have the duration risk. You don't have the risk from the up and down in the yields. And we would stick with investment grades, corporates, treasuries, mun, essential service and general obligation munis. Best places to go there.
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A
Okay, Paul Christopher of Wells Fargo, thank you. We've got breaking news out of Capitol Hill. Emily Wilkins has a story for us. Hi, Emily. Hey, Morgan. Well, the Senate has tried again and failed again to get the government funded. I believe this was the sixth time and we're not seeing any movement here in the, in the stalemate, rather there we're still seeing those three Democrats and the one independent crossing the lines, voting with Republicans to keep the government funded. But of course, that is five short of the number that they need for Democrats to actually fund the government. Now tensions on Capitol Hill are rising. We had two Arizona senators, Senators Kelly and Ruben Gallego, that actually were chatting with reporters raising concerns about the government not being reopened, raising concern, concerns about the Affordable Care act and the health care tax credits and then they actually had Speaker Mike Johnson kind of walked, walked over to them. They began talking, they began discussing. And it really just seems like the line in the sand is still what it was before. Republicans are saying we'll discuss these Affordable Care act tax credits, but the government needs to open first, while Democrats are saying we're going to need some more assurances than that. We are expecting more votes, votes to happen this week. This has been the strategy for Senate Majority Leader John Thune is to just have Democrats vote as many times as possible on the shutdown. But I have talked with senators today who say that bipartisan conversations are going on over these tax credits, trying to talk about a way to move forward, trying to talk about what they would want to see. It's just not clear if or when those discussions will get to a point where five more Senate Democrats will be comfortable voting to open up the government. Morgan. All right, Emily Wilkins, thank you for bringing us the latest. Coming up, Bitcoin topping 125,000 for the first time this week. The recent rally has led to a record number of crypto millionaires. But how are they spending their newfound wealth? We've got those details ahead.
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B
What made you confident that you could.
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A
Do something that hadn't been done before? I have no fear of failure. Trailblazing women, changing the game. One of my favorite pieces of advice, 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 gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday, wherever you get your podcasts. Welcome back. We have new numbers for the mortgage market and they show increased demand for riskier loans. Diana Olich has the details. Hi, Diana. Hey, Morgan. Yeah, Mortgage demand fell again last week even as interest rates eased slightly. The average rate on the 30 year fixed dropped to 6.43% from 6.46 for loans with 20% down. Those are conforming loans. Applications to refinance fell 8% for the week and applications for a mortgage to buy a home fell 1%. All this according to the Mortgage Bankers Association. Now interesting in the report, the share of applications for adjustable rate loans rose to 9.5% from just just 8% the week before. The average rate for a five year ARM fell to 5.49% from 5.74. So that's a considerable savings from the 30 year fixed. This happened in mid September as Well when the 30 year fixed dropped sharply from where it was, but only to 6.39%. So not that far from where it is now. So ARM demand that week jumped nearly 13. It jumped to nearly 13% of all applications, the highest share since 2008. So clearly current borrowers and buyers are looking for savings wherever they can get it, given still high home prices. Important to note though, arms can be fixed for up to 10 years. And today's ARMS are unwritten much more strictly than the ones that led up to that subprime mortgage crash we all remember. Still, there is, of course, some risk because these loans will eventually adjust to the market rate, which could be higher. But Morgan, as you know, could also be lower. All right, Diana Olek, thank you. Now let's turn to Seema Modi for a CNBC news update. Seema Morgan, Law enforcement officials say a 29 year old man was arrested and charged in the connection to the destructive Palisades fire in the Los Angeles County. Authorities say the man, a former Uber driver, has been charged for destruction of property by means of fire which they allege he set maliciously. The Palisades fire sparked on January 7, killed 12 people while destroying 7,000 and structures. Elon Musk and X have settled a $128 million settlement losses from former Twitter executives. The terms of the settlement were not disclosed, but in the suit, the former executives claim they were not paid their promised severance pay after Musk fired them following his acquisition of the social media platform Now X. And lawyers for the former executives have yet to respond for comment. And Coca Cola is bringing its many single serve cans to convenience stores nationwide early national next year. The beverage giant said it hopes the 7.5 ounce can will entice more calorie and budget conscious consumers as it struggles with slowing demand for sodas. Morgan. All right, Simon Modi, thank you. Well, coming up, don't look now, but the dollar is hitting a two month high. That's despite the government shutdown entering into its eighth day. We dig into the currency trade and look at how to play the greenback's next move. Exchanges back after this. Welcome back to the Exchange. Gold soaring past the $4,000 mark as investors continue to flock to the Safe Haven asset. But there's another precious metal that looks even more attractive to our next guest. CNBC contributor Tim Seymour joins us now with more. Tim, great to have you on.
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B
Great to be here, Morgan, thanks.
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A
First, I just give you some kudos because you are in many ways early to the gold trade. You were a gold bug before it became Cool. So I do want to get your thoughts on what we've seen there, there.
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B
It's nice to be cool in some way. Thank you. You know, as someone that's been investing internationally, what I've seen for a long time is the central bank diversification dynamic. I think what's going on with gold and to some extent with silver is it's an asset class designation as well. And if you, whether you listen to Morgan Stanley recently saying gold could be up to 20% of a portfolio, but you know, Ray Dalio, I mean I just think institutions are finding gold a lot more interesting and then they're these, these kind of, these factoids that every $10 billion of gold demand equals a 3% move in the price dollar weakness is kind of stabilized. So a lot of this move has been I think institutional allocation. We got numbers out of China last month that said their gold holdings are at record highs and that their treasury holdings had fallen reasonably. I don't think they're jumping fully out of the treasury trade by any means. But you know, these are dynamics that are all contributing. And yes, silver looks fascinating just because I think there is that relationship between gold and silver. And if you look at silver relative to its flash adjusted highs, there's a long way to go in silver. But we're only now just breaking through the highs of 2011 when also what used to be kind of the old high water mark for gold.
- [30:55]
A
Yeah. And of course this gold trade is sort of being referred to as a debasement trade. But if we dig a little deeper in silver, I mean there had been a sense that, or some speculation if you will, that that relationship, that correlation between gold and silver had broken down zone and wasn't it wasn't working the way it used to anymore. Has that changed? Is that reversed again here or something else driving silver?
- [31:16]
B
Well, I think silver has also. We know the industrial usage but I'm not sure there's this, this industrial trend in silver. I think it really is diversification across PGM and the asset class. Look at palladium, look at platinum and again I would just bring it back to where silver, that gold, silver relationship. If you look over the last 20 years, silver has underperformed gold by 40%. So you can do that, that ratio. I think this is a catch up trade and I think the same trends though that are supporting all PGMs are going to continue. I think you can be tactical here. You could trade gold down to maybe 30, 37, 50, but I wouldn't, you know, I Wouldn't step too far off this train. Gold miners have a beta typically of 2 to 3 during the periods it's running. They've slowed down in the last few days relative to the metal. But gold miners, free cash flow yields, the upgrades are coming if, if not, you know, haven't already happened.
- [32:07]
A
It talked about dollar stabilization. What is driving that right now? How much of that is domestic versus some of the dynamics that we're seeing play out in other markets around the world, including political dynamics in places like Japan.
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B
Yeah, good point. I think some of this is, is just central bank differentials are catching up. So there was a time the Fed was clearly leaning that much more dovish than the ECB seemingly was done boj and what's going on there? I mean they got a wage number this morning that was somewhat hot. I think they should be hiking whether they do or not. Fiscal policy in Japan after Takaichi, you know, after that dynamic fiscal spending may be part of buying Japanese equities and a weaker yen and that tends to be good for Japanese equities. We are overweight Japan and IDevo. So I like that trade. But dollar was also one of the most crowded, you know, being short. Dollar was one of the most crowded trades going into this year, much of this year. Obviously we're getting numbers in terms of the deficit. We're seeing some dynamics in terms of, of the White House policy here that that may be a lot more dollar positive. I wouldn't, I wouldn't say the dollar is going to run away back, you know, higher here. And I'm not sure the White House wants it to be a lot higher even though they may or may not talk about, about that.
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A
So finally, the fact that we're eight days into a government shutdown doesn't look like we have an end in sight, at least not yet. Are the markets behaving the way you would expect them to based on history?
- [33:33]
B
Based on history they are. And based upon, boy, you know the headlines. We're getting both in what have been market drivers in terms of AI and mega cap tech and whatnot. I guess I'm not terribly surprised. I'd say be careful because every time consumer could be a little bit different. But no, based upon history here I think we're going to. And we've also learned just what part of the economy is most affected. It's not reason to sell the market here.
- [34:01]
A
Okay, Tim Seymour, great to see Morgan. Coming up, crypto's recent rally minting dozens of thousands of new millionaires. But they aren't just buying flashy sports cars or luxury watches where the crypto watch wealth is flowing. That's coming up next. Welcome back. Bitcoin breaking above 126,000 for the first time earlier this week, nearly doubling over the past year. The record run giving rise to thousands of new crypto millionaires. Millionaires Robert Frank joins me now with more.
- [34:46]
B
Robert Morgan, great to see. Well, the market cap of crypto increasing by $2 trillion just over the past year. That has created 70,000 new crypto millionaires. There are now 240,000 individuals with crypto holdings worth a million dollars or more. That's according to a new report from Henley and Partners at New World wealth. There are 450 people with more than 100 million in crypto and 36 crypto billionaires. That's up from just six, two years ago. So how much of this new crypto wealth will actually be spent? Well, new research by a group of economists found that for every dollar that crypto investors gain in wealth, they spend about 10 cents. So that would equate to about $200 billion in additional spending if they sold as usual. Now their purchase right now or their favorite one is real estate. The study found that locations with large crypto populations saw larger gains in home prices when crypto was rallying. Now for more on the new crypto wealthy and how they're spending and investing, you can sign up for the new Inside wealth newsletter out tomorrow morning@cnbc.com InsideWealth that's cnbc.com InsideWealth Morgan oh, it's super fascinating.
- [36:03]
A
I guess if you made your fortune by owning bitcoin, which is sort of seen as a store of value, then of course you would put it into another store of value. One is as old as time, which is real estate. Are there certain specific markets? You just mentioned it, I guess. What are the markets and what is that doing for home prices in the luxury end?
- [36:23]
B
Yeah, the study wasn't specific in terms of exactly which counties or even states, but broadly it said that low tax states rates in the Sun Belt tend to be the highest concentration of the crypto wealthy. So I would imagine that's Texas, that's Florida, that's Tennessee. Not so much on the coast, New York, California in terms of the crypto population. So maybe a good sign for the real estate in those markets.
- [36:49]
A
Yeah. I would also just say anecdotally, it's been my experience that a few of the crypto billionaires that I have come in contact with with have reinvested some of that money into things like space and other frontier technologies. Are you seeing and hearing the same thing?
- [37:04]
B
Absolutely. I mean, these are folks that like to defy convention. They like to be at the cutting edge of where technology and innovation is going. Space, longevity, you know, clearly AI, all these new technologies at the sort of bleeding edge. Frontier technologies is exactly how they see Bitcoin in terms of finance and it's how they see their investment themes in other areas as well.
- [37:29]
A
Robert Frank, thank you. Coming up, a key freight index posting its lowest September reading ever. What that indicates about the health of both the supply chain and consumer spending ahead of the holiday season. Next exchange will be right back. Welcome back to the exchange. FedEx lower today after JP Morgan downgraded shares to neutral from overweight, lowered their price target by 10 bucks to $274 per share. You can see shares down fractionally now. The writing. Any potential upside from FedEx's strategic turnaround will be offset given the quote, significant headwinds from a difficult industrial backdrop and increasing competition. Meanwhile, a key freight indicator also flashing a warning sign in what is usually a boom month for logistics and transportation companies. Global supply chain reporter Lorianne LaRocco is here on set with me to discuss the latest. The state of freight. What are we seeing? The state of freight is not that great. Sorry for the rhyme, but but in all but all tens of purposes. So we're talking about the logistics Management Index. And so they really look at eight key indicators all about logistics and the predominant ones are ocean freight orders, warehousing, inventory and trucks, what, how much they're moving and what they're bringing, you know, to and from. It was the lowest ever in the inception of the index for September. Now September is a key month because this is a time when you've got your stuff coming in for Halloween and then in October, where we are now, that's when we're going to start seeing the all important holiday freight moving in and it's not there. Okay. Is this a reflection on the broader economy? It's a reflection of the broader economy and the impact of the tariffs. So what we saw was this massive pulling forward from these companies bringing their items in because of what was going on with the global trade war. Well, those items are sitting in the warehousing and the inflation in those products are sitting there. That's why we're not seeing that trickle down effect. Right. Because the holiday items haven't moved in. But more importantly, no one's ordering. And so what happened is and what we're seeing in this index is that the containers, they're sitting, you know, gathering dust in the warehousing and no new product is coming in because retailers and manufacturers are holding back because we're not buying anything. So what's the read through to the different parts of transportation and logistics? What does this mean especially as we start to head into earnings season here? So the key thing is here it's the battle of the box. So freight companies get paid per item that they're moving. And it doesn't matter what segment you're in.
- [40:28]
B
You could be in the light truckload.
- [40:30]
A
Whereas, you know, you're getting paid per parcel, you're getting paid by containers, you're getting paid by air freight. The less items that are coming in therefore means you're going to be making less money. And so what's going to be interesting to see is particularly with October for the investors is how much freight moves out of the warehouses into the stores for the holidays. And we know for a fact based on ocean freight orders and with interviews that inventory is going to be lean this holiday shopping season. So that means the lighter, the lighter than truckload folks that are going to be delivering to the consumer or to the store, they're going to be moving less. We keep talking about, especially in this government shutdown, alternative types of data. What is freight signaling right now? What are the leading indicators? The leading indicators are ocean freight bookings. And so we've got some great data here from Vision. And so this is all about the stuff that's coming in for your tomorrow. And so we went all the way back year over year and we are now at a point right now 1 million less containers for this year compared to last year. And so when you're in an industry that you get paid for moving a parcel, a million containers, that's a lot of parcel that will not be here. Interesting. Buckle your seatbelts for this holiday season. Exactly. Lorianne LaRocco, great to see you and have you here on set. Thank you. Thank you. Well, coming up, another day, another AI fight in Hollywood. Last week it was Tilly Norwood, an AI actress touched off a firestorm. This week studios are bracing for a copyright battle with OpenAI how executives plan to protect IP next. And as we head to break, check out the NASDAQ composite hitting an all new all time high today just a few moments ago joining the S&P 500 and the NASDAQ 100. The exchange will be right back.
- [42:32]
B
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- [43:07]
A
Welcome back. OpenAI's video app Sora. It's the latest battleground for big tech in Hollywood. Sora said studios could, quote, opt out if they didn't want customers to use copyrighted intellectual property in the app. Julia Boorson joins me now with that story. Julia. Hey Morgan. Well, sources tell me that media executives were outraged that OpenAI asked them to opt out out of their intellectual properties inclusion in Sora because that's not how copyright law works. Since then, OpenAI CEO Sham Sam Altman shifted, saying he will give rights holders granular controls. But we hear studios are trying to figure out how much SORA could be violating their copyright. And they're watching for SORA to address their concerns, preferring to negotiate rather than sue, as they did with Midjourney and Mini Max. A source tells us that Warner brothers met with OpenAI to show examples of blatant copyright infringement as well as backdoor prompts that don't explicitly name protected ip. We prompted Sora to, quote, create a superhero that wears a black cape and is saving a woman from a burning building. Got you.
- [44:19]
B
Just keep breathing. We're almost out. I I thought no one would come. Not on my watch. Hold on tight.
- [44:25]
A
Thank you.
- [44:26]
B
You're safe now.
- [44:26]
A
It very quickly created that video that looks and sounds very similar to Batman. But Sora blocked many of my queries. Requests for a fat orange cat eating lasagna like Garfield violated Sora's guardrails. I got a video of a tabby cat with some lasagna was the closest I could get. So it does seem like Sora has made some changes since its launch. And I'm also hearing, though, that Sam Altman's offer to share revenue about some of this protected IP does not necessarily appeal to the media companies who want to control how their characters show up. And then there's another concern. One entertainment attorney flagged to us that the focus on generative AI outputs can distract from the question of whether Sora trained on copyrighted materials. OpenAI says that Sora adheres to fair use. Back over to you. Oh my gosh, there's so much here. I do wonder, especially when you see Warner Music Group on the music side starting to engage and strike some deals and take a more targeted approach to AI within music. Whether we could see something similar here happen with the Hollywood studios, I think we will see some collaboration. I think we will see studios decide to license certain ip, certain characters for certain use cases. But they want to make sure that they understand exactly what's going on. They don't want to see their valuable IP like a Batman or Superman show up in places that does not fit with their brand. So I think this is something they're going to be watching and wanting to be part of the negotiation of as opposed to told about it after the fact. Okay, Julia Boorstin with some great reporting as always. Thank you all. The major averages are higher right now. It looks like we're pretty much at session highs. The NASDAQ Composite, NASDAQ 100, the S&P 500, all trading at record highs. And the Russell 2000 up 1%. That does it for us here at Overtime. Thank you for watching the Exchange. I'll see. No, it doesn't do it for us for Overtime. I'll see you at Overtime. Powerledge starts now. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [46:34]
B
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