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The Exchange
The Exchange 10/22/25
00:44:18
Listen to the day's top stories, the must reads & a whole lot more for today's modern investor.
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- [00:00]
Morgan Brennan
Introducing Fidelity Trader Plus. With customizable tools and charts you can access across all your devices. Try our most powerful trading platform yet@fidelity.com TraderPlus investing involves risk, including risk of loss. Fidelity Brokerage Services llc Member nyse, SIPC.
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Commercial Announcer
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Leslie Picker
You're listening to the Exchange.
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Morgan Brennan
Here's today's show.
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Phil
Big one at 3:00'.
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Dom
Clock.
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Morgan Brennan
Closing bell.
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Mike Brown
Adam Parker, Liz Thomas, Dan Ives, Stephanie Link, Bryn Talkington.
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Morgan Brennan
We'll walk you up to Tesla earnings. We'll see what this market does as well.
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Mike Brown
Let's do some final trades.
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Morgan Brennan
Mr. Seti, I'm sticking with Thermo. I think there's good momentum behind this name.
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Commercial Announcer
And you want to own it.
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Mike Brown
Okay.
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Phil
Vertiv.
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Morgan Brennan
That's got to be Weiss. Vertiv is wise.
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Bradley Tusk
Could be Joe also.
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Morgan Brennan
He owns it, but I think that.
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Bradley Tusk
It'S oversold at this point and you have to buy it when it's down, not when it's up.
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Mike Brown
Who deserves more credit for it, do you think? Joe T or Steve Weiss?
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Bradley Tusk
I think I was in a way before Hit Momentum.
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Morgan Brennan
I was in originally in the 40s.
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Mike Brown
You think you were in it before the Jyoti added it?
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Bradley Tusk
Yeah, definitely.
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Morgan Brennan
He was. I can confirm that.
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Mike Brown
Okay.
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Morgan Brennan
And my final trade is Merck. I mentioned I bought some Merck about a month ago.
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Mike Brown
I think if you're going to take.
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Morgan Brennan
A position here, make sure it's ridiculously small. Let the stock prove itself after earnings on October.
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Mike Brown
I was trying to stir controversy.
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Morgan Brennan
I missed. You would never do that. I'll see you three.
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Welcome to the Exchange. I'm Morgan Brennan. And for Kelly Evans, stocks lower with the Dow tracking for the first negative day and for following record setting session yesterday. This as earnings roll on. We've got Tesla and IBM on deck after the bell. Meantime, Netflix the biggest loser in the S&P 500 today following an earnings miss that the streamer blamed on a Brazilian tax dispute. Revenue, subscriber growth and ad sales all solid last quarter. Still Shares are on pace for the worst day since early March, down 10% right now. And shares of Texas Instruments under pressure as well on a disappointing outlook. The semiconductor company warning of a slower recovery in semis, but Evercore says the stock is a buy. Here the analyst joins us. He's going to make his case. Earnings is where we start today though. Of the 97 companies that have reported so far, 85% have beat on earnings with the breadth of beats, the highest since Q2 of 2021. These numbers helping our next guest stay bullish for the rest of the year. He's sticking with the 7000s and P500 year end price target. So joining me now is Binky Chadha, chief equity strategist at Deutsche Bank. Binky, it's great to speak with you and let's start right there because so far, and maybe Netflix and Texas Instruments notwithstanding, it does seem like it's been a pretty strong earnings season.
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Binky Chadha
Yeah, I think, you know, bigger picture. One wants to keep in mind that basically over the last two years, S&P 500 earnings have basically bobbed up and down around 11% earnings growth. 11% earnings growth happens to be the historical average outside of recessions. So we were a little bit lower at 9 and a half percent in the second quarter. And right now, you know, we were looking for sort of 11 and a half percent. It looks like we're getting 12 and a half percent basically. So a little bit better than even we expected, but broader. Bigger picture, you know, it's the same picture, hasn't really changed very much.
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Morgan Brennan
Hmm. So in light of that, what drives us to 7,000 on the S and P? And I asked that, knowing we're under a little bit of pressure again today, 6691 is the level there.
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Binky Chadha
Sure. So I would say, you know, earnings doing what they've been doing. And you've got to remember that the equity market's down pretty well over that period. I would add basically to that that given the events of the last two weeks, what we've basically seen is equity positioning, you know, for the market as a who basically moves to neutral. But if you look at, you know, what we think is the most important part of the investor base, which is discretionary or fundamentals based investors, they moved basically to underweight. So normally their positioning tends to align with earnings growth. Right now their positioning is aligned with slightly negative earnings growth. And as we were just talking about, you know, we're getting double digit earnings growth. So there is quite a gap between what they are positioned for and what we are getting. So view that basically as an upside. And last but not least, I would remind that you know, we've been having basically a big boom in inflows across asset classes and equities of course have also benefited from that. So solid earnings, yes, might be the same thing, but given all of the uncertainties, the risks and the concerns, it's a positive if we get what we've been getting, which is pretty decent earnings growth, positioning is underweight and the inflows boom, you know, continues basically.
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Morgan Brennan
One of the interesting things to me is the fact that so far in results we've gotten and commentary we've gotten is it hasn't just been this AI infrastructure investment fueled cycle that is driving the numbers higher. It's also some of these more consumer facing companies that, okay, even if maybe they're struggling with a turnaround or some such, are talking about improvement especially as you go into these final months of the year.
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Binky Chadha
Yeah, you know, we are relatively bullish. So but I think, you know, one wants to be fair to the facts. I think, you know, one of the aspects of the last couple of years has been that earnings growth just really been dominated by you know, it's responsible for 87% or let's say 90% basically of earnings growth for the S&P 500. So you know, key part of the thesis is, you know, earnings will broaden out and we're clearly seeing that basically some extent in the current reporting season. But you know, the stories are not really about macro improvement or industry demand improvement. They all really been off the self, self help and you know, get increased market share variety. So it's not speaking loudly to the broadening holding out though of course, you know, all companies can do that and you know, of course, you know, focus on efficiency and cost cutting and cost cutting is not generally good for the macros where I would put it.
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Morgan Brennan
So in light of all of this, how would you be positioning yourself as an investor across sectors and different parts of the market?
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Phil
So.
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Binky Chadha
Our positioning is, you know, overweight really is going to cyclical tilt basically. So we've been long the financials, we along the cyclical parts of the consumer, we're long cyclical parts of the industrials. If you think and go back to what I was saying about positioning discretionary investors, basically, you know, we're sitting at neutrals and since July, despite the market running up, they now move to underweight. They have, I would argue the common denominator of their concerns is really cyclical risks. And so the question is, you know, if earnings growth is running much stronger, you know, and they, you know, relent or capitulate, you know, what are they going to buy? I would argue if their concern is cyclical growth, then they will buy the cyclicals if they start to show signs basically of their earnings improving, which, you know, we see to some extent. I don't want to overstate the case yet.
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Morgan Brennan
Okay, thank you. Chadha with Deutsche Bank. Thanks for kicking off the hour with me.
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Binky Chadha
Thank you.
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Morgan Brennan
With all the major averages lower this Wednesday afternoon, now they say everything is bigger in Texas. And for the nation's largest banks, that is proving true. Wells Fargo unveiling a massive new campus today in Irving, Texas. This is right outside of Dallas. It's the latest sign that Wall street is betting big on the Lone Star State. And that is where we find our Leslie Picker. She is live with a special guest, Wells Fargo Chairman and CEO Charlie Scharf. Leslie, take it away.
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Leslie Picker
Hey, Morgan, thank you. And thank you, Charlie, for inviting us here to the opening of your campus in Irving, right outside of Dallas. It's one of a few Wall street firms that have made big footprints in the state of Texas. What's the attraction for being here, and why is it important for Wells to have such a big presence?
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Morgan Brennan
Sure.
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Well, first of all, thank you for coming. It is incredibly exciting for us to open this new, wonderful facility that's going to hold almost 5,000 people. You know, we, first of all, we have. We have large populations of people all across the country. We're not concentrated in any one place. And when we think about where we want to expand and where we want to commit, we want to go to places that are business friendly, that are interested in helping us develop the kind of people and resources that, that we're going to need over a period of time. And that's what's exactly what we found here in Texas and specifically in this area. The governor has been extremely accessible. The mayor is accessible. People love living here. There's great talent, there's great education. And so, you know, add all those things up and you say we'd prefer to be bigger here rather than smaller.
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Leslie Picker
As you think about streamlining the footprint, which I know it's been a goal of yours, is this in any way a reflection of the difficulty of doing business on the coast coasts and it being easier here in terms of taxes and regulations and so forth, or is.
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Morgan Brennan
It just the night? I'd say it's slightly differently. The coasts are extremely important for a lot of reasons, both in terms of just the size of the economies and the talent. But, you know, I grew up in the New York area, and in 2000, I moved to Chicago for the first time. And I learned very, very quickly that the coasts are not what this country is all about. There's a lot more to this country, and the only way that you really have an understanding of what this country is, what it can be, who lives here, who can add value to us, what our client base looks like. It's helpful to be places other than the coasts. And so we want to have large locations and places other than the east and the west coast. And this is a great example of it.
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Leslie Picker
Speaking of efficiency at earnings, last week you all updated your return on tangible common equity targets, or ROTCE targets, 17 to 18% over the medium term, which is more than double what it was back in the fourth quarter of 2020. How should we think about your efficiency goals as it pertains to the use of technology or the reduction of headcount in terms of talent and workforce?
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Morgan Brennan
Listen, I think the way to think about it is efficiency can be two. It can be. It's two things. Efficiency is doing more with the same amount of resources. So, for instance, in our technology group, where we're using AI, many of our developers are seeing 30, 35% more productivity. We don't have less developers than we used to have, but we're getting more accomplished because there's so much more we want to do in other places, we might wind up being able to do with less people in a certain area. But I always point out that if you look over time, huge amount of technological advancements over the last 20, 30, 40 years, and our company is a lot bigger today than it was. We employ more people because we figure out where we need more talent to be able to serve more of this country, and that's what we're going to do. As we think about what we can get out of AI, you think that.
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Leslie Picker
Will be kind of the, The. The future for Wells Fargo?
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Morgan Brennan
I think it's definitely the future. I think that what I worry about is that it's not linear. I worry about that it's going to take a concerted effort on not just Wells Fargo, but all companies to think about, how will jobs change? What will we need more of, what will we need less of? And how do we figure out how to make that transition? Because, you know, we people who work at this company care. And so we're focused on trying to develop a plan for what that means, figure out how we Retrain people. We people retire, people leave the company. We have sets attrition. So use attrition as our friend to take people whose jobs might be changing and slot them into other jobs where they're going to continue. So as we work through this AI transition to do it in a way which is really, really beneficial, not just for the company, our shareholders, but for the people that work here.
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Leslie Picker
And Wells Fargo is going through a really interesting moment as well having that asset cap lifted. You recently told Fortune that that restricted deposits and securities 2.1.95 trillion. That caused the firm to forgo an estimated 600 billion. And I'm just curious how quickly you think you'll be able to win that business back. Is that the goal?
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Morgan Brennan
Well, the goal is to win that back and a whole lot more. Again, we were restricted for a long period of time. You know, when we think about the asset cap, the asset cap means that you're limited on how much you can lend. It's limited on how much you can take in in deposits because deposits come with cash. We're limited on the amount of securities financing we can do in securities inventories to facilitate customer order flow. So even though we found pockets to grow the company, which haven't relied on balance sheet, now all of our businesses to compete on a much more level playing field. And we've got significant aspirations on where we want to go from here because we can compete on an equal playing field. But the real key is we think that the value of the franchise that we have, the scale, the breadth, the depth of what we have, the quality of the people, the brand, we think it's, you know, we're going to be a really formidable competitor in all the businesses in which we still operate. And as I said, High aspirations, 17, 18% ROTC is a new target for us. We've also been clear that that's not the end game, that's not best in class. And our goal is to be best in class, but to achieve best in class returns while we're investing significantly. Because you can underinvest, have strong returns for a period of time, but you're just hurting the future. We want to have best in class returns while we're investing for the future. So we've got the ability to continue that on the trajectory that we think we can be on.
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Leslie Picker
Yeah, it's definitely a balance. When it comes to lending, credit has been very much in focus these days at the Economic Club of New York. Yesterday you said there is a, quote, very, very big difference between what could be a fraud. And what is a credit? And investors I've spoken with have said that the concern is that the fraud is basically a precursor to the credit. Jamie Dimon called them cockroaches. Mark Rowan calls them late cycle accidents. What do you call them?
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Morgan Brennan
Well, listen, I think when times are really good, when there's huge liquidity in the marketplace, people chase things. That's unfortunately what happens. And so the question is how much of that is out there. There's no question that when one starts to get exposed, there might be others. But again, I just try and separate it in different pieces. Credit quality is strong overall. And I'll just tell you, credit quality for us still looks very strong. It doesn't mean it's not going to deteriorate. There are cycles and credit will deteriorate over time. We just don't see it happening yet. And yes, there might be pieces of fraud in different parts of the business, but it's going to come down to the quality of the operational practices that firms have because most of those things you should be able to identify before they get there. So listen, it's a great thing. And I think Jamie's comment on cockroaches is it's very apropos in that when there's. When you see one problem, it mean that there could be more. And so that means you need to go look for it, don't wait for it to find you. It doesn't mean that it's a systemic issue at this point. Those, I think, are two very different things.
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Leslie Picker
The common thread between the big cases we've been talking about Tricolor First Brands, the borrower of Zions and Western alliance, it's really put a spotlight on NDFI loans. These are non depository financial institutions and banks lending to them. And according to S and P Global, Wells Fargo did more of that type of loan than any of its peers, making $158 billion worth. How do you think about the risk exposure with NDFIS right now? And what have you been doing to kind of scrub through your own loan book in light of these things?
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Morgan Brennan
To look for similar ways to think about it is, you know, these loans, that's a very, very wide category. So that includes lending to other public companies that are not banks that go on and lend in asset classes that we might not want to lend to. It can be lending to funds through something called subscription finance. It could be lending to the fund itself to create back leverage. It could be lending into individual deals. Not all those things carry the same Risk. We've been doing these things a very long time. And just like any other credit, the question comes down to how good at you. Are you at understanding the risks you're taking? Are you lending to the folks who you know, you understand, you trust? Are you doing the proper due diligence to make sure that the people you're lending to have the right practices? And so while it's always a prudent thing in any environment to step back and say, what can you learn from other people's mistakes? A lot of the folks you mentioned, we either didn't do business with with or we did do business with and decided not to do business with after a period of time. But, but, but doing, running, managing credit properly is deep in our discipline and again, we feel very good about the lending that we do. But yes, when you see other issues, you should stop and say, don't assume it doesn't happen here, ask if it happens here, but we haven't found it yet.
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Leslie Picker
Are you worried that maybe outside of Wells Fargo that other banks are, you know, maybe not seeing the particular risks as it pertains to NDFIs, which are seen as more indirect loans? So you don't always have the same insight into collateral and underwriting.
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Morgan Brennan
I said yesterday worries a strong word. But again, I think that it's, there are a lot of really smart people outside of the banks that really understand credit. And my guess is, and from what we can can tell with the folks that we do business with, they've got their disciplines, they know what they're talking about. We're not concerned about them. Doesn't mean we're not looking, but we're not concerned about them. But it's a very, very big business today. There's a huge amount of capital that's flowed into it and when that happens, you know, not all companies underwrite things the same way. And it wouldn't surprise me if there were issues out there that. That doesn't mean that it's systemic, it doesn't mean that it's everyone and doesn't mean that it's, you know, broadly banks or non banks. It's pockets of people that either run their business well or don't run their business well. And those that run their business well I think will do fine and will experience normal cycles. And that's what these businesses are.
- [19:32]
Leslie Picker
Yeah, important distinction. Charlie. Char, thank you so much for joining us today from your new offices here in Irving Tech.
- [19:39]
Morgan Brennan
This really appreciate your thanks for joining us.
- [19:40]
Leslie Picker
Thank you, Morgan. I'll send it back to you.
- [19:43]
Morgan Brennan
All right, Leslie Picker, thank you. And our thanks to Charlie Scharf from Wells Fargo as well. A great discussion. Well, coming up, shares of Texas instruments down nearly 7% on concerns over the pace of recovery in the semi sector, but Evercore just add the stock to its tactical outperform list. The analyst joins us with what makes him bullish. Plus, VC heavyweight Bradley Tusk weighs in on the circular trillion dollar AI economy and what he thinks can be done to mitigate risk. That's ahead. Exchange will be right back.
- [20:16]
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Morgan Brennan
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Morgan Brennan
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- [20:47]
Morgan Brennan
When work gets crazy, I like to.
- [20:49]
Bradley Tusk
Stop by the bar after have a few cold ones.
- [20:52]
Morgan Brennan
I don't drink at all until 4 o'.
- [20:54]
Bradley Tusk
Clock.
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Morgan Brennan
We limit ourselves to one bottle of wine a night.
- [20:59]
Commercial Announcer
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- [21:47]
Morgan Brennan
Welcome back to the Exchange. Shares of Texas Instruments falling today, taking the chips with them after giving a weaker than expected fourth quarter outlook. You can see shares of Texas Instruments down about 7% right now, the company noting that while the semiconductor industry is recovering, it's happening at a slower pace than prior upturns. But Evercore just added the company to its tactical outperform list, telling investors to buy the dip despite lowering its price target. Joining me now is Evercore's Mark Lapackis. Did I get that right, Mark?
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Commercial Announcer
Yes, Mark, the Poxas.
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Morgan Brennan
Exactly.
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Commercial Announcer
Thank you, Morgan.
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Morgan Brennan
Welcome to the show. And let's start right there. Why are you bullish now?
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Commercial Announcer
Well, I think, you know, the CEO, like you said, said that the pay, the pace of recovery is happening at a slower than normal pace. The question is why? And we did a series of checks in the channel and what we heard is the supply chain just spent two years lowering the inventory from the biggest bill that they've had in two years. Right. And so, so basically they have such bad tsd from that Covid inventory build that they would rather pay expedite fees or broker fees to find chips that are in short supply than to rebuild their inventory safety stock. So normally at the part of the cycle we would see an inventory rebuild downstream in the supply chain, but they don't want to do that. And lead times are stretching and inventories continue to deplete. So it becomes a bit of a coiled spring on the, on the way up. That will happen, we believe, sometime in the next six to nine months or so.
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Morgan Brennan
Yeah. Why six to nine months? What is it about that time period that this normalizes?
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Commercial Announcer
Well, you know, if you, if you look at their guidance as actually, you know, they, they, they delivered a seasonal quarter which was a little bit better than expectations. They, they actually guided for a seasonal quarter down 6% sequentially in the December quarter. So it looks like things are kind of ticking along that we have, you know, decent demand. You have very healthy end markets and AI and data center, you know, defense. You have certain parts of EV market that's strong. So it seems like things continue, chips continue to get concerned. But what our checks are telling us is that the supply chain is starting to get nervous that inventories are going too low. And one of the things that we heard on the, on the Texas Instruments call is that the TI is lowering their utilization rates. And so you have to remember it takes like 13 weeks to make a chip. Right? And we saw this situation happen back in Covid when everybody got concerned, they lowered utilization rates. And then the next thing you know, the lead times start to stretch and you can't just turn a fab on and start spitting out chips. It takes 13 weeks to make the chip. So our checks in the supply chain are concerned that sometime in the first half of the year we're going to be in really tight supply. We'll be on allocation. Maybe it's the second quarter, maybe it even is the first quarter. That's why our checks are indicating that.
- [24:48]
Morgan Brennan
Okay, well, you just touch on some of the areas where there's still some strength, Data Center, Air EVs, etc. But overall, we keep hearing about ongoing softness in industrial and auto overall. Is there read through to other parts of the semi industry here?
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Commercial Announcer
Yeah, and I think what's, you know, what we heard yesterday is like, by and large, you know, industrial was about up 4% sequentially, and you'd hope it to be up a little bit more a couple hundred basis points. Autos were up 10% sequentially. And, you know, communications equipment and enterprise equipment were up 10 and 20% sequentially. So we actually had some, some healthy demand. And I think it's important to understand, like in semi, semis are a bit different than other companies in the S&P 500. A lot of companies, S&P 500 sell directly to the consumer. The semis are way early in the supply chain. So they sell to distributors who sell to contract manufacturers who sell to OEMs, and they sell to their own distributors and so on. And so there's a pile of inventory at each one of these stops.
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Dom
Right.
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Commercial Announcer
And so, you know, when things stretch out like they did in Covid, everybody builds inventories and semi revenues are really high. And then when lead time shrink, which they had over the previous two years, everybody blows out their inventories. So we're kind of at that bottom of the cycle. Right. And so what. What kind of restocking you have may not necessarily be a reflection of the end market demand. And like I said, like, TI is guiding for a seasonal fourth quarter. And I would point out the last four quarters, they beat their guidance by 2 to 4%. So they're known as a very conservative company. And we actually are at the kind of the higher end of that guidance range.
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Morgan Brennan
Okay. A lot for our viewers to consider. Mark Lapasas of Evercore, thanks for joining me.
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Commercial Announcer
Thanks for having me.
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Morgan Brennan
Well, coming up, Tesla shares more than 30% in the past three months. But can Elon Musk keep that momentum going? We take a look at what to expect with the EV maker on deck to report after the bell. The exchange is back in two. You know what?
- [26:57]
A girl's best friend is not diamonds her lawyers.
- [27:01]
Bradley Tusk
From executive producer Ryan Murphy comes a fiery new legal drama.
- [27:05]
Morgan Brennan
It's our own boutique women representing women.
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Bradley Tusk
You can't afford to miss.
- [27:10]
Morgan Brennan
Make it rig. Showtime, ladies.
- [27:13]
Binky Chadha
Stand up straight and breeze into that.
- [27:16]
Morgan Brennan
Room like a storm no one saw coming.
- [27:20]
Bradley Tusk
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- [27:26]
Morgan Brennan
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- [27:38]
Bradley Tusk
Power.
- [27:38]
Morgan Brennan
Because in every Chevy truck, like every Chevy driver, dependability comes standard. Visit Chevy.com to learn more. Chevrolet received the highest total number of awards among all trucks in the J.D. power 2025 U.S. vehicle Dependability Study Awards based on 2022 models. Newer models may be shown. Visit J.D. power.com awards for more details.
- [27:53]
Commercial Announcer
Chevrolet together let's drive.
- [27:57]
Morgan Brennan
Welcome back to the Exchange. Take a look at stocks right now, where we're back towards session lows here with the do about three quarters of 1% or 357 points the S&P down almost 1%, the Nasdaq down 1.6% and treasury yields also under pressure here. Dom yield.
- [28:14]
Dom
Dom Chew, I do yield.
- [28:17]
Morgan Brennan
Closer look at today's biggest movers and yielding some results for us. How's that?
- [28:21]
Dom
That's right, Morgan. So we're going to start things off with a couple of S&P 500 earnings movers that aren't named Netflix or Intuitive Surgical. The bad news first. Shares of our Nova are down about four and a quarter percent right now in midday action, it's one of the worst performers in the entire S&P 500 so far today. The GE spinoff focused on power generation reported mixed results. Profits came in shy of some estimates, while revenues did come in better than expected. Those results were helped by its electrification segment, which helped offset some expected weakness in that wind power business. GE Vernova also saw order growth of 55% and reaffirmed its full year guidance. But for a stock that's gone up double in the last year, some pullback today from power to travel. Now shares of Hilton Worldwide are among the best S&P 500 performers up north of 4% after the hotel operator reported better than expected profits and revenues and raised its full year outlook, thanks in part to growth at its luxury portfolio, which includes hotel brands like LXR Conrad and Waldorf Astoria. That helped offset overall declines in revenue per available room, or revpar. That's a key metric of operational and financial performance. CEO Chris Nassetta did point towards expected future growth because of things like lower interest rates, a more favorable regulatory environment and significant investment cycles in the U.S. so Hilton worldwide up 4%. We'll end with a check on neem stocks. The one of the moment. Anyway, it's Beyond Meat. It's only up three and a half percent right now, moving between gains and losses all day, but they were up more than 100% at one point just earlier in the session. A ton of retail trader involvement, the closing out of losing bets on share price declines, of short squeezes, also the recent inclusion into a meme stock ETF have played a role in those big gains. Now, Morgan, back on October 16th, this stock was worth $0.50 per share. It got as high as $7.69 intraday today. So it seems as if some of that euphoria is taking a bit of a breather, at least for now. I'll send things back over to you.
- [30:19]
Morgan Brennan
Yeah, this Beyond Meat has been beyond in terms of the moves here. Very shorted stock we should note. Dom, chill. Thank you. Now let's get over to Kate Rogers for a CNBC news Update. Kate Morgan, two U.S. officials telling CBS News today that American forces struck another alleged drug trafficking boat last night, this time on the Pacific side of South America. While the Trump administration has notified Congress that the US In a quote, non international armed conflict with drug cartels, several Democratic critics have called for hearings into the legality of the strikes. Israel's parliament today advanced a bill that would effectively annex the West Bank. It's the first of four votes needed to pass the law. Members of Prime Minister Benjamin Netanyahu's coalition have been calling for years to annex parts of the West Bank. The UN's highest court ruled last year that the occupation and its settlements are illegal. And Pro bowl festivities are moving to super bowl week starting in February. NFL Commissioner Roger Goodell made the announcement today at the annual fall owners meeting. He says the plan is to have the AFC vs NFC flag football game on the Tuesday ahead of the big game. The league is hoping to increase interest in flag football ahead of its debut at the 2028 Summer Games in L A. Morgan, back over to you. All right, Kate Rogers, thank you. Well, coming up, JP Morgan downgrading Oracle's credit receipts recently, citing its, quote, Capex conundrum and the limited visibility into Oracle's financing strategy for AI projects. Up next, venture capitalist Bradley Tusk joins us with his solution for funding those sky high spending plans. The exchange will be right back. Welcome back to the Exchange. Meta partnering with Blue Owl capital on a $27 billion joint venture agreement to fund and develop the company's massive data center in Louisiana. This move comes just weeks after Meta announced a Deal with Core Weave for up to $14.2 billion worth computing capacity. Now, Core Weave notably rents Nvidia chips to power that cloud infrastructure. This is just one example of the tangled deal making web happening across AI with chip makers, cloud providers, startups, all intertwined. And let's not forget the financiers as well. Should investors be concerned that the circular spending might be the first sign of a bubble in space place? Joining me now is Bradley Tusk, founder and CEO of Tusk Venture Partners. Great to have you on and let's start right there and have you weigh in on this notion of whether this is getting bubbly or not.
- [32:43]
Bradley Tusk
Yeah, I mean, I think, look, I assume that when these companies say we need to invest $10 billion, $100 billion, $500 billion into infrastructure for AI, compute and the energy for it, that they're not just throwing away the money for no reason. They truly believe that for the various plans they have to come to fruition, that amount of compute is necessary, that amount of data centers are necessary. So if we assume that's true, the challenge that we run into is it's still quite risky, right? Because you're effectively about a dozen companies that are driving the market today spending incredible amounts of money, taking out incredible amounts of debt. And it is risky because if their perceptions of what's needed turn out to be wrong, or if the timeline is different or anything else, you know, to have only a handful of companies effectively holding all the upside and all the downside is a lot. And I think there's a revenue source that isn't being talked about, but should be. So when President Trump did his trade agreements with a bunch of different companies, some of them had components that included foreign investment in US technology and the US tech ecosystem that includes UAE. So it's 1.4 trillion. Japan, 550 billion. Why don't we start including them in these deals and start spreading out the risk? So it's not all on American companies, all not ultimately on the American economy and American consumers. And there's precedent. There are countries that have been good partners over time. So like take the uae, they've done a lot with us on nuclear, a lot on defense tech. So we know we can work with them. And this may be a little bit of a crazy idea, but I would love to get to a point where we're not only accessing these countries for capital they said that they want to put into the US tech system, but we almost create like an axis of good on AI. Who are the countries that are really valuing innovation and investment and sensible regulations, which means not, you know, a centrally controlled system like China, but also as hands down as the eu. And use that to create a world of AI that solves massive global problems, whether it's decarbonization or drug formation. I think there's a tremendous amount of opportunity here. And I think because everything is so frenzied, we're not necessarily looking at it.
- [35:01]
Morgan Brennan
I think it's such a key point that you're raising, especially as we do have Korean officials, according to reports in Washington this week, to try and hash out a trade deal with Korea that includes potentially investment into this country as well. It gets it, I guess a broader topic and that is the role that policy plays in all of this. Especially if you start to look at this AI build up globally through a geopolitical lens.
- [35:24]
Bradley Tusk
Yeah, sure, look, there are countries that clearly want to do these deals with the United States. They seem to be the same kind of countries that are generally very interested in building their own AI infrastructure because you need it for your economy and you need it for national security. And that's only going to grow and grow. And so to me, let's not just make these all a bunch of random one offs in different trade deals. So let's put it all together, put the capital in front of the US companies taking on all of this debt and all of this risk. Aim it with a bunch of different policy things around, regulation, around, you know, what can we use to really solve really big problems. And the third thing I think that I mentioned before is we also need to keep seeding a lot of money into the early stage of the US tech world. Because yes, it's great that we have these dozen or so companies that can do really well already if they have what they need. But every company eventually gets stagnant one way or another. And if we have 10,000 or tens of thousands of earlier stage tech startups using AI to try to achieve different types of, you know, different types of goals, create different types of companies, services, products, everything else. Among those are going to be the next Nvidia's, Google's, Amazon's, whoever else. And so yes, it's great to build all this infrastructure and capacity, but you need users for it. That's how you prevent a bubble from bursting. And I think in ways I would take some of that money from Japan or Korea or the UAE or wherever and say, here's a dedicated fund to really invest in all kinds of interesting early stage US tech companies that can help ensure that there is demand in the future after all this stuff is built.
- [37:03]
Morgan Brennan
Alphabet today unveiled a new quantum chip. Willow, how is quantum computing going to fit into all of this as well? And I ask that knowing that I'm finding myself increasingly having conversations about the fact that the promise of quantum computing is going to come faster than everybody anticipated.
- [37:21]
Bradley Tusk
Yeah, that's definitely possible. And there's, there's good and bad, but overall, more good. I mean, generally speaking, the more that we can solve really complicated technical problems and put them to actual use in the economy and in the world, that's a good thing to have. It might increase ultimately some of the infrastructure costs even more because obviously operated quantum computing is incredibly intensive, especially on energy. At the same time, there is also a world where between quantum computing and AI, you figure out ways to do AI that might not require as much compute and might not require as much energy. So perhaps, you know, in a way, by bringing them into existence, we then develop the tools to actually solve the problem.
- [38:02]
Morgan Brennan
All right, Bradley Tusk, thank you.
- [38:04]
Bradley Tusk
Yeah, thanks so much for having me.
- [38:06]
Morgan Brennan
Well, coming up, we just mentioned it, Alphabet, those shares are falling more than 4% on OpenAI's web browser announcement that came yesterday. But recouping those losses and then some on reports of an anthropic deal and its own quantum news today. Will Google be able to stay the face of the Internet as competition increases? We've got that coming up next. The Exchange will be right back. Welcome back to the Exchange. We got more sellers and buyers in this market today. Stocks are at session lows. The S and p is down 1.1%. The Nasdaq is down 1.1.8% here. Very defensive tilt to this market. Health care, consumer staples and real estate are the best performing sectors and are actually in the green today for the S and P. Also energy as those stocks move higher on the back of crude, which saw an unexpected drawdown in inventories and is pushing that commodity higher today. Also investors buying into bonds and sending treasury yields lower. Well, Google reportedly in talk box for anthropic for a new multibillion dollar cloud computing deal. So today's tech check, Mackenzie Sagalis joins us. She has more on what this signals about the tech giants broader AI strategy. Mac. Hey, Morgan. So Google stock, it's jumped more than 65% in the last six months and yet it still trades at a discount to its big tech peers. And that's partly investor skepticism. Can Google still lead the next wave of tech or is it just chasing OpenAI Two headlines Tuesday captured both the pressure that Gen AI places on Google's core business and the opportunity to reinvent it. OpenAI's Atlas browser is the clearest threat yet to Chrome, which is Google's gateway to the web and the foundation of its ad business. Microsoft could not make Bing a true rival even with OpenAI's help. But Atlas is different, agentic and already tied to 800 million weekly ChatGPT users. Pressure from its AI rivals hasn't shown up in Google earnings yet, but with the next print just a week away, I'll be watching to see if there's any sign that Gemini is cannibalizing its cash cow search business. We learned during the antitrust trial that Google quietly raised cost per click to hit revenue goals. But that only works for so long. And on the enterprise side, Wells Fargo is calling that rumored Google Cloud deal with Anthropic bullish for its in house TPU chips that rival Nvidia's. And with Amazon's cloud outage knocking services offline this week, well, Anthropic stayed up and running thanks to its multi cloud set up with Google. Investors are taking a closer look at which infrastructure can actually hold up under pressure as those Gen AI workloads flood the cloud. Morgan. All right, Mackenzie Segallos, thank you. Coming up, shares of the travel company of this travel company having their best day since November of 2020. That's after a strong earnings report chart. Management also saying its model offers protection from inflation surprises. We're going to reveal this name on this mystery chart and speak to the CEO on the other side of this break. Welcome back to the Exchange Travel and Leisure. That was our mystery chart surging more than 15% today on better than expected earnings and full year guidance hike. After vacation ownership and spending climbed in the third quarter, stock is now up about 38% this year. Joining me now with more on those numbers and the state of the travel industry is Mike Brown, president and CEO of Travel and Leisure. Mike, it's great to speak with you today.
- [41:30]
Mike Brown
It's great to be back on the show. Nice to meet you, Morgan.
- [41:33]
Morgan Brennan
So let's talk about this, what you saw last quarter and how it's benefiting the company.
- [41:38]
Mike Brown
Yeah, fundamentally we are 100% leisure travel focused and being in the vacation ownership brands business, we have great brands like Wyndham, Accor, Sports Illustrated, Margaritaville. And what we're seeing from those leisure consumers is a desire to continue to travel. And given that our 800,000 member owner base, nearly 80% of them have already paid for their ownership, there's no reason for them not to travel. And we saw that demand really continue in Q3 and with a vision into Q4 of about a 90 day booking window. We know Q Q4 as well will stay strong for leisure travel. And it showed up in our earnings report.
- [42:21]
Morgan Brennan
So how much of that signals the fact that maybe your portfolio and the way your owners and your users are traveling is less cyclical versus the fact that the consumer is just holding up in general better than maybe perhaps people had expected just a couple of months ago?
- [42:37]
Mike Brown
Well, I think you have to look across broader hospitality to see the variations of performance on how the consumers are holding up and the forward demand. Demand, as I mentioned, our forward demand is very strong. But the reality is, is if you've already paid for your ownership, we've seen coming over the last five years coming out of COVID that leisure travel is one of the last things that people will give up and one of the first things they will return to after tough economic times. There's no reason for our consumers not to travel. They often distinguish whether it's a fly to destination or a drive to. But even that statistic that we watch very closely is not showing signs that consumer leisure travel is lightening up. And therefore in high inflationary times like we've seen in the last five years, people see the value of their ownership that they might have bought pre Covid getting to enjoy vacation at a small fraction of the price they would have otherwise had to pay for a hotel room that's priced at today's prices.
- [43:39]
Morgan Brennan
When you're a timeshare owner or a member, you tend to be able to choose or switch around where you're going to go and when as well within the portfolio. Are you seeing any sort of shifts in terms of demand right now, globally speaking or geographically speaking.
- [43:56]
Mike Brown
Demands stayed fairly consistently on a regional basis or market basis. We saw especially high demand this summer in the Smoky Mountains of Tennessee. It's a great regional drive to from the mid Atlantic and Midwest and that destination is becoming super popular. I know Las Vegas has has had its tougher times this year, but we saw a lot of popularity there. And then I think finally, especially coming out of the summer season, the Southeast beach destinations or the California coast were some of our most popular demand locations this past summer. It may say a little bit toward hesitancy that's often talked about with the consumer that they're choosing to drive to versus these mid to long long haul fly destinations. But we're also hearing that coming up in 26. Cruise is going to be a big year for 2026. So all around consistent demand with a few hotspots that I mentioned and a little more drive to.
- [44:57]
Morgan Brennan
All right. Mike Brown of Travel and Leisure, thank you for joining me.
- [45:01]
Mike Brown
Thank you, Morgan.
- [45:02]
Morgan Brennan
The shares up 15 and a half percent right now. We're still ahead. Tesla shares, those are lower. Ahead of its report after the bell. The key numbers to watch and why strong EV deliveries may not be enough to boost shares. We've got that coming up. Exchange will be right back. Welcome back. Tesla reports this afternoon on overTime. And while EV and battery numbers are important, the street is keeping a close eye on other areas. Phil joins me now with that story. Hi, Phil.
- [45:30]
Phil
Hey, Morgan. These are the numbers that people are expecting for this afternoon. 55 cents a share profit. They're probably going to come close to that range. I don't expect a big change in terms of shares of Tesla unless they are wildly under or wildly over that. But nobody's expecting that at this point. So what are they going to be focused on? Three things stand out. First of all, in terms of where the company is when it comes to auto gross margins. Have they improved? They improved in the second quarter from Q1. Does that continue in Q3, robo taxi growth? Elon Musk is going to say, oh yeah, we're growing. Does he give us specifics? And by specifics that means when will we see autonomous robo taxis on the road? Is it Q1? Is it sometime next year? And then finally there is AI and humanoid robot development. He's been very bullish about this during the conference calls. Expect the same thing to happen this afternoon during the analyst call, which starts at 5:30pm Eastern Time. In terms of the robo taxi, right now they're on the road in Austin and in San Francisco. But this is an important point. They are not fully autonomous. There is a human observer driver, call it whatever you want. The vehicles are largely on their own, driving autonomously, but there is a safety driver in the front seat. When does that change in terms of deliveries? Things improved in the third quarter. There's no doubt about that. We already got the delivery numbers. China has shown a sizable improvement. We know about the US and the end of the the EV tax credit and how that spurred a big surge in deliveries for Tesla. By the way, full year deliveries still expected to be about 1.6 million. Remember the analyst call as you take a look at shares of Tesla 530. That's really where the news comes out, Morgan. The report itself is important, but it's the call and what Elon has to say that is really going to be the focus of the street.
- [47:19]
Morgan Brennan
All right, Philibo, thank you. That's it for us. Thank you for watching the Exchange. I'll catch you on closing bell overtime. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [47:36]
Bradley Tusk
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- [47:45]
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Bradley Tusk
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- [47:55]
Bradley Tusk
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