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The Exchange
The Exchange 11/12/25
00:43:28
Listen to the day's top stories, the must reads & a whole lot more for today's modern investor.
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A
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B
Thank you, Scott. Welcome to the Exchange. I'm Courtney Reagan. And today for Kelly Evans, stocks mixed with the Dow hitting a fresh record and the tech heavy NASDAQ once again lagging down. Facebook's first 4th negative day in 5AMD, a standout on the tech front, surging on bullish growth projections from CEO Lisa Su for the next five years. Meanwhile, Metta, Nvidia, Palantir, Oracle, they're all lower with debt concerns not going away. And we're seeing it play out in the bond market with investors buying protection against corporate debt. More on that just ahead. And a quick check in on oil. WTI down more than 3% and back below $60 a barrel. You can see at 5860 OPEC projecting steady oil demand, but rising global inventories begin with markets. And while our next guest acknowledges that there are rising risks in the trade, he's more worried about something else, a slowdown in the economy. And that's leading him to make some changes. He just downgraded value to negative and he's sticking with growth from here. Joining me now is Vinny Krishna Barclays, head of US Strategy, equity strategy specifically. Thank you so much for being here with us. I'd love to talk about some of your changes. Let's talk about downgrading value to negative and your worries. There's.
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C
Yeah, I think, you know, we have been consistently positive on growth. So and growth, as you know, is really dominated by technology where not just overall profitability but the scale of the beats of earnings continues value. Other, on the other hand, has exposure to segments which continue to face, broadly speaking, cost pressures, which include parts of especially staples, for an example. So I think the sector composition and the fact that eventually consumer sentiment Sort of going down will sort of hurt the kind of sectors which are more in the value space is what makes us negative.
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B
And what about momentum? Momentum to neutral. So you think there's value there, but maybe just sort of treading water for a bit.
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C
Yeah, I mean momentum is, you know, has worked at varying points in time. But our point at this point is we are kind of neutral on it. What we really like effectively is growth. And even on quality we have been effectively neutral. So I think from a factor standpoint, I think what it shifts to is even when you talk about, for example on the size, you know, we are, you know, we, we are kind of neutral on large or small. We were, we were positive of large for a long period of time. But then more recently we changed our stance because within large are again focuses on big tech especially on the other hand small because of rate cuts, at least in the short term have some, some sort of support to them. And on the other hand, more recently their earnings have actually shown strength after a long period of weakness.
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B
Definitely, definitely more bearish here. Some of your changes obviously downgrading value to negative and then upgrading momentum and quality, but just to neutral and not beyond that. Can you sort of extrapolate a little bit about what you're worried about when it comes to the broader economy? Is it a slowdown or is it a possible recession?
- [03:53]
C
No, I don't think recession is a very low probability, especially given the strength one in consumption which remains robust even as the labor market is weakened. So I wouldn't characterize as being negative, but I think the bigger scheme of things, what I would relate to is the single biggest issue in the market right now is the scale of a spend and key questions about the returns on that spend and also what could potentially cause it to sort of decelerate at some point in the future. So that's something on which we've done a lot of work, work that is the single biggest discussion. And of course the discussion also moved into the scale of spending remains at this level, then operating cash flows of these hyperscalers is not going to be enough to sort of to do that. So it has to move into more the credit markets. And obviously that has implications. If the size of the capex, for example, incremental capex has increasingly gets dependent on the credit markets. So I think those are the bigger issues. But if I think about there are two sort of downsides which can happen if the trade stumbles. In other words, you start seeing a deceleration rather than acceleration of the next two years, which we think highly unlikely. But the less likely but a situation worth pondering is what if we have a macroeconomic slowdown because of the labor market or inflation going the wrong way, then that is likely potentially to be that weakness will be accompanied by a pullback in a capex as well. That combination we feel is going to have a fairly negative consequence. But that's not our base case. But that's something worth thinking about given the continued strength in the equity market. Overall though, we still remain positive. I mean, I mean I look at the current quarter with over 90% reported. These earnings are as strong as they come, tracking almost 50% growth on the earnings side and about six and a half percent on sales. So there's a lot of good operating leverage in the system. So overall we are optimistic. But it's also our job to keep an eye on what can go wrong.
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B
Yeah, obviously some very different stories being told when you're looking at say the fundamentals of a company and what they're putting up in their earnings reports and then you're looking at some of what we're hearing when it comes to the economy even though we are sort of in this absence of government data right now. Vinu Krishna of Barclays, thank you very much for joining us with your theory here today. Well, those 10 year notes are up for auction. Rick Santelli is tracking the action at the CME and obviously a lot of attention in general on Deb Rick.
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D
Yes, a lot of attention, especially with yields moving down. We're at levels that we haven't seen on a closing basis in tenure in about two weeks. So what do we have today? The second leg of 125 billion in a refunding. This was a total of 42 billion primary auction 10 year notes and the yield 4.074 which was about a half a basis point higher than when issued market was trading right as the bidding ended which was 4.068. A lot of numbers there. The long and short of it is is a higher yield at the final result of the auction means slightly lower price. Government was a seller. The grade I gave for this auction for demand was a C as in Charlie. We had certain metrics that were below average like the bid to cover certain metrics slightly above average like the dealer takedown at 10.5% versus 11% 10 auction average. But in the end it really is a steady eddy auction. But a lot of attention paid to it as you pointed because of the real lack of any main driving fundamentals or lack of Data like ADP gets upgraded from its usual average stance to something super important. And when all the data hits over the next couple of weeks, is it going to be as weak as the market seems to be pricing in? Only time will tell. Tomorrow is the last leg of this refunding. It was interrupted by yesterday's Veterans Day where the bond market is closed. Tomorrow will be 25 billion 30 year bonds and as I said, that will complete 125 billion and auction supply back to you.
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B
And there's, there's a lot there to digest. Rick, obviously we know that your main, main attention is often on the treasury market. But I am curious in your thoughts about what's going on in the world of debt and credit when we're talking about trying to fund this AI boom.
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D
You know, I think when it comes to the debt markets, there's one direction that most investors ultimately think supply is going and that is higher. The only question is how Bessen and the Treasuries divide some of the issuance down the road up. Will it be more or continuing ongoing larger scale bill auctions? Will the coupon auctions like we have today ramp up as well? Supply has to go up because we're not really cutting anywhere. And much of the fighting that's been going on keeping the government closed, all of it adds to more money being spent and even if they don't spend more money on the subsidies. The budget that this administration has has a lot of good points, but one of them is not cutting the ultimate debt levels that we're at. And that will continue to be a sticky issue. The main reason rates are going down now is because of Fed implications for the day that comes out being weak.
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B
Interesting stuff. Rick, thank you so much. Stay close as always. Well, meantime, House members are back in the beltway to vote on ending the longest government shutdown in history. Emily Wilkins is there with the latest. Hi Emily.
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E
Hey, Courtney. Well, we are just hours away from a vote that at this point is expected to end this shutdown after 43 days. We know that House members are back. We know that optimism is very high among leadership that they are going to have the vote. You saw President Donald Trump come out and already congratulate Republican leaders on getting this one done. Now we know that things are going to be tight just because of course it's the House. You have narrow margins. But we're actually seeing seen at least one member who voted against. Remember they took this vote in September on the stopgap. She voted against the stopgap. This is Congresswoman Victoria Spartz. And she's now tweeted today that she actually does support this and does plan to vote yes. She said on Twitter that we need to open the government, pay our military and provide essential services. Then she added that the bill they'll be voting on today doesn't increase spending or set us up for a Christmas Christmas omnibus. So she will support it. So that's at least one person Republican who vote no who's now a yes. They also do expect at least a couple Democrats to cross the aisle and vote for this package as well. Of course, once that is done, we're expecting in the next couple of days for those back pay paychecks to finally hit some bank accounts. We're expecting airports, airlines, flights to really clean up, go back to a more normal operations than what we've seen for the last couple of weeks. And then of course, when it comes to the economic data, now we know that the BLS has some of those numbers ready to go. The September jobs report has been ready this entire shutdown to be released. However, some of the other data, especially when it comes to the October jobs report, folks who are collecting that they really were not working for most of the shutdown. So we're waiting for an updated schedule on when that data could be released. Could take a couple of days, maybe a couple of weeks before we actually see some of the economic indicators that will be so important for, for the Fed and a number of other folks to really get a sense of where the economy is at.
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B
Courtney, very interesting. Of course, we always talk about how some of that data is backward looking. I guess it'll be even more so now. But hey, we'll take it, take it when we can get it. It sounds like we don't know the exact schedule yet. Emily, you mentioned airports. Hopefully getting back to normal at some point when this shutdown ends. But as lawmakers are trying to get back to Washington, it's kind of abnormal what's going on. Are they all able to get back and we have this vote?
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E
I mean, Courtney, this is the thing. I mean, for Republicans, they can only lose two members to vote no if all of the Democrats vote no. That's not the scenario we expect. But it shows you how narrow and how tight things are. And so we do know that members did begin to head back, some of them on Monday, some arrived yesterday, seen a lot of folks in the hallways today. It's unclear if all 435 of them have come back in D.C. but they got a couple more hours before those initial votes start. That'll begin around 4 o', clock, 5 o'.
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F
Clock.
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We know at least one member there are getting a little creative. Derek Van Orden of Wisconsin actually says that he rode his motorcycle all the way from his district to Washington, D.C. that would be probably more than a ten hour trip there. And we've certainly seen other members do road trips in the past. So we will see if there's anyone who's struggling. If they do, they'll likely delay the votes tonight. But again, when this vote happens, whether that's at 7, 8, 9, 10 o', clock, we fully do expect it to pass and for the government to be reopened tomorrow.
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B
Fairly ironic, I suppose, all of that put together. Emily, thank you so much. Well, coming up, if you've noticed higher prices for clothes and shoes, you're not the only one. Morgan Stanley is tracking the brands hiking the most and who still has the biggest deals. The analyst with those answers joins us next. Plus, with growing concerns around the trade, is there enough investor appetite to fuel the Mag 7 forward? We'll speak with one fund manager who stayed bullish on the AI Boom. The exchange is back right after this.
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This is the exchange on CNBC. Hey there, it's Dr. Sanjay Gupta with.
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Some exciting news to share.
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B
Welcome back to the Exchange. The holiday shopping season is upon us and so are higher prices. I'm sure you've noticed, but according to Morgan Stanley, apparel prices were up an average 3% year over year in October with increases continuing post the so called Liberation Day on April 2nd. Now those higher costs coming mostly from retailers Morgan Stanley says like Anthropologie, Banana Republic, American Eagle and Macy's and Morgan Stanley says those prices could continue to expand from here. So for more let's bring in Alex Retton. He is retail analyst at Morgan Stanley or she is. Alex, thank you so much for being here with us. It's so interesting your report because so many of us have tried to track pricing. Retailers we know aren't giving us a lot of details on what prices they're increasing, where or how much. And so all sorts of different data sources are trying to go at this. Can you explain to us Alex, how you came up with, with your 3% increase what apparel companies were in that and just give us some more details so we can understand a little more.
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F
Sure. So we use a third party data source that tracks e commerce prices. So it's not perfect in terms of it doesn't necessarily capture brick and mortar changes. But in light of very limited data to your point, it's wonderful to use something. Now something to keep in mind is that this pricing data that we look at also factors in things like discounting and mix shift and we can't exactly see how that's factoring in to the pricing. But what is clear for how you kind of intro this segment is that from an apparel category perspective we are seeing prices rise slightly. I wouldn't call it a huge step change versus the prior trend as it relates to 24 and pre liberation Day just a little bit higher. And in our view where you're really going to see the rubber meet the road in terms of potential price increases that retailers could take is this month onwards. So it's kind of a more to come as it relates to our read on the fact that it isn't a huge jump yet, but we should see more on the horizon soon.
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And so these prices just to sort of dig down a little bit deeper, it's not necessarily the msrp, but it was the final selling price. So this takes into account a discount code or what shoppers actually paid is what you're saying.
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F
That's exactly right. And the reason why you're probably not going to see that the prices move so much already is that we have seen a mix shift phenomenon in the space of the last number of years. You have to remember that most of these apparel retailers are sitting at gross margin highs and I think an underappreciated component of why that's the case for an industry that actually faced declining margins for years and years and years is the fact that they are mix shifting into higher price point categories. So think going from tees and jeans into things like, you know, work wear and tailored pants, that's a higher price point. So some of this is just an industry phenomenon, not necessarily exactly related to tariffs in my opinion. Opinion.
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B
Got it. Yeah. Because I was going to ask you that. We've seen economists mainly talk about how they don't believe that full impact of tariffs is in yet based on what we think we know about inventory, timing and receipts and when these goods were accepted and at what tariff levels they were subject to at the time. But then some of those economists say but we could have this one time hit later on. Do you believe that as well that we actually have not yet seen the impact of tariff and this is inflation and prices from other factors?
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F
I think that's broadly correct because the way to think about it is the average apparel retailer holds three months of inventory on hand. If you were seeing in April, you were safe for April, May, June. If you're sitting when the additional incremental tariff headlines hit and we're starting to be implemented, which was August, you were sitting on August, September, October. So what that tells me is that November onwards, and really as we just keep moving further on the timeline away from the original announcement, you're going to see the incremental and the real pricing that these guys are taking probably flow through these piano. Now it's a little bit different if you're a wholesale model, which is mostly my footwear guys. So a lot of footwear businesses are run as wholesale, so you can buy them at a Macy's or Nordstrom, etc. And those businesses operate differently from a retailer in that they typically have their forward order books locked in for the six months out. So if you were sitting in April, you were basically locked in on whatever pricing you promised your partners. For the most part almost through the end of the year though in footwear maybe you see the price increases more clearly in the front half of next year. So the timing varies depending on what category you sell and what type of business model you run.
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B
Okay, I'd love to then drill down on some names. So from this data that you're saying is a third party E commerce source that sort of is scanning pricing, who's raised prices the most? Who have raised prices the least?
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F
Yeah, so I think the best way to look at it as opposed to just looking at October in a vacuum is to say who's taken the most since Liberation Day in total. And a couple that stand out to me for that for the biggest jumps are names like Tor it in anthropology. Now Anthropologie sits within the urban Outfitters business. Does that surprise me? No. They're a makeshift beneficiary. They've been increasingly moving into higher price points as a percentage of their of their product and with something like a torrid. That was a business that did suffer from some discounting missteps over the last couple of years. So you have to. There's a bigger mosaic going on with some of these names. That doesn't just mean they're outright taking the price on this shirt from X to Y. It's a bigger assortment change that could be happening from a strategic perspective. That's apparel. On the footwear side, we're seeing more price increases versus a pre Liberation Day level from names like hey dude. Even Macy's, Kohl's. So that's interesting. A couple of the department stores are kind of scanning or screening as as more or as taking higher levels of pricing which could also be a mix shift dynamic. We know that the department stores are trying to fortify themselves with the most popular and premium brands and they're doing active work to adjust business model to be in a more favorable relationship with the brands.
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B
What about on? I mean I believe they also, you know, they reported today they're not looking to offer discounting or promos. What are you expecting for them going forward when it comes to pricing?
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F
Yeah. So on already took some pricing in the U.S. now you have to remember for brands particularly in the specialty run premium space, they've been taking price very consistently for the last five years. So part of why you might not see another incremental jump is the fact that one, you get them every year and two, it's done in a very discreet way on particular models. New launches, again, that's sort of a mix shift dynamic. You have a new Launch that costs $5 more. So it's. It sounds like for them, you know, there might be a little bit ahead. But they've, they've done the initial kind of raise. They've seen actually no elasticity to it which is quite amazing potentially because of their higher household income consumer. So ON is unique though. You have to remember that the skew of that customer base is not your average consumer in the US absolute.
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B
And of course we've talked about some brands are able to do this more than others. It is a study and sort of price elasticity what consumers are willing to pay. We do have to let you go. But if I can sneak in one sort of final question about pricing. If you can make it somewhat quick as we're thinking about pricing and you say that you believe that pricing is to come, we're also looking at the holiday season which by nature is promotional. So how do we actually figure out pricing? If you think prices are going up but then you get 40% off or whatever the case may be. Can you explain that?
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F
That, yeah. So I think that look, it's not going to be something that's easy to kind of bifurcate as we think through the dynamic of pricing moving higher but maybe offset by slightly higher discounting, it could shake out even I think bigger picture. We're pretty cautious on the holiday season and part of it is this, this worsening price increase dynamic. But it's also the fact that you have inventory imbalances in the space to what you said, potentially rising promotional levels. Pretty negative sentiment indicators. So far we've seen that in our a consumer pull survey, which is proprietary Morgan Stanley. And then just the fact that we had a really competitive backdrop entering the year just with that dynamic I mentioned earlier with margins sitting so high versus history. So there's a lot more reasons to be, be cautious I would say on, on holiday perhaps more so than we were call it a month ago. And the price part of it is just one piece of it and a.
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B
Lot more reasons why we really have to do our homework to try to figure it all out. It is far from straightforward when it comes to pricing, inflation, the impact of tariffs, startups or not. Alex Stratton, thank you so much for joining us. Well, coming up, forget the 50 year mortgage. Homebuyers are dipping their toes back into the market despite rising interest rates. What do I mean? Well, we've got the details coming up next.
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It's deal days at Volkswagen. And by deal days I mean that our numbers guys away for the winter holidays and we're offering signed and drive deals on new VWs, by which I mean cars made by Volkswagen. It's a classic case of while the cat's away, the mice will play. And by play I mean offering, offering sweet holiday deals on the most affordable German engineered car brand. And by sweet holiday deals, I mean zero down, zero deposit, zero first month's payment and zero due at signing, excluding tax, title and other fees on a new 2025 Tiguan just in time for the holidays. But our numbers guy won't be on vacation forever by not forever I mean deal days, like the holidays themselves is a limited time thing. And by limited time I mean you better get your tucus into your VW dealership. And by tucus I mean exactly what you think I mean. Volkswagen deal days claim based on US market MSRP information available at time of publication for 2025 and 2026 German engineered vehicles zero duet signing excluding tax title, license options and dealer fees. No security depos. Example 3.99amonth lease for 36 months for a 2025 Tiguan SE based on an MSRP of $33,045 with destination charges and excluding other noted exclusions. Limited inventory available Closed end lease financing available through January 5, 2026 on approved credit to well qualified customers by Volkswagen Credit through participating dealers Offer not valid in Puerto Rico. See your Volkswagen deliver details are called 1-800-drive-VW extra value meals are back.
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That means 10 tender juicy McNuggets and medium fries and a drink are just $8 only at McDonald's for a limited time only.
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Prices and participation may vary. Prices may be higher in Hawaii, Alaska and California.
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B
And for recovery, welcome back to the Exchange. Take a look at markets Right now we are mixed. The NASDAQ composite is the laggard again on the day, down about 3.10of a percent. Dow Jones Industrials highest of the three, up by about 8.10of a percent. And we're watching the yield on that 10 year Treasury. Rick talked about it earlier today. We're at 4.065%. That's at least some of the major movers, but let's talk about some individual ones too. We've got circle plunging 9% despite reporting strong earnings and raising its full year.
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Guidance.
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Investors focused on the company's higher cost outlook, implying thinner margins in the coming quarters. On the flip side, Bill holdings soaring on reports that the firm is exploring strategic options, including a potential sale. Remember, it's been under pressure from activist investor Starboard Ventures after It took an 8 1/2% stake in September, shares higher by 11% and health care stocks hitting a 13 month high for the second day in a row. Eli Lilly, JJ Gilly Apple Ad trading at all time highs, Amgen shares touching their highest level in over a year. Eli Lilly shares higher by more than two and a half percent. Meanwhile, some movement on the housing front with demand for mortgages ticking up last week. Diana Olek has the numbers for us. Hi Diana.
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H
Hey Corey. Even though we're heading smack into the slowest season for housing, homebuyers seem to be making maybe one last gasp, likely because of more supply on the market and softening prices. Mortgage applications to buy a home rose 6% last week to their strongest pace since September, according to the Mortgage Bankers Association. Now volume was 31% higher than the same week one year ago. This despite the fact that the average rate on the 30 year fixed for conforming loans rose to 6.34% from 6.31 for loans with 20% down. That rate, though, is 52 basis points lower than it was a year ago. Purchase demand rose for all loan types, Conventional, FHA and VA as potential home buyers continue to shop around for the best deals. Now as for refinance demand, not so much. It had been strong last month, but dropped 3% for the week, still 147% higher than the same week a year ago thanks to those lower rates. The average loan size for refis also dropped as higher rates offer less savings. Okay, so what about this week? Well, rates have actually come down a little bit to 6.29% on the 30 year, according to mortgage News Daily. That is likely due to the impending end of the government shutdown. But the big question remains, what happens when we start to get all that economic data from the government that we missed during the shutdown? And Courtney, how will markets react to that?
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B
Yeah, who knows exactly what we'll see there. And as we mentioned earlier, sometimes it's backward looking, but hey, it's what we have. Why do you think that we've seen this uptick in demand? Diana, you obviously noted that this is a slower time of year. Are potential buyers just saying, ah, forget it. We can't wait forever. We've got to just do this.
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This.
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H
No, it's as I said, it's just a little more supply on the market right now and prices are starting to soften and soften a little bit for those sellers that are on the market. They're making better deals right now. And folks are just saying before everything locks up in winter, maybe I'll make a try at getting a better deal.
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C
Hmm.
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B
Very interesting stuff. Real estate always so fascinating and very dependent. Location, location, location. Right. We're going to move on to Bertha Combs. She has a CNBC news update. Hi, Bertha. Hi, Courtney. A classified opinion by Justice Department lawyers.
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Over the summer gave legal cover to personnel taking part in military strikes on alleged drug trafficking boats in Latin America, arguing they would not be exposed to future prosecution. That update according to the Washington Post, which reports that senior military officers sought caution on such strikes. Strikes as critics raised concerns about their legality.
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White House press Secretary Caroline Levitt accused.
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Democrats in the House of releasing emails.
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From Jeffrey Epstein to create a fake.
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Narrative and smear President Trump. Following that statement, the GOP led House oversight committee released 20,000 additional documents from the Epstein estate saying, quote, you deserve the full truth. The president has repeatedly denied any involvement or knowledge of any Epstein sex trafficking operation. And a rural Kansas county has agreed to pay more than $3 million and apologize over a raid on a small town paper, the Marion county record back in 2023. The raid prompted five federal lawsuits and a nationwide debate over press freedom.
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B
Courtney, very interesting. Bertha Coombs, thank you so much. Well, coming up, the buildout is facing a growing debt problem and that includes this mag7 name. That's one of our next guest top holdings. We'll tell you what it is. You got a one in seven chance of guessing right and whether investors should be worried. That's next. Welcome back to the Exchange. Both Barclays and JP Morgan recently downgrading Oracle's credit. But that's not the only mega cap tech company raising some debt concerns. Sima Modi joins me now now with that story. Hi Sima.
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E
Hey Courtney. Been speaking to a number of different people on this topic and it's not so much the size but the speed at which hyperscalers are issuing billions of dollars of debt. And it's drawing the attention of big short investor Michael Burry, hedge fund investor Jim Chanos who specifically calls out core we that stock by the way, down again following earnings that it released two days ago. Strategist at JP Morgan ran analysis of the costs tied to build out of data centers and think thinks $1.5 trillion in investment grade bonds will be issued by the hyperscalers over the next five years. And even then they say it's not enough that private credit and the government will need to step in and provide support. Now. Yes, Oracle has arguably been the most aggressive in the debt market as it races to develop and lease a number of data centers across Texas, Wisconsin and New Mexico. Its five year credit default swap now at a two year high volume volume has also been increasing as well. Analysts say this tells us that investors are starting to hedge their bets and buy protection should this AI bet not materialize as expected. And it does come as Metta announced that it just broke ground on its 30th data center, $1 billion project in Wisconsin. So court the race continues.
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B
This is really interesting stuff. Sima, thank you for bringing us the latest. And my next guest says that debt is definitely something to watch. But so far the investment thesis remains strong, strong. Joining me now is Tony Wang, he's manager of the T Rowe Price Science and Technology Fund. The Fund is up 27% this year, outperforming the broader market thanks to its tech holdings which include AMD, Micron and SanDisk. Tony, thank you very much for joining us. So give me your overall thesis around the idea of AI debt. It sounds like yes, it's growing, the numbers are impossible to ignore but not a worry point for you. Why not?
- [31:01]
G
Yeah, you know, I think it definitely is something to watch but to me what's most important is that the kind of outcomes they can get with generative AI are still there. I think that we're looking towards agentic AI to push the productivity potential of the technology. I think all the companies that we talked to over the last few months, no one's taking their foot off the gas pedal. I mean it's an absolute imperative investment and I think you've got new companies are doing new ways of building companies and then you've got the existing companies that need to adapt to the environment or to stay competitive. So to me I think that I'm looking for like, you know, all these use cases that weren't around over the last few years and that are going to be driving spend going forward.
- [31:48]
B
There are so many ways I think to play the trade. How are you looking at the different pieces of IT and can you sort of segment for us? Are there areas of more opportunity at this point point in where we are and what I can actually give us?
- [32:05]
G
Yeah, so I think that one is that the compute platforms are going to continue to be the building blocks of the technology and so I think Nvidia, the platform, I think you also have parts of memory like NAND and dram. So nand like there's going to be a lot more storage of the data, both you know, real world data and synthetic data. So you're seeing like bottlenecks appear there and I think that, that you know, the industry has consolidated in NAND specifically and so there's areas to play there. So you know, I think that it's going to be a multi year investment and I think you know we are still early in the S curve of adoption and you think about usage of ChatGPT, large language models, I think people are getting a tremendous amount of value. And you know, when you're looking at the engagement and the potential of this technology, I still think IT markets is there to drive a lot of potential disruption too.
- [32:58]
B
You know SIMA Was, was on just before and hopefully you're able to hear some of her report. But she discussed, you know, Oracle's five year default credit swap volume rising exponentially in the last week. Potentially some worries about its aggressive debt financing. What do you make of that one in particular?
- [33:14]
G
Yeah, so I think that, you know, it is up but off of a pretty low base. And so I think it's definitely something to watch. I think at the same time, you know, Oracle there is, the leverage is manageable and I think that if you think about this new type of financing, it probably is novel but over the long term I do think that people are going to recognize that these GPUs, you know, the useful lives are not really probably three years, it's probably more five to six years. And when they're running, you know, they're generating a lot of profit. And I think we're going to go from this idea of like, you know, we're just building and ordering GPUs to like how much profit can you get from HGB? Are the tokens profitable? And we cross that threshold, they become more self sustaining. So what I'm looking for is like the unit economics actually improving and it's not going to be a straight line but I think that is important, not that companies are going to figure out a way to drive more usage and drive better productivity for their businesses.
- [34:18]
B
Obviously your fund has had a nice performance, but when I look at some of the performances individually, you know, Palantir still jumps out at me at up 139% year to date. I know it's pulled back a little bit AMD up 115% year to date, which then brings up that whole conversation about valuation. If you're not currently in those names, is it too rich to get in now?
- [34:39]
G
Yeah, well look, I think that we're still early in this investment cycle and you know, with those two names, I think Palantir, for example, they're really at the leading edge of implementing AI for companies. And, and you've got companies are spending $80 million, $80 billion with them. I mean, so $80 million. And so, you know, that's a tremendous amount. I think they're driving a lot of value for their clients because they're able to essentially have an ontology that their clients can plug and play a little bit more and connect their data. And so I think that, you know, this kind of paradigm is a new shift. And I think with amd, you know, the market is really growing at an exponential rate and I think that with what AMD is building, you know, they're going to have a segment of the market and their development with open air kind of strengthens that. So, you know, I think there's a lot of exciting things that, that these companies can do. And if they can deliver, I think there's a place for them.
- [35:36]
B
AMD and Palantir moving in opposite directions today. AMD up about 8%, Palantir down about 4 and a half. Tony Wang with T. Rowe Price. Thank you very much for joining us here tonight. Day well, coming up, the bulls are still running on Wall street, but the bears have dominated the art market for the last three years. But that might be coming to an end. We'll head to Sotheby's for a live report next, which includes a golden blue. Welcome back to the Exchange. Let's talk a little Monet. The art market finally may be emerging from a three year recession. Robert Frank is at Sotheby's in New York City. He's shopping for me.
- [36:13]
C
Me.
- [36:13]
B
Hi, Robert.
- [36:15]
G
Monet.
- [36:16]
A
Monet.
- [36:16]
G
Monet.
- [36:17]
A
Courtney, great to see you. Well, this could be the week that finally turns around the art market after three years of decline, it's the most important week for the art market of the year. More than $1.4 billion worth of art coming across the auction block. If they hit that number, which they probably will, that would be more than 50% increase over last year. I spoke to Southern the Beast CEO Charlie Stewart, who said that the rising stock market is one reason that bidders right now have a bit more confidence. I think it's a combination of collectors having more confidence in, you know, perhaps the macro and market outlook. There's obviously been an enormous amount of wealth creation over the last several years, but that's accelerated this year. Interest rates easing, geopolitical improvement, greater comfort level with the political dynamics in various countries and all that together somehow is combined to create a higher level of confidence. And another big reason is an incredible supply of museum quality masterpieces coming to auction, including this monetary that's at Christie's, that's estimated at more than $40 million and that Rothko estimated at more than $50 million. But the big collections are here at Sotheby's. One from Jay Pritzker and his wife, that collection. But the big collection, Leonard Lauder, this collection, over $400 million alone. Three Klimps for sale, including one of them a portrait that could go for over $150 million. And we'll end with the painting piece that everyone will be talking about. It's Maurizio Catalan's America, A solid gold toilet that Courtney, just the gold, 220 pounds of it, 18 carats, would be worth $13 million in today's dollar, in today's prices. And I would have to say that I've been to a lot of auction previews, Courtney. There are thousands and thousands of people coming to this exhibit to see the works. Part of it is because, because Sotheby's just opened this brand new global headquarters here on the Upper east side in the Breuer building. So people come to see that. Also coming to see that Catalan piece. And of course, these three klimps, which is rare to see three of them at once. We'll probably never see so many come to auction in our lifetime.
- [38:41]
F
Wow.
- [38:42]
B
Fascinating. I have so many questions, but we have some news. So we're going to have to pay attention to the rest of your reports and check for more online. Robert Frank, thank you so much. As I mentioned, we do have some news out of the White House. We've got Press Secretary Caroline Levitt telling reporters that the October CPI data and jobs report will likely never be released. The comment comes as a historic government shutdown which has prevented the release of economic data may finally be coming to an end. We'll get you more on that when we have more. Well, coming up, the Dow the only major average in the green today as the rotation out of tech continues, continues. Goldman Sachs and UnitedHealth are the top performers, good for nearly 250 points. The big banks also touching record highs today. So we'll break down the bank trade that's coming up next. Welcome back to the Exchange. As we mentioned, banks touching record highs today, including JP Morgan, Morgan Stanley, Goldman, Wells Fargo. So some of the biggest names joining me here on set with what's driving the recent move, senior finance and banking reporter Leslie Picker. Leslie, what's in charge of the move today? I imagine it's tied to rates, like often it is is it's tied to raids. There's also this sigh of relief because.
- [39:48]
I
The shutdown is ending, which kind of bodes well for risk and risk on. I also think the banks are benefiting from some of the selling you're seeing in bigger tech. There were some ETF flow data from bank of America last week showing that as investors were selling out of technology, they were rotating in perhaps to financials which saw the biggest weekly inflows since May. So you're kind of seeing this rotation dynamic. There's a bit of a relief trade with regard to the shutdown potentially ending. And all of that is boding well for banks. I would also add the biggest performer among the banks today is Goldman Sachs, up nearly 3%. There were some headlines about how it earned its biggest fee ever, about $110 million due to the sale of Electronic Arts. So that kind of helps with sentiment, that helps with confidence as it pertains to this revival of the capital markets as well.
- [40:43]
B
Yeah, I mean, for so long we thought we were going to get all these deals and there was going to be lower regulation and maybe we'll get it, but we haven't really seen a lot of that yet. But at least there was that deal, the EA deal. So that gave us some hope.
- [40:54]
I
There's definitely been a pickup this year. Year to date we're up substantially. IPOs have been on pause of course, largely due to the government shutdown. But if that starts to kind of change change, there's a limited window for the rest of the year for IPOs to come to market because they typically don't do so over Thanksgiving, they don't do so over Christmas and New Year. So there are very few weeks which you could get deals done the rest of the year. But even without that, we've seen a pretty big uptick in IPOs year over year. In many cases the biggest since 2021, which of course was somewhat of an anomaly as it pertains to just the overall capital markets environment. So we have seen a pretty decent amount of, of activity and that's driven substantial upside in earnings for a lot of the banks that are more levered toward capital markets activities, like a Goldman Sachs, like a JP Morgan, like a Morgan Stanley.
- [41:42]
B
So more of the bigger names, less of the regional players at this point getting some of the, the buy ins.
- [41:47]
I
Yeah, there's certainly a gap there in terms of performance with regard to regionals which have been, you know, usurped by all of these fears about credit quality. That hasn't been the same for the bigger bank bank the bigger banks, even though a lot of them, JP Morgan certainly had exposure to some of these issues, bank of America and others. And so it's just a much, much smaller proportion of their balance sheet compared to the regionals and just their ability to work these things out. Investors are much more focused on the higher premium fee based businesses, you know, banking, wealth management, so forth. That could kind of offset any potential issues on the balance sheet at this point in time.
- [42:26]
B
And I imagine we're going to get some video maybe later today of some of the bank CEOs in Washington. Right. So that's sort of on the top of everybody's intrigue list maybe today. Yeah.
- [42:35]
I
And what comes out of that as well? Obviously regulation has been a huge driver to the upside for the industry just ever since, you know, basically over the past year or so. And we've seen a lot of that kind of progress throughout the course of the year.
- [42:48]
B
Got it. Leslie, thank you so much.
- [42:50]
F
Thanks, Court.
- [42:51]
B
Well, still ahead, the Nasdaq the underperformer today amid worries about an AI bubble to Palantir. As you mentioned, Datadog Palo Alto, Tesla and Alphabet among the biggest laggards. That's the streets take up next, we will head to San Francisco for a check on how founders are feeling. We will be right back. Tech underperforming broader markets today as AI bubble fears persist. Deirdre Bosa is live at the Cerebral Valley AI Summit in San Francisco, getting gut check on the industry's epicenter for today's tech check. Heidi.
- [43:20]
H
Hey. And it's just about to kick off. So it's filling up in here. But even here where you have the true believers, these are startup founders, top model foundation companies, there's still bubble talk and anxieties that the elephant in the room now. A year ago it was all about how fast I could transform everything. Now it's a little more about revenue and real world adoption. Now. Few people have a clearer view of that than Replit CEO and founder Amjad Massad. He has been at the forefront of the Vibe coding, or AI first coding trend that has just exploded over the last year or so. He admits that yes, the hype has cooled, but there's still plenty of growth and Replit is looking at free cash flow and profitability next year.
- [44:01]
A
If you look at the coding space like two years ago or maybe even a year ago, Copilot, it was the only game in town. They were like at 500 million in revenue. If you add up all our companies in the Vibe coding space and otherwise is maybe like 5 billion air. So like there's a 10x increase in revenue in this category. You go from one player to like 10 plus players. We're all making money. And you know, there's criticism about being an app player. Can you make, can you actually have margins? And we do have margins. We're on our way to being, being profitable next year.
- [44:35]
H
Now. Courtney, this is interesting. Most founders that I talk to, they are in no hurry to go public. So I was surprised by what Massad told me on that front. Have a listen.
- [44:45]
A
I went around Silicon Valley and asked companies that are a lot bigger than us, that are still private, why are you private? I've never gotten a good answer. It's mostly, you know, laziness around.
- [44:56]
G
Oh, there's chores.
- [44:56]
A
They've just doesn't seem to be good answer why companies are not going public. And that makes it more attractive to me. So we're looking into it.
- [45:04]
H
Are you talking to bankers? Maybe. I asked him if 2026 was a possibility and he said possibly. And that would make Replit one of the first pure play AI coding startups after the Neo clouds to become public. And that would be a real test for a market that is becoming increasingly skeptical of the trade. Courtney?
- [45:27]
B
Yeah, very interesting. Leslie said, look, you're probably not going to get a lot of IPOs the rest of this year, but look ahead to next year and maybe we will. Do you think that there's a healthy understanding of some of the worry that is percolating around the trade there? I love that it's full of hope and opportunity, but I mean, are they realist there too?
- [45:46]
H
Yeah. You know what? I would say there is a lot of optimism here, of course, because everyone here is building in the space and they're hearing from each other. But there is a healthy dose of reality. I mean, Replit is a company, a vibe coating company that has been able to increase revenue. It's looking at a billion next year, but there are also many that will not make it that are in sort of this price war. So there's both sides of this. And I would say here there's a lot of talk too about, you know, the Gardner hype cycle and how, yes, when you're at the top of hike, it's hype, it's way up here, but it will level out somewhere that is more reasonable, more realistic. Where that is, that's what markets are trying to find out and that's what I think the private markets and founders here are trying to figure out too.
- [46:27]
B
Very interesting stuff. Thank you for bringing us the pulse from the ground. Deirdre Bosa. That is it for today. Thank you for watching the exchange. We do have markets mixed tech again. The laggard on the session with the nasdaq down about 3, 10 of a percent. Dow up 8. 10 of a percent. Power lunch starts right now. Extra value meals are back.
- [46:47]
D
That means 10 tender juicy McNuggets and medium fries and a drink are just $8 only at McDonald's for a limited time only.
- [46:55]
A
Prices and participation may vary. Prices may be higher in Hawaii Alaska and California and for delivery.