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The Exchange
The Exchange 10/28/25
00:42:21
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]
Leslie Picker
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Andrew Ross Sorkin
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- [00:45]
Leslie Picker
You're listening to THE Exchange. Here's today's show. Welcome to THE Exchange. I'm Leslie Picker in for Kelly Evans. Today, stocks once again at record highs as big tech earnings and a Fed decision loom. Busy week goals continuing its decline down again today, holding below that $4,000 level, dipping below it in yesterday's session. It's now down 4% in the past two days. Microsoft a big gainer today. This is OpenAI has finalized its recapitalization plan. Microsoft holds a 27% stake in OpenAI. That stake valued at $135 billion. With today's move up about 2%. Microsoft has once again reached a $4 trillion market cap. It briefly crossed that milestone in July, but failed to close at that level. It's on track so today though, and Microsoft has company in its market cap milestone with Apple also above the $4 trillion market cap mark now at session highs. Apple up about a third of a percent there. But we begin with Microsoft co founder Bill Gates weighing in on the massive CapEx spending we've seen in the build out of the AI infrastructure. Here's what Gates told our Andrew Ross Sorkin when asked whether he thinks we're in an AI bubble.
- [02:03]
Andrew Ross Sorkin
If you mean it's like the Internet bubble where in the end something very profound happened. The world was very different. Some companies succeeded, but a lot of the companies were kind of me too, fell behind. Burning capital companies. Absolutely. There are a ton of these investments that will be dead ends.
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Leslie Picker
Ark Invest CEO Cathie Wood echoing that state sentiment, saying we think there will be a quote, reality check. And our next guest thinks the current backdrop sets the stage for more speculation ahead. Joining me now is Michael Kantrowitz, chief investment strategist at Piper Sandler. Thank you for being here, Michael. So let's get into the terminology here because one thing that Gates was saying to Andrew earlier today was this notion that a bubble is used to describe both the 17th century tulip mania as well as what we saw in the 1990s and early 2000s. With regard to the Internet, after the Internet, there were a lot of real companies that came out of it. So it wasn't just this speculative bubble with nothing to show for it. And he thinks that's more akin to what we have now. Do you think there's an appropriate description for what we're seeing in AI now and how it relates to maybe the bubbles of the past?
- [03:19]
Michael Kantrowitz
Yeah, there's, there's certainly some echoes of bubble esque behavior, but we would characterize things more as a boom today. Generally the characteristics of a bubble are a good economy and overall I'd say we have a good economy, easy money, which is something we're moving back towards with the Fed raising rate. So I think if, if we want to characterize this as a bubble today, it's unlikely to pop in an easing, easing money environment. I think it's ultimately could end from a macro perspective, partially why 99, 2000 ended if we get another tightening cycle.
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Leslie Picker
But we did see, I mean a lot of the surge in spending took place when rates were historically, you know, relatively high, at least over relative to the past decade or so.
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Michael Kantrowitz
In the late 90s.
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Leslie Picker
No, the 2022, 2023 and yeah, a.
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Michael Kantrowitz
Lot of those companies though that are so fully matured also and that's a big difference between Today and the early 90s, late 90s were that a lot of these companies again have really good fundamentals. So they were almost able to self finance through free cash flow. So they're not as rates dependent as some other speculative parts of the market that have also gone up as well.
- [04:27]
Leslie Picker
Yeah, and to your point, you know, earnings will be a key factor here tomorrow and Thursday we get earnings from the five companies that account for a quarter of the S&P 500. Do you think we'll hear from them that the AI theme is all systems go and how much margin of error do you think the market will give them for the results that come out?
- [04:46]
Michael Kantrowitz
Well, I think unless there's some of real, a real bomb being dropped, proverbially that, you know, what we've seen in the last couple of years is markets have moved from a couple of the Max 7 stocks or AI stocks and will rotate over a period of time to other ones. So between Microsoft Media, Google, Amazon, Apple, there's always a few of those names that are shining. So what comes out of this earnings season could perhaps propel the best two or three going forward. We're viewing this from a macro perspective and we don't really see any macro headwinds to stopping this story. And ultimately listening to our technology straddle strategists, we hear that things are still have momentum to carry on.
- [05:29]
Leslie Picker
Yeah, I saw in the notes that you, you believe that, you know, earnings will be the key factor in 2026 too, as markets have priced out nearly all macro risks. And I just wanted to kind of push you on that a little bit because the last few weeks were pretty volatile as it pertained to trade tensions back in the forefront. Of course, now they've abated somewhat. There were the credit risks at the regional banks that also has abated somewhat. So it seems like investors are still attuned to the macro risks.
- [05:56]
Michael Kantrowitz
Absolutely.
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Leslie Picker
But maybe you believe that they're kind of self correcting in a way that tunes them out pretty quickly.
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Michael Kantrowitz
Yeah, if you think about the last three years, the markets drifted up broad, pretty broadly. I mean, the index have been led by stocks because of stronger earnings, but you've seen a broad improvement because inflation risks have come down, rates moving higher risks have come down, recession risks, I would say have come down. And to the extent people are still worried about softening labor markets, it's being somewhat offset by falling interest rates. And in a backdrop where people are still so focused on inflation, I think that can persist for quite a while longer. Markets are going to continue to absolutely be very attuned to macro. But we got here today because the market's current view of the macro outlook is that risks are very low. Of course, if something pops up, markets will react as we saw last week and the week before and the week before. But ultimately, whether these things go from being idiosyncratic sector issues to being systemic is really the key question. We don't think unemployment is going to be rising sharp enough to see that and we would actually see that in 2026. We think the data actually gets better and the big biggest risk to the market, or perhaps the next correction could be because things are overheating and the market has to price out some of.
- [07:12]
Leslie Picker
Those rate cuts, which we could see as soon as tomorrow. Michael, thank you so much. Michael Cantrowitz.
- [07:17]
Andrew Ross Sorkin
Thank you.
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Leslie Picker
Busy week here. Shares of PayPal moving higher today. The company reporting earnings that beat expectations. But its new deal with Open Air that is the key driver of the stocks jump. PayPal's digital wallet will now be embedded into ChatGPT so users can pay for items through the AI tool. The move with PayPal is just one of many deals OpenAI has made in the past few months so it can broaden ChatGPT's use. Shopify, Etsy, Walmart, Spotify, Zillow and DoorDash are just a few of the names on that dealmaking spree. Today's jump in PayPal, though, not enough to lift the stock back into positive territory for the year. Shares still down about 10%, 10 and a half percent year to date, but up about 9% today. Joining us now for more is Dan Dolev, senior analyst covering the fintech and payments space at Mizuho. Big day here. One thing I'm trying to wrap my head around, and I think investors maybe too, is what you see is the total addressable market for agent tech commerce. And, and what's the upside for PayPal to play into this? The stock, I think I saw it was up as high as 15%. Now it's come down a little bit. Do you think that the move currently is an overshoot or do you think that's a logical. A logical move?
- [08:34]
Dan Dolev
Yeah, it's a great question, actually. Let's parse it into two so that the TAM is, is. Is basically all of E Commerce. But we've seen some research that, you know, you could get a 20% bump in e commerce consumption because of agentic AI. This is huge news for E Commerce overall, right? We're talking about trillions of dollars. And it's amazing news for PayPal because they're part of that group. Like you said, Shopify, Affirm, we've written about this. They haven't gotten the bump yet. So if anyone's looking for what to do, Affirm's next in line, right, for that. Let's call it the OpenAI Magic Touch. The reason the stock is not up, which is kind of your second question, the reason it sort of faded a little bit. You know, people are looking at the branded checkout button. It hasn't accelerated. We think it will. So. So there's reasons why it didn't stay at 15%, but that's sort of the opportunity in our view.
- [09:24]
Leslie Picker
I mean, also, is there exclusivity that PayPal has with OpenAI or is it going to be something where you see, you know, you can pay with credit card, you can pay with your debit card with, I mean, Obviously Venmo and PayPal Other buy now, pay later services? I mean, is this something that PayPal will exclusively benefit from or will we see choice as consumers?
- [09:46]
Dan Dolev
Absolutely. Choice. But you want to be there, right? So not being there was the fear. So the fact is PayPal is there and it's there as one of the first, you know, few adopters of it. It's great. Same goes for like a firm Shopify. Right. So being there is important. And everyone, like people that have written PayPal offer didn't take that into account. We didn't. We're very bullish. And so the fact that they chose PayPal as a partner tells you a lot about PayPal's durability.
- [10:11]
Leslie Picker
Yeah. And I mean this is one of many tie ups that PayPal has made in the AI world as well, including deals with Google and Perplex. You know, how do you see PayPal's role in this environment and does the economics change as it pertains to agentic commerce versus e commerce that we've seen for the last few decades or so?
- [10:34]
Dan Dolev
The balance of power changes. Right. So the consumer is not, or the, the, you're basically, the app is basically telling you what to do. Right. So the balance of power is changing. But I think it's actually great news for PayPal because, because there's only one global e commerce network and that's PayPal and that's what people are forgetting. So PayPal being part of this gent e commerce revolution just puts, you know, takes like everything that OpenAI is doing and puts it on a global, global basis. So I think it's actually, it's great news for, you know, it's just as good news for OpenAI as it is for PayPal. So I think PayPal's going to play a huge role in, you know, shopping, which people didn't take into account like a week ago.
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Leslie Picker
Yeah, yeah. And clearly they have the benefit of network externalities and this benefit of trust. They've been doing this for a very long time. You see major competitors to PayPal in this space. I mean how, how permanent or how enduring is their prominence as we kind of read this Tie up.
- [11:38]
Dan Dolev
So PayPal is a two sided network. I think that's, I mean there's always competitors, right? You basically have the card networks which are doing great. You have companies like Affirm, et cetera or even Klarna. But PayPal is a two sided network, right. It's got 30 something million merchants, like almost 400 million consumers. That's what creates a two sided network is like the best thing ever since sliced bread because there is moat embedded in that. So yes, there is competition, but we think that, you know, PayPal sort of, that two sided network is going to create a lot more sort of benefits down the road than people think.
- [12:16]
Leslie Picker
Yeah, not something you can really build overnight. Although, you know, we've seen a lot built with the AI ecosystem in the past few years. Dan, really appreciate your time today. Thank you so much.
- [12:26]
Dan Dolev
Thanks Leslie.
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Leslie Picker
Coming up, Amazon planning to cut about 14,000 corporate jobs in an AI restructuring, saying it wants to look leaner and less bureaucratic as it invests in the latest technology. We have the latest and a closer look at just how AI is recalibrating the American workforce next. Plus, it's been a red hot year for the IPO market. Pricing activity is up 41% compared to last year, according to Renaissance Capital. We'll speak with Liz Myers, the global Chairman of investment banking and capital markets at JP Morgan on what to expect in the year ahead. That is next. The Exchange is back after this.
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- [14:54]
Leslie Picker
Welcome back to the Exchange. In what's expected to ultimately be the largest corporate job cut in Amazon' company also saying it plans to invest heavily in AI. Is this a sign that we're heading into an AI First World. Mackenzie Sagalos has more on this important story. Mackenzie.
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Mackenzie Sagalos
Hey, Leslie. So we're seeing this sharp divide across big tech right now. You've got companies like Amazon and Alphabet that are pouring hundreds of billions of dollars into generative AI infrastructure, building custom chips and expanding data centers while cutting tens of thousands of jobs. Most recently, Amazon announcing this morning that it's cutting 14,000 corporate roles. Now crosstech, the message from leadership is clear. Become leaner, move faster and reallocate resources toward AI. Take Meta as an example. They spent the summer aggressively hiring elite AI talent with blockbuster pay packages, even as they slashed thousands of roles, including another 600 cuts just last week. And there were 15,000 job eliminations at Microsoft this summer. Part of that broader narrative of big tech gutting the ranks of middle management. Amazon's number that could climb to 30,000 according to Reuters, which would make it the largest round of white collar layoffs in the company's history, eclipsing that 27,000 number of jobs lost in the last wave of cuts in 2022 into 2023. And the reality is that headcounts, they're flat or they're falling even as these companies race to scale revenue and R and D. And they're doing it by flattening the org chart. Amazon CEO Andy Jassy has said that generative AI will shrink the workforce. And internal documents show Amazon is reportedly looking to automate percent of warehouse operations in the next few years, potentially avoiding another 600,000 new hires. So, Leslie, while Capex surges to fund the arms race, the modern tech workforce is being quietly and systematically thinned out.
- [16:45]
Leslie Picker
Yeah, Mackenzie, I mean, these are eye popping numbers when you hear them. I mean, they're the size of small cities in the United States. Do we have a sense of exactly how I will supplement those jobs, what they'll be used for? Or is it more for kind of organizational restructuring to make the, the organization more lean in order to lean into the new technology in a better way?
- [17:09]
Mackenzie Sagalos
Well, we talk about the automation side of AI. We're very much talking about that warehouse role. But today's narrative, this is looking at that white collar job, that middle manager position. And it's something that you've seen across big tech. That really started with Metta and Mark Zuckerberg, the CEO there, talking about this year of efficiency. And so for the last few years we've been seeing this thinning out of the middle manager ranks. In the spirit of trying to flatten the org charts, you can make decisions more quickly and that's really a product of the generative AI era. And if you want to get products shipped to customers sooner, you just need fewer rounds of approval. So it's really about making that final decision easier to expedite.
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Leslie Picker
Yeah, and you've been all over that story. It's an important distinction because it's not so much that the AI is replacing these jobs, it's that they need to flatten the structure in order to be more competitive with AI, move faster, less bureaucratic. That's something that seems to be catching on across the entire tech ecosystem as this race for AI continues. Mack, thank you so much. Appreciate it. The conference board has been talking to CEOs, and 81% say they expect AI to transform over half of their jobs in their company. And AI is now one of their top concerns. Joining me now is Steve Odlin, president and CEO of the Conference Board and CNBC contributor. So how should we be thinking about this? The jobs will be transformed by AI. That doesn't necessarily mean they'll be replaced by AI, right?
- [18:37]
Andrew Ross Sorkin
Well, that's right, Leslie. I think you have to look at this in context. First of all, AI is software. It's ones and zeros. It is the next phase of digital transformation. It reminds me of the 80s when, you know, personal computers were evolving, putting on people's desks, and then you had to have some software to run it, and it made people more productive. You know, the whole secretarial or administrative staff was converted and that went away. So these kind of evolutions have happened, you know, continuously over our careers and certainly over the last hundred years. This is just the next phase. So AI is a concern of CEOs. Mostly the highest concern is that others will get there first and therefore establish a competitive advantage. That's the number one concern. People are spending these outrageous amounts of money. None of it's paying out yet. So they're all going, well, where's the payout? I got to get there. I've got to spend the money, but where's the payout here? So their point of view is that, yeah, over the next five years or so, it's going to impact about half the jobs. We can see that. We're not sure exactly how, but it certainly should improve productivity.
- [19:39]
Leslie Picker
Yeah, it may not be negative necessarily. That said, this all comes against this backdrop where we've seen a slew of layoff news, news Morning Brew compiled, the ones that we've seen over just the last week. PwC5600 ups 48,000 chegg 45% of its workforce target 1800. Amazon, we just talked about it. Paramount 2000 over two rounds of layoffs. And one thing I think we need to understand is this, is this, you know, jobs being supplanted or transformed by AI or do you think this is just indicative of a weakening labor market?
- [20:13]
Andrew Ross Sorkin
I think it's a weakening labor market, yeah. I mean everybody's using AI in the mix here because it sounds good. There's very little evidence that AI has taken anybody's job yet. Okay, there's a couple of forms here that are being used. Agency is becoming an agent of whatever. So it's automation. It's the next phase of automation with robots and so forth. That's what Amazon's talking about in their warehouses, for example. And then you have, you've got generative AI, which is creativity. It doesn't supplant all creativity, it just makes it faster. The kinds of things that we're seeing in terms of layoffs are where people got out over their skis. Either, you know, post Covid or, you know, for whatever reason they over invested or the economy is not growing as fast and you're seeing paring back because of that. So I think that people are conflating two separate issues here as they're looking at what's going on.
- [21:04]
Leslie Picker
Yeah. And so maybe that begs the question, when we do see a real downturn and you know, cycles happen, they do happen, eventually we will see one. Is that the time that you expect companies to really lean in and go full force in terms of replacing their workforce with technology in order to garner those efficiencies, when the economy isn't doing as well.
- [21:28]
Andrew Ross Sorkin
Well, I think everybody's experimenting with it now to figure out how to do that. You know, we have a situation right now, it's two economies. The high end consumer confidence index from the conference board was just introduced this morning. The updated this morning. There are two economies going on here. The older, wealthier people are sitting on a lot of assets. The stock market's at an all time high. The housing market is, you know, it's very high. So they're asset rich, they're doing fine, they're spending fine. It's the lower end of the demographic scale. People who are earning less, more junior in their career who are, you know, having trouble here. Two thirds of all the households in America live paycheck to paycheck. And this is where the squeeze is also with the government workers and the government slowdown. But it's a general issue here. So it's the low end with inflation. And those are the worries that are dealing with. And I think the slowdown in consumer spending because of that is now driving companies to have to pare back to adjust to a different growth rate in the economy.
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Liz Myers
Yeah.
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Leslie Picker
And that was something that was discussed on the 9am squawk on the street this morning, this idea of the junior, the most junior employees being really affected by this and what that means for the future if they're not there to really be trained and get up to speed in their various crowds. Thank you so much. Steve Odland with the conference board. Appreciate your time today. Coming up, Jensen Huang delivering the keyNote address at Nvidia's annual conference. As we speak, Nvidia shares higher by about 2%. We'll bring you the details and the deals the company has announced so far. And Amazon not the only company slashing jobs. As we mentioned, shares of UPS, they're popping on a Q3 beat. And expanded layoff plans, the company said, cutting around 48,000 jobs this year as part of a turnaround plan. Shares up just about 8%. Back in two minutes.
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- [24:14]
Mackenzie Sagalos
Welcome back to the Exchange. I'm Seema Modi with your CNBC news update. We'll start in Washington where Hurricane Melissa just made landfall in Jamaica As a Category 5 storm, the most powerful storm to hit the island nation in 174 years. The National Hurricane center is telling people to take cover now. Officials say the monster storm will bring catastrophic flash flooding, landslides and destructive winds. In other news, Israeli Prime Minister Benjamin Netanyahu directed Israel's military this afternoon to carry out powerful strikes in Gaza. It comes after Hamas returned the partial remains of a hostage overnight that Israel says soldiers had already recovered during the war. The Israeli military claims Hamas planted the remains at an excavation site and called it a clear violation of the cease fire agreement. And a potential crackdown is coming to AI. Republican Josh Hawley and Democrat Richard Blumenthal are set to introduce a bill in the Senate today that would ban AI companions for minors, institute an age verification process and mandate that at regular intervals AI companions disclose their non human status and lack of professional credentials to all users. Leslie, back to you.
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Leslie Picker
Seema, thank you. Fascinating. Seema modi, Coming up, new Fed Governor Stephen Myron pushing to cut rates by a half point. But Paul McCully warns that would be an open invitation for, quote, irrational exuberance in asset valuations. He joins us after this quick break with what he expects from Powell tomorrow. The Exchange will be right back. Welcome back to the Exchange. We're a little more than 24 hours from the Fed decision, but 28 days into the government shutdown. For the impact of that and the ongoing trade uncertainty, all of that could have a future fate or could impact the future of rate cuts. We turn to Steve Liesman with the results of the latest CNBC Fed survey. Steve?
- [26:03]
Steve Liesman
Thanks, Leslie. Respondents to the October CNBC Fed service see a rate cut on the way from this meeting, the next meeting in December and possibly one in January, despite continuing worries about inflation, tariffs and the government shutdown in which, according to one respondent, the Fed is flying blind. Take a look at the numbers here. 92% say the Fed will cut in December. Of course, only 66% think the Fed should cut. There's concern about inflation. The other things I mentioned before, additional cuts coming, 100 basis points. That includes this meeting, December, maybe January, all the way through 2026, bringing the funds right down to drumroll, 3.2%. So just another hundred to go from where we are right now. Richard Bernstein, CEO of Richard Bernstein Advisors, tells us that because of inflation and a surging stock market quote, in more normal times, there's no way the Fed would be cutting rates here. Inflation is seen remaining above the Fed's 2% target, 3% this year to 8 by 2026, 26 by 2027. That's around where the Fed's target is because CPI runs a little hotter than the PC. Tariffs remaining the number one threat to the expansion according to the survey. But 63% say that the effect on inflation has been less than they expected, 37% say in line. But why? 48% unfortunately say the impact has been muted so far because the full effects of tariffs have not been passed along yet. That speaks to perhaps further increases in prices. 30% say the Fed, sorry, say companies are eating those tariffs, maybe more pass along there. 13% say they've been offsets to tariffs by declines in other categories of the cpi. Several Fed officials, along with survey respondents, have concerns about cutting too much. With inflation still above target and without the data, we need to know if we're doing the right thing. Leslie?
- [27:48]
Leslie Picker
Yeah, Steve, stay with us because I want to get into this distinction of whether the Fed should cut or whether it will cut, because that that was an interesting stat from your survey there. Our next guest says the Fed has been very clear about rate cuts since the Jackson Hole meeting where Jay Powell signaled moving policy from modestly restrictive to neutral. Joining us now is Paul McCully, former chief economist at PIMCO, currently an adjunct professor at Georgetown's McDonough School of Business. Thank you both for being here for commenting. I want to get your perspective, Paul, because Steve just outlined his survey where he said, I believe the numbers. And correct me if I'm wrong, Steve, 66% said the Fed should cut, but 92% believe they will cut.
- [28:31]
Steve Liesman
Yep.
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Leslie Picker
So that, I mean, that's a pretty big distinction. How should we, how should we kind of distill that?
- [28:39]
FedEx Advertiser
I actually agree with the conclusion of Steve's survey, and I also think very strongly that not only will The Fed cut 100 basis points in the months immediately ahead, but that it should. So for me, the numbers are the same. Will they and should they? And I think they should get down to about 3%, 100 basis points south of where we are reflecting both the macro as well as what's going on in the market. From the macro perspective, clearly we've seen softening in the labor market and we could talk about the reasons, but the bottom line is the labor market has softened and we have downside risk there. So the Fed, from a risk management perspective, should not be restricted, it should be neutral. So I think that's the bottom line on the macro and from the marketplace. The treasury market, the SOFA market, has already discounted a 3% policy rate. So the Fed needs to validate what the market has already discounted in order sustain the financial conditions, which are easier, but are easier on the presumption that the Fed's going to cut 100 basis points. So I think we have things in a pretty nice alignment right now.
- [30:04]
Steve Liesman
Paul, I've already discounted being a billionaire and retiring, you know, pretty soon, and that doesn't make it so.
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Leslie Picker
That's the godmother, right?
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Steve Liesman
Yeah, exactly. Paul, my question is this. It seems like there is some division on the Fed, maybe not about cutting to your neutral point, because I think if you write down neutral as a Fed official, it means you sort of think that's where you ought to be. Right? But there is some debate about the speed with which you get there. You said 100 in the coming months. The survey suggests 100 through the end of 2026. How cautious would you be about getting to neutral and what is the signal the Fed sends by the speed with which it moves?
- [30:49]
FedEx Advertiser
I think caution in these circumstances is defined by measured and predictable and also, quite frankly, not terribly data dependent. So when I say the months immediately ahead, I'm thinking in terms of a steady march at each of the next three or four FOMC meetings of 25 basis points and the Fed resisting getting wrapped around the axle. Should we do 50, should we front load and all of that sort of stuff. So I think that the issue of caution is to say, without saying we're going to 3% in a measured sort of way, and do it without a lot of herky jerky behavior. And for me, that is unlikely to reinforce negative psychology in the marketplace or positive psychology, if you're looking at it from the standpoint of bubble risk. So I think that steady March of 25s, which 100 basis points, would be 4. So that would take you over the next six months, essentially starting with tomorrow.
- [32:07]
Leslie Picker
So as we think about the other part of the Fed's mandate, which is inflation, I know that in that survey it was about 50%, 48% that believe the effect of tariffs have yet to fully work their way through. How concerned are you that easing into an unknown environment like that could backfire? And I ask that because Bloomberg had an editorial today which basically said the Fed should be pausing now because there's too much uncertainty out there with regard to all of these crosscurrents and all of these factors that they may have to pivot again in the future.
- [32:42]
FedEx Advertiser
I push back really hard on the notion that the Fed should not be cutting here. That's a textbook sort of conclusion as opposed to a conclusion based in the context of forward guidance being the sharp end of monetary policy. And forward guidance is already guided us to the notion of neutral and the capital markets have taken it on board and put it into asset prices. So essentially the notion that the Fed shouldn't validate the forward curve or the fruits of its forward guidance doesn't make sense to me. So I push back on that, from the standpoint of risk, notably on the inflation side, I'm generally a buyer of the profit proposition that the tariffs will be a staggered one off effect, not a persistent and enduring inflation phenomena. And I also very strongly believe that the pass through that is yet to come. And I think there's more to come where corporations basically say I can't eat it anymore in profit margins, I got to pass it along. It will show up as inflation at the consumer level, but I think it also takes real purchasing power out of the consumer's wallet. So actually I'm more worried about downside risk on economic activity, notably consumer spending by the bottom half of the income distribution, than I'm about some sort of esoteric inflationary problem.
- [34:27]
Steve Liesman
I am going to uncharacteristically take a little bit of the other side of my brother and colleague Paul McCully on there. So I agree that tariff inflation is likely to pass through, but the notion of looking through the tariffs does not necessarily mean you cut. It could also be defined as you don't hike because of it. So I would take a more cautious approach because I'm afraid that the signal being sent is one that we're cool with 3% inflation and we're not really hot and heavy and concerned about our target. Which is why I would take a more cautious approach. If I got the signal, which includes an if I got the data, but if I got the signal and if I got the data that I could show I was heading towards 2%, I would give you a cut. But I wouldn't say I'm doing it no matter what. I think I would do it no matter what the data said. So I guess I would be a little more data dependent it than my friend and my colleague Paul McCully would.
- [35:29]
Leslie Picker
Be, which is of course is hard to do when there is a government shutdown. And that's true, government data is a little bit harder to come by. Thank you, Steve. Thank you. Paul McCauley, good conversation, appreciate it. Coming up, we'll bring you the highlights from Jensen Huang's keynote speech and Nvidia's GTC conference. One of those includes a strategic partnership with Nokia. Those shares higher, soaring 21% higher after being halted briefly on the news that Nvidia will make a $1 billion equity investment. Nokia will issue more than 166,000 new shares directly to Nvidia, giving it a near 3% stake. Exchange will be right back. Jensen Huang's keynote still underway and Nvidia's GTC conference. Christina Parson Navalis is live from that conference in Washington, D.C. for today's tech channel, check. Christina, what have you learned?
- [36:21]
Christina Parson Navalis
Oh, a lot. A lot to go through. And CEO Jensen Long, like you talked about, is in D.C. with the hopes of really showing policymakers how important it is for Nvidia and other tech firms to really build out AI infrastructure. So to answer your question, Leslie, now for the news of the keynote, which is underway. Nvidia is partnering with Oracle and the Department of Energy to build the DOE Department of Energy's largest AI supercomputer, which would involve 100,000 Nvidia Blackwell GPUs and another system adding 10,000 more Blackwell GPUs in 2026. Still unclear, though, on how the government is actually planning on procuring those chips. The deal made between both on quantum computing. Nvidia introducing NV Q link. So there's a lot of names here, but just know that it's about connecting quantum processors to eight major national US Labs. When he did announce the this collaboration, you did see the reaction in the stock price for Getty D Wave, IQ all falling on that news when he mentioned those names. And then we move on to a collaboration with CrowdStrike to help cybersecurity AI agents. That's when you saw the stock pop. So this event is clearly having an outsized impact on a lot of tech names. And then there was partnership with Palantir, both the companies joining forces to build systems that run business operations. So businesses is decisions like eventually changing the route of a ship depending on the weather pattern. So this is essentially where you would take out the human and the I would make the decisions for you. We're not at that point per se, but the two companies are working together. And one example that they use is the company Lowe's that is involved with just building up this infrastructure. And then last but not least, we have Nvidia also investing $1 billion in Nokia to update wireless network networks and also cell towers across the United States. This Airan market, which is what is called it, is expected to hit roughly $200 billion by 2030, according to Jensen Huang and T Mobile will start testing it in 2026. The Nokia deal, though, really is part of Nvidia's recent, shall I say, spending spree. They committed money to intel, about $5 billion, up to $100 billion to OpenAI over the next decade. And so that's why you're just seeing such an outsized reaction. Nokia's share price up now almost 24%. The stock was initially halted and that's because they're essentially giving Nvidia almost a 3% stake, 2.9% stake in the company. And then I'll just end on this, Leslie, because of all the conversations that are going on in China. President Trump and President Xi are meeting Thursday, Korea for trade talks. And guess who is also heading to Korea, Jensen Huang, who is going to be there. And I have to say, from all the CEOs that I spoke to at this event, from Vertiv to cadence to perplexity, etc. Everybody seems to be very, very bullish on the outcome of these talks. And I'm wondering, do they know something we don't know? Or maybe they have to be bullish because they are the CEOs of said companies and the future revenues would rely on a good relationship with China. I don't know. But everybody seems to think positive. Things for semiconductors, CJ Muscle from Cantor's Gerald telling me it's not priced in a lot of these stocks, including amd.
- [39:26]
Leslie Picker
Yeah, it's all really interesting timing and of course, the conference taking place in D.C. no small thing as well. Christina, thanks for being there to cover all of it for us. Christina Parts and evolis Coming up, it's been a notable year for IPOs. The Renaissance IPO ETF up nearly 15% since January. We discuss what's next with JP Morgan's global chairman of investment banking and capital markets. That's next. Welcome back to the exchange. Global IPO momentum picking up in the third quarter with deal volume increasing 19% from the previous year and proceeds surging 89% according to Ernst and Young. Joining me now to discuss is JP Morgan's global chairman of investment banking and capital markets, Liz Myers. Liz, thanks for being here. Great to be here. So we saw the IPO window opening and then of course, over the last 28 days we've had this government shutdown. So how would you characterize the pipeline now and just the overall sentiment around the capital capital markets?
- [40:19]
Liz Myers
Well, I would say notwithstanding this brief pause in things, the IPO market's been really vibrant. And I think what's been notable is just the breadth of types of companies. On one end of the spectrum, you'll have a circle and a bullish that has really broad retail and institutional interest. And then on the other side, you'll have a name like Alliance Laundry. In the industrial space, it's a consistent but slower grower getting equally good reception. And in the middle, blackrock Coffee, Neptune, the Flood Insurance Company, high growth, small Caps that have done great as well.
- [40:50]
Leslie Picker
Yeah, there's been a lot of breadth for sure. And one of the missing pieces that people talk about is just the sponsor backed IPOs, the LBOs coming to market and kind of what that means for the flywheel of overall deal making as it pertains to sponsor backed IPOs, but also sponsor backed M and A because of the dual track processes that come with that. We just saw Medline file, which I know is a JP Morgan, JP Morgan's an underwriter there. I know you can't comment on that one specifically, but what do you make of kind of the environment for sponsor backed IPOs right now? Do you feel like there is a buy side interest in these types of deals?
- [41:22]
Liz Myers
There absolutely is. And I think finally financial sponsors are starting to feel that valuations are fair and represent what they were hoping to realize for companies in their portfolio. We've also seen the M and A market come alive. So there's been multiple avenues to realize gains for LP LPs and to return capital to LPs so that they can then invest in the next fundraise. Which has been a big theme for the alternative asset managers.
- [41:45]
Leslie Picker
Yeah, which is important for the whole cycle. Going back to the idea of the government shutdown. So you know, we're about a month in. I know it thwarts the process because the SEC isn't able to process and approve IPOs. There are other avenues that companies can take. But how are companies reacting to this? Are they still gung ho about moving forward? Because as I look at the calendar, given Thanksgiving and giving, given Christmas, I mean there are only a few more weeks that companies can realistically price and go public for the remainder of the year.
- [42:17]
Liz Myers
Some companies have used an avenue to be able to price their IPOs while the SEC is shut down. That involves a 20 day period where you can achieve automatic effectiveness if you're willing to have a little bit less flexibility in movements in your price range or size. So about eight companies are pursuing that and the rest will either try to complete something by the end of the year or some will move into next year.
- [42:38]
Leslie Picker
How do you see the retail investor role in IPOs? I mean, we've known each other for a long time, more than a decade and a half at this point in time. And it used to be we never talked about retail as participating in IPOs. Now those allocations, particularly with the deals we've seen this year in the crypto space and some of the fintech space, have had outsized allocation to retail at Least relative to the past is that conversation that you advise companies to have and to pursue. I know it is company dependent, but do you think it achieves better outcomes for the deal process?
- [43:12]
Liz Myers
Well, I'd say that there are certain sectors that have more appeal for retail. We talked about some of the digital assets, consumer names, quantum. There are all sorts of AI sectors that have broad appeal for retail. I think it's really company specific. Some companies really want their customers to be part of the IPO as a thank you and a part of ensuring loyalty. So it can be company specific in that regard. I think it's here to stay, but not in every deal. And for some it can be a real accelerant in the aftermarket, which is great and also can be an important part of the allocation itself.
- [43:48]
Leslie Picker
And your role as global chairman now has you jet setting meeting with CEOs all over the world. How would you characterize their confidence against this macro backdrop that for many of us feels uncertain, unprecedented and unknown given the shutdown and the lack of government data we've been getting.
- [44:08]
Liz Myers
Yep. CEOs we find to be quite confident. And in particular, there's a lot of activity in Asia right now. Lots of IPO happening in India, some big ones there as well as in Japan. So over in Asia we're starting to see a big, a big uptick in terms of activity for capital raising in the US I would say we often compare notes about how we see the consumer with so much exposure in terms of our customer base into the US Household group. And many companies are also seeing pretty good performance from their customers in the way that we are.
- [44:41]
Leslie Picker
Excellent. Liz Meyers, thank you so much for being here. Liz Meyers of JP Morgan, appreciate it. The exchange is back after this. Be sure to stick around for power lunch. Nvidia CEO Jensen Huang and Palantir's Alex Karp will join us from Nvidia's GTC conference in Washington, D.C. two big guests. You won't want to miss it. And we want to check in on Apple and Microsoft Both crossing the $4 trillion market cap level today. Right now those shares are higher. Both stocks set to report earnings this week, Microsoft tomorrow. Apple on Thursday. Quite a busy week. Let's take a look at the markets as we round out this hour. The Dow is up about 325 points. The S&P up 0.4%. Nasdaq the standout here up about 0.8% and the 10 year sitting around 3.98% under that 4% level. That is it for us. Thank you so much for watching the Exchange. You've been listening to the Exchange.
- [45:47]
Christina Parson Navalis
Make sure you're subscribed to get each episode every day, same time, same place.
- [45:54]
Andrew Ross Sorkin
It's Cybersecurity awareness month and LifeLock is here with tips to help protect your identity.
- [45:59]
Leslie Picker
Use strong passwords, set up multi factor authentication and report fit phishing scams.
- [46:04]
Andrew Ross Sorkin
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- [46:18]
Leslie Picker
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