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The Exchange
The Exchange 12/18/25
00:43:38
Listen to the day's top stories, the must reads & a whole lot more for today's modern investor.
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Fidelity Brokerage Services LLC Member NYSE SIPC At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more@capella.edu. thank you very much, Scott so should you trust the CPI report? Will Micron surge help or hurt the AI trade in the long run? And what happens as prediction markets hit the trillion dollar mark? All of that is ahead this hour. Welcome to the Exchange. I'm Kelly Ev the cooler CPI print has helped lift stocks today. The Dow the S and P higher even as economists question it. And the Nasdaq is surging up 2% at the highs as Micron hangs on to a 12% pop after its strong earnings last night. Even the momentum trade is catching a bid today with Palantir, Reddit, AppLovin all showing 4, 5, 6% gains. But what happens if the good news proves fleeting? Let's begin with the brewing controversy over today's much better than expected inflation report. Steve Liesman is going to go there.
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Trying to get to the bottom of its stocks loving the much cooler than expected inflation report. But the bond market and economists highly skeptical, many saying changes to the data gathering process might have distorted the numbers. RSM job Sulla says dude that was one flawed report. Morgan Stanley says this was a noisy print make it difficult to draw stock draw conclusions. And Pantheon cautions the data collection issues mean trend. The trend will only be clear in December. Economists have raised questions especially about the sharp drop in housing costs or owners equivalent rent as well as whether the survey, which was limited to the second half of the month instead of the whole month, might have overweighted holiday discounts. CNBC has contacted the BLS on this issue. We've not heard back yet guys. Give me a call if it's accurate it would suggest the headline index was not as benign as indicated. Well, the two year yield did not trade as if inflation was vanquished and the Fed would embark on massive cuts. It rallied and is actually sold off since the numbers by at least by a few basis points. Not a big number but that's a big tell Me, something, I don't know, story right there. Fed probabilities also unchanged. January, 24% down two ticks. March, 52% up two ticks. So really, you can see right there, they are not trading as if there's an imminent change in the Fed's attitude. The irony here is this. Housing inflation is probably declining, but it takes a while for those declines to show up in the cpi. The this looks to be too much, too fast to be credible to a lot of economists, and we might have to wait until December or even January to get an accurate read. Well, we might get an accurate read when I talk tomorrow morning with John Williams, the president of New York Fed, exclusively.
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B
Everyone, by the way, can't wait for this interview because he moved treasury yields a lot the last time that he spoke. So I would say, based on observations so far, the responses seem somewhat politically split. The left leaners think that this report is nonsense. The right leaners, if I may call them that, think that it's based on real enough or legitimate enough data. So I'm looking for the crossover, Steve. I want someone to break with the ranks and come out with a strong opinion against the grain.
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So here's the thing. There's a specific thing that might have happened that has been written about by a major investment bank that was in my report up until half a minute ago, and I took it out because I haven't been able to check it with the bls.
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B
Okay.
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If that's true, then it will be empirically true that this number is not to be trusted.
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B
If what is true?
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If this story about what's happening with housing is true. But I don't want to get it wrong and come back on here and say, kelly, let me back on. I have to correct the mistake.
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B
I will, I will lead you into speculative.
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I will tell you it is objectively true that there are multiple questions about the housing number.
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B
Right.
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Which was point three, and now it's like point one three.
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But my understanding is it still tracks with what we're getting on, like the Zillow data and otherwise.
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It was tracking like that for a year. It's always been there. That was a big question in the Biden administration. Why didn't, why wasn't the decline picked up?
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B
Yeah, absolutely.
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It takes a long time. Steve Schwarzman talked about it this morning with Becky. It was a big, he's right, it's coming down, but it shouldn't be picked up now. You didn't have this massive change. It doesn't change, ironically.
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B
It's why they've been underperforming the last couple of months because they were real estate.
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A
Also this business about collecting over half a month and picking up the discounts at the end of the month and not getting the full price spectrum over the course of the month. So I think it's objectively true there are problems with this thing. Yeah, I'm here. I mean, I'm trying to think of these guys. I mean, look, what I gave you were the nice comments I got.
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B
Right, Right.
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I got a bunch of expletives too in my text. And I didn't, I didn't put those up on air, so. And I don't want to. You're right. That the administration would love to see these things coming down. This would be in line. So it's not crazy to think that you have offsets. But one of the things I didn't trust was the goods numbers, which showed a really modest inflation number. I still think that's to come. Right. I think one of the administration's arguments.
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B
By the way, even Michelle Meyer said they were tracking 2% inflation, which their goods is more like retail goods and that sort of thing. And she said we're around 2% right now.
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So 2% what? You know, and inflation in goods.
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Yeah.
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So that's a high number. You realize that, right? Because that's really the Fed's. The Fed hawk story. Right. The Fed hawk story is goods were negative to zero before.
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Right.
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And now they're 2%. So they don't offset the service side.
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Probably not goods broadly, but more like the consumer spending areas that they're tracking. But nevertheless.
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So it is, it is, it is objectively true as well that the full amount of tariffs have not passed along.
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Definitely.
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And there is also, you know, a debate about whether they will and when they will or if they will. That's part of the debate right now. That's one of the things we're tracking. Goods inflation in this, in this fork in this report were up 1.4% year over year. They had been like zero to negative.
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Let's bring in Greg Dock.
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That's a good idea.
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He thinks this report wasn't just noisy and full of gaps, but that it shows a downwardly biased view of inflation. Greg, am I saying that correctly? What do you see here that jumps out to you?
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Yeah, that's absolutely right, Kelly. And I think Steve put it well. It was full of gaps for sure. It was very noisy, it was messy. But there was a downward bias. And this downward bias, to clarify what Steve was Mentioning is due to the BLS methodology when it comes to filling in cells for which it doesn't have data. And that's called the carry forward methodology. Simply put, if the BLS does not have a data point for the month.
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Of October, it uses the September data.
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Point and that imparts downward bias to the inflation trajectory. Just right there. All right, Greg, Greg, I'm going to stop you because now you've opened the can of worms for me to actually ask you this question. Okay. Here's the note from my friend Krishna Guha, Evercore isi. It says it looks as if the BLS put in a zero inflation in multiple categories for the roughly one third of cities that are not surveyed each month. Biasing the read lower. You confirming that, Greg? I think that's the carry forward methodology. The BLS was not entirely here yesterday they released an FAQ on what was going to happen with the data. But we are seeing that across a lot of the measures that were surveyed, very low inflation numbers for the month of October, which imparts that downward bias to the inflation dynamics. I think that's very important to keep in mind because it's not just a story for October and November. This potentially lowers the inflation trajectory into 2026 and will mean that through the mid part of 2026 we're going to see this downward bias coming from shelter costs disinflating faster than what was previously the case. So I think we have to be very careful not just with these two reports, but the reports that will come out over the next few months will also have this downward bias. And this is a real risk in terms of reading properly where inflation is what it's worth.
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On his substack, Berry Knapp has a different point of view where he thinks the core goods price was 0.0 6.03. But in other words, are these, do these are these literal zeros or were they actually picking up numbers that were very close to zero in there?
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Yeah, I mean I think we're going to get a lot of people clicking away if we go too down into the weeds of this report. I think the way to think about it is. Well, Greg, tell me if I'm wrong about this. I think that this is probably a report where it probably came in at or around the estimate of 3%. There's no reason to think that prices have accelerated and not a whole lot of reason to think they're falling, except over time the oer the homeowners rent will offer a downward bias to the.
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B
Number that's one Reason why I wanted to quickly raise this with both of you, even though it's a mega, mega topic. Let's show we have Diane Swonk made this tweet earlier that caught my eye because lurking behind all of this is this larger question about a productivity boom. Anyway, Diane points out based on some of the data we're getting and the way inflation is looking, the GDP report could have gains crossing 4% stronger than the 3.8 in the second quarter. She says that's stunning. AI and the wealth it generates still posting big gains along with the narrowing trade deficit. So in other words, she said, by the way, this occurred with essentially flat employment since April. Productivity helps to explain that her head is about to explode.
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I'll take a victory lap and tell you. That was my question to Powell.
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Oh, perfect.
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Yeah, that was at the press conference. I said how are you raising GDP to that and not reducing the unemployment he talked about?
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He said this is a multi year product.
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It's not an AI story. We'll let Gregory answer.
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Right.
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It may be an AI story, but he said we've been running hotter than expected. And there were a couple of technical reasons. There was the pull forward of the down the negative numbers of GDP from the shutdown from 25 into 26. That was point two. But still there was an upgrade to GDP and part of that is the product.
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I think we have the Nancy Lazar chart on this as well where she shows that same thing, two and a half percent we're running. She thinks we could get to three. So Greg, the reason why I raise that is are we getting too myopic about the back and forth on these inflation reports that the larger point is we are creating more GDP with basically flat employment. That's not going to accelerate inflation in the longer run, which right now is looking somewhat contained. Look, we want to bring it down from three, closer to two. But this, this last couple of months, it still looks like we're heading in the right direction.
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I mean, that's absolutely right. I was speaking to Fed Chair Powell about this. The productivity momentum that we've seen was the key reason for US exceptionalism in the couple of years that led into 2025. And it's not AI, it's actually businesses being more efficient with their processes, with their talent and in a higher cost environment looking to drive more growth with less. That is really the source of productivity upon which I will ride that wave. So it's a positive story. And this is disinflationary in the medium term. So I think you're absolutely right. When you look at the CPI report, two things stand out. One, cost of goods are still rising and I agree with Michelle Mayer that we're seeing upward pressure from the tariff pass through and we're not at the end of the tunnel there. But two, we also have disinflationary currents on the services side, perhaps overstated in this report but shelter cost disinflation is weighing to the downside. And three, productivity momentum is still quite strong with this AI wave that will ride upon strong momentum and drive stronger growth.
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Reporters Notebook Give us a final word.
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Just a Reporter's notebook. In 23 years of covering the CPI here at CNBC and several years of journal, I have never been reporting the actual numbers at 1:11pm on the day that it comes out.
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Right.
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Right. I'm still trying to figure out what the heck is in this report and how they did it. And Greg, if you want to give me a call, we can talk after this and I'll figure it out. And we're going to do another hit at 2 o' clock and then we.
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B
Have a little more detail to be continue gentlemen. Thanks. Steve Liesman Greg, thank you as well. Greg Dacko now let's turn our attention to Micron, which is still up sharply after its earnings last night and boosting the whole air trade today. But could that lift prove to be short lived? Christina Parts and Evolutions is asking some questions about that. CHRISTINA Kelly Micron delivered a massive beat and the stock is up because supply is getting tighter. The company's advanced memory production for AI is just completely sold out through all of 2026. Demand is soaring and they actually don't even have enough clean rooms to build these chips. You know those rooms you have to walk in with an entire white suit? Hazmat well, that's why dynamic memory pricing jumped 20% quarter over quarter. Also why Micron CFO expects margins and performance to continue improving through FISC fiscal 2026. So a stellar report for Micron. But he also noted the rate of pricing increases will actually slow beyond February. And that matters because memory is still cyclical. Prices surge during shortages and then they come down when supply catches up. So you have some analysts a little bit worried that Micron will hit peak margins mid next year. More pressing for the AI buildup though is who's going to pay for Micron's near 70% gross margins. Hyperscalers like Amazon, Microsoft, Google need these chips. AI data centers, server makers like Dell, Lenovo and HP have to pay these higher costs and pass them along. HP raised server prices. Dell is going to do the same this month. Even Broadcom is feeling the squeeze with memory costs compressing their gross margins by roughly 100 basis points just in the last earnings report and contributed to that stock sell off. We saw about 11% post earnings last Friday. The question is whether these rising memory costs start slowing down the AI infrastructure buildout or they just create margin pressure across the supply chain. Nonetheless, Micron strong guidance really helping other memory and data storage names like Sandisk, Seagate, Western Digital, Lam Research, all of these at least 6% higher right now. Kelly Exactly. Christina, we appreciate it. Christina Parts and Evilis. Let's turn to our next guest who isn't worried and says the magnitude of upside in Micron today shows the AI trade is back on. Michael Sanzatera is CIO at Sylvan Capital Management. Michael, it's good to see you. This will have some people shaking their heads, others breathing a huge sigh of relief. What do you see happening here?
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Yeah, this is a great measure of actual demand.
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Again, when this is important to remember.
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There'S not a lot of those left for this year.
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But Micron's demand and really what they're seeing from a contractual obligation going forward.
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Tells you that the fundamentals of the.
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Trade is very much alive short term. It was getting a little nerve wracking there for some folks who are traders were investors at Sylvan Cap, but traders were nervous and that makes sense. But the fundamental, like Christina said, 75% of EPS guidance range, pulling the TAM.
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Forward a couple of years, you've got.
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You'Ve got north of 40% CAGR for.
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The next couple of years. That's unheard of in memory.
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That tells you demand is off the charts. So pull this together. For me, it's like if I were asking ChatGPT, I say I want one sentence that brings together what's happening with Oracle, what's happening with Micron and what you presume to happen with the rest of the trade, you know, all at once.
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Okay, that's a big sentence.
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I would say that with, with Micron we are getting a solid read that demand for chipsets continues. With Oracle we are being reminded that.
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Free cash flow is the most important.
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Way to fund CapEx. And as the rest of the space.
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Is looked at for the next, next.
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Year, next two years, I think you.
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Want to stay with the winners.
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You want to be in the large cap names that are executing that are paying the 80, 90% of CapEx that they keep increasing with free flow and not debt. Yeah. Our guest yesterday even was kind of bullish on Oracle in the long run and said look, they're the ones who have the proprietary enterprise data and as the models move in that direction, they think ultimately that that's going to pay up. That's up to investors whether they want to make that bet right now. But I like your summary. So if free cash flow is the most important thing, what's that setup look like going into next year? Are they an outlier or do we have to worry about the rest of the mega cap starting to face those problems?
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Yeah, the mega caps look fine.
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Literally 80 to 90% of capex is fully covered by cash flow from operations across the board. So that, that. Look, the question really is Oracle. We don't own Oracle in the Virtus.
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Sylvan Focus Growth Fund, but we can.
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See that the market doesn't want to see the debt and the amount of debt that that's being required. Right. So I think there's, I think there's a tale of two cities here. There's the folks that are paying it.
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With free cash flow and they get.
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A multiple and there's the folks that have to borrow. You know, if you look around even, even outside Oracle, but some of the smaller players that are growing very fast.
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But also have to go to the.
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Market for debt, it's a different valuation. It doesn't mean it can't work. It doesn't mean the demand's not there, means that the market right now doesn't want to pay for that incremental risk. Enough risk in AI in general, I think. So you guys are laying your bets with those who are, you know, have plenty of cash to fund these expenditures and have no reason otherwise to worry about this trade stumbling in 2026. Yes, exactly right. It's the, it's the hyperscalers, you know, it's the same story we've been hearing for a while. I know it gets old, but it is the Google's slash alphabets, it is the Amazons and Microsoft. It is absolutely Nvidia, which we have a lot. There's. It makes perfect sense that those guys would continue to see massive demand.
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They've got the capital to pay for it and the growth continues.
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All right, Michael San Satara, thank you so much, sir. Appreciate it today. My pleasure. Good to see you. Capital. You too. Coming up, the precious metals and all of the metals really. We've got gold coming off its 50th record close of the year, silver hitting new all time highs while Oil is having its worst year since 2018. We're going to talk to Carlisle's Jeff Curry about all of it next year. Plus, investors are looking to buy quality but having a hard time, according to one strategist. She calls this a joyless bubble. So what do you do into next year? We'll debate that ahead on the Exchange.
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This is the exchange on cnbc.
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What made you confident that you could do something that hadn't been done before? I have no fear of failure. Trailblazing women, changing the game One of my favorite pieces of advice Think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday. Wherever you get your podcasts. Silver Retreating after hitting an all time high yesterday, Gold is just below record levels and the clear breakout today it's Platinum, which my next guest is arguably the strongest commodity in the precious metals complex. Joining us now is Jeff Curry, the Chief Strategy Officer of Energy Pathways at Carlyle Group. Jeff, it's so great to see you welcome.
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A
Hey Kelly, great to see you as well.
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B
You know, I still thought you had the best encapsulation of what was going on in Covid when you said there were too many dollars chasing too few atoms in the world and so the price of everything was going higher. Do you have, is there a macro theory that explains why all of the metals prices are absolutely levitating?
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A
If it's in the periodic table and it has atomic number attached to it, it's the debasement trade. If it's a molecule and it has a carbon in it, like oil, gas, corn, wheat, it's struggling. But I think let's focus on the ones with the atomic number attached to them. And your point here is, you've had a great run in gold, you've had a great run in silver because they're pricing that debasement trade when we look at platinum. And the reason I'm going to argue that's the one you want to own today is the news coming out of the EU this week which took away the ban on ice internal combustion engines because the platinum group metals go in as the autocad. So you have taken away the negative, you know, positioning on platinum and open it up to the upside in that gold. Platinum ratio suggests there's a lot of upside here.
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B
Right? Because I understand when people say it's all, you know, gold is the central bank purchase story, that's fine. But it feels much more like what you said, that this is a dollar debasement trade. Obviously the dollar is going lower. But when we say dollar debasement, are we making too much of it? You know, is it a dollar weakening? Is it dollar debasement? Does it matter if there's a big kind of differentiation there?
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A
Well, I think there's, there's two points here. The debasement trade is I want to own something other than, than fiat currency. The de dollarization trade is I don't want to own dollars and subject myself to U.S. sanctions. And that would be like China and Russia trying to get away from seizure of central bank assets. So there's two different dynamics at play. Gold is being squeezed essentially by em central banks trying to put both of those positions on at the same time. But people in the developed markets, they want to own gold, silver in the precious space primarily for the debasement reason.
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B
Right. And I noticed that Bitcoin is not participating lately. Again, it's fine. It's done obviously quite well in prior years, but this would seem to be the time that it would be taking its center stage role as the debasement asset of choice.
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A
Well, I think you still have the on ramp and on ramp and off ramp of the cryptocurrencies. You know, obviously if you're a central bank sitting anywhere in Asia, you can move gold and nobody knows you have it. You can move it anywhere in the world. Gold can survive anything. It could survive a nuclear winter. Bitcoin, it's still in its infancy. It's a 16 year old market. You put that against gold, which is a three millennia market. We know gold can survive anything. And when we look at why is gold outperformed all the other precious metals. Let's go to platinum. Remember platinum records platinum. Everything sits above gold because historically it's more rare, it's more dense. But the reason why there's such a demand for gold, it's a $30 trillion market. It's absolutely enormous relative to something like bitcoin, which is, you know, one and a half trillion. So you know, that long history there provides a level of security that both essential banks want as well as individual investors.
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B
Do you think the dollar keeps weakening next year because it's already down 10% since from like the peak, let's say this year. So it's already had a big move. Does it keep weakening? And why is the price of oil going down and not up in that situation?
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A
Well, let's talk about a little about oil. So the debasement trade has been driving all those things with atomic numbers, everything in the periodic table. What about molecules, things with carbon in it? It's being driven by the oil glut story. And the oil glut story is one that's being driven by this idea. OPEC is flooding the market. At the same time you have US shale and other supplies coming on the market market. The reason why nobody wants to buy the Venezuelanoise and nobody's willing to sell the pop is the market is very unexplainable. Let me just talk about it. So we have this supply chain where we see oil at sea going up at that glut so we can observe it. But remember, there's two markets out there. There's the US market and then there's the China market. So you need to have more working capital. And that glut is only about three days of extra supply. Now the confusion comes from the fact that we're not seeing this in inventories in the consuming areas like US and Europe. And we're not seeing it in the front end of the curve. The front of the curve is still backwardated which is bullish, which is telling you, yeah, there's a lot out there. We see it, but it doesn't conjo doesn't make sense with what we're seeing in the markets. And one last point. When OPEC made its decision to increase production and it felt very comfortable, there were three criteria. One, distiller diesel margins, refining margins were very strong. Two, physical grades were very strong. And then three, the markets backwardated. We've lost two of those. Right now. The margins have come off and the physical grades have weakening, which is an indication, partially the reason why OPEC stopped, which means this is going to rebalance. I think 2026 is going to be a great year for not only the ones with the atomic numbers on it, but will be a very solid one for oil markets beginning to rebalance and we don't have any investment. Let's go back to that story I'm telling you in 2020. That story is still today. We're under invested across the entire space, right?
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B
Exactly. And so at some point you could see it experiencing something of what the metals are experiencing now. Who knows? Certainly on the energy side, we know that's been an issue. Jeff, we hope to continue. I'll have a whole new set of questions next time, I'm sure, but who else talks about the atomic numbers versus.
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The numbers in the periodic table?
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B
Thank you very much. Appreciate your time today. Jeff Curry, thank you. Coming up, Trump Media merging with TAE Technologies to form one of the world's first publicly traded fusion companies. DJ T shares are up 30% on that deal. News we'll have the details and reaction from Washington right after this. At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the courseroom to the workplace. A different future is closer than you think with Capella University. Learn more at capella. Edu. What made you confident that you could do something that hadn't been done before? I have no fear of failure.
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A
Trailblazing women, changing the game.
- [27:21]
B
One of my favorite pieces of advice, think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just got to think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday, wherever you get your podcasts. Welcome back. Shares of Trump media soaring 37% after announcing plans and follow me on this one. To merge with a fusion company, a private one called Tae Technologies. That's right, a nuclear fusion company. It's going to make that company go public. Eamon Jabers is in Washington with more. Eamon, please explain this deal to us.
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A
Hey there, Kelly. Yeah. The announcement this morning was surprising to say the least. Trump Media and Technology Group said it will merge with an experimental fusion energy corporation called TAE Technologies in an all stock transaction valued, they say, at more than $6 billion. Shareholders of each company will own approximately 50% of the combined company, which the parties are calling one of the world's first publicly traded fusion companies. And they say that Trump Media's hefty balance sheet is going to help fuel innovation in that fusion energy tech. The company says it's just on the verge of commercial application for its fusion reactors. And it says it will now be led by Co CEOs, former Congressman Devin Nunes, who was the CEO of Trump Media, and Austrian physicist Michael Benderbauer, who is the current CEO of tae. But this transaction raises two important questions, Kelly. First, is fusion technology actually commercially applicable at all? Scientists have been trying to generate nearly unlimited energy from fusion power for decades, but so far no one has been able to create reliable commercial power that way. And second, how will a company that's partly owned by the President and his family handle all these potential conflicts of interest here in terms of regulatory approvals, potential federal funding and all the national security security concerns that might go along with it? Still, in an eight minute conference call this morning, Nunez wasn't shy about making big promises that fusion power will lower energy prices, bolster national security and secure energy that's needed for AI development.
- [29:36]
B
Kelly, does it mean on some level that DJT as a media company ceases to exist and simply now becomes those assets get rolled up into a nuclear fusion company which may or may not be successful, but that, that is effectively what the entity is now? 1 and secondly, what remains the Trump family's interest and ownership in this entity?
- [29:56]
A
Well, it's going to be a social media nuclear power company, naturally, Kelly. I mean, they're going to not dispense with truth social, right, which is the President's media organization that he uses to promote all of his ideas and proclamations to the world. That company's got a lot of value because of its association with the president and the attention that that gets. And you know, if you're running a company like that, you got to look at a fairly limited time horizon, right? I mean, at some point President Trump will no longer be President Trump. And does the value of that entity decline as the President moves into a retirement phase of his life. And, you know, there doesn't seem to be any other sort of exciting new content creators in that media sphere. So you realize you've got a short time window here to do something with that company. This looks like the play, very speculative. You know, fusion power, not really proven. You know, it is the holy grail of energy. It's been the holy grail of energy for a while. And the cynics say it'll always be the holy grail of energy. But if you can do it, you know, there's huge, huge, huge upside.
- [31:02]
B
All right, Eamon, appreciate it very much for now. Thanks, Eamon Jabbers. Let's get to Bertha Coombs now for the CNBC news update. Bertha. Kelly, multiple people are feared dead after a business jet crash at Statesville Regional Airport in North Carolina this morning. Multiple reports say that according to public records, the plane is owned by NASCAR driver Greg Biffle. Local officials say the FAA is on scene and coordinating the investigation, but has yet to provide an update on the victims. State and federal authorities in Rhode island are still seeking the gunmet who killed two and injured nine others at Brown University. Investigators say so far they have collected DNA evidence at the scene and are also seeking a second man who appeared to cross paths with the shooter leading up to the attack. Police say none of the images and video they've reviewed so far show a clear view of the suspect's face. And North Korea's hackers stole more than $2 billion in cryptocurrency this year, according to blockchain watchdog Chainalysis. That's up from a prior record of 1.3 billion in 2024. UN has long accused North Korea of using hackers to steal crypto in an effort to fund its nuclear weapons program. Kelly. All right, Bertha, thanks very much. Coming up, are the small caps the way to play this market? Our next guest says we're in a joyless bubble. We'll explain what that is and what she wants to do about it next. Welcome back. Tech is back in the leadership position today. Big tech, but small caps lately have been the ones putting up some big gains. The Russell 2000 outperforming the Mag7 over the past month. And my next next guest thinks that'll continue, says the trade has legs next year, but expects the leadership to change. Julie Beal is chief market strategist at Kane Anderson Rudnick. Julie, welcome. And what do you think is about to take place? Place Well, I think that what's going to really start to happen is people are going to recognize that earnings growth is what really matters. And a lot of what's been doing great in the Russell has been quantum computing, which doesn't have earnings, biotech companies which don't have earnings, and companies with high levels of debt. And I think there will be some recognition that growth is going to accelerate in small cap. But among the higher quality businesses that have really figured out how to resolve inflation, labor headwinds, higher interest rate costs, I think those are the ones that are going to do better. And I think that if you really study a little bit of the idiosyncratic qualities of all of them, you can find some really nice gems and they're trading at better valuations too. A lot of people have pointed this out that even when we're talking about the small cap rally, they've called it, I don't want to say the trash, but like the low quality stuff. Why is that? Is that because that also could be where the growth is. I think a lot of it is just, it's pure speculation and a lot of it has been driven by retail traders. Right. So a good chunk of it is actually happening in retail. Something like 30% of volume is in stocks that are less than $5. So it really kind of points to, you know, what you would call lower quality. And I think it's a recognition of a lot of young people really trying to try to get rich quick on some very speculative parts of the low cap, low, lower quality market. So to me, it's just this is an opportunity to look at the higher quality businesses that still haven't gotten the shine on them the way that low quality has. For instance, LMAT is one of your picks, down 6% this year and cino is down 23%. You love it. I do. I think both of these businesses are really differentiated. Lemaitre is a business that is in health care, but it really doesn't face a lot of the same regulatory pressure and pricing pressures. It's actually been able to find a lot of pricing growth and strengthen its business. And in Cino, you know, nothing in software has done really well because everyone is just assuming that we're rip and replacing and vibe coding. And I actually think a lot of these vertical SaaS, software companies are the ones who are going to be able to leverage a lot of the AI and sell it to their customers. They have the relationships and Sino is really well positioned to do that. Aaron Levy has talked about that too. He thinks that actually I will make higher adoption of software because you can have the AI go and do the tagging for you instead of hiring people to do so. I agree. I completely agree. And I think that they have the data. Usually that data is really clean and leverageable. Part of the problem with being able to really enact AI in a broad way is that a lot of enterprise has this hodgepodge of data that is in silos, that is from acquisitions and that doesn't really talk and that isn't very clean. So we make this assumption that it's going to be so easy to just layer the AI on top of that. And I think the reason why a lot of these early pilot programs haven't been super successful, it's just the quality of data isn't great. Totally. No. It's like we're all janitors, right? Just cleaning up data to try to make everything more efficient. It's important work. Exactly. Julie, thanks very much. We appreciate it. Thank you, Beal. Coming up, every component of this semi etf, the SMH is higher after Micron's blowout results last night. Their management saying the company is more than sold out of its memory chips. But with companies like Google and Rivian shifting their focus to in house chips, are those demand tailwinds about to change? Before we go, check out shares of Medline, the IPO of the day and year yesterday. It's fractionally lower today, but holding around 40 above yesterday's opening price of 35 and well below the $29 IPO. We'll be right back. Google is working. Google is working on a new software approach that would take aim at one of Nvidia's biggest advantages in AI. Let's bring in Deirdre Bosa with more details in today's tech check as we try to keep all of these pieces and players straight in our heads. Deirdre, there's a lot going on. So here's the story. It's that Google's chip challenge video. It's moving from hardware to software. Nvidia's dominance with GPUs that's always gone hand in hand with software needed to run them. That is Cuda. But now Reuters first reporting in a source familiar, confirming to me Google is working to make its own chips more adaptive, adaptable, which will in turn make them more appealing to a wider swath of customers. So if Google can crack this piece, it becomes a real test for Nvidia's moat. Google GPUs. They were first built as an internal tool optimized around Google's own AI. But once it started selling those chips to outside customers, the limits showed up. They were harder to drop into existing systems and they required more engineering work. So that kept Nvidia as the easier default. Now, just because Google is working on this and may crack it, it doesn't mean that Nvidia is about to be displaced. But it does change the stakes, the air race. It is certainly not just about peak performance anymore. It's about margins and scale very much so recently. And that is where the pressure is starting to build and where this development with Google on the hardware and software side could really come up. So the big question for investors is what chip neutrality means for the AI trade. Now, this is the idea that companies are less locked into one vendor and they can move workloads to where compute is the cheapest or the most available. So in the short term, Kelly, this will create some uncertainty. Nvidia bulls, they don't like to hear it, but in the longer term, this could be what makes the build out more sustainable. Yeah, I think your banner sums it up well as this Nvidia's eroding mode. I think that's going to be one of the biggest debate questions of 26. Deirdre, thanks very much. Deirdre Bosa. Still ahead, a prediction for the prediction markets. With Robinhood and Coinbase both ramping up the their offerings, we'll dig into the record numbers and the names best positioned to cash in on this stunning growth. Okay, happening right now. The President is signing that executive order to reclassify marijuana as a less regulated Schedule 3 drug from a Schedule 1. Let's listen in for a moment.
- [38:42]
A
That is exactly what we're doing. This is really something having to do with commons sense and it's something having to do with the fact that so many people that I respect ask me to do. People that are having problems, big problems. They are having big problems with illness, with cancer in particular. I now want to ask Dr. Oz to say a few words, followed by Dr. Braun, Dr. Casseret, Dan Wiley and Dr. Valkow. And we'll sign the order again.
- [39:12]
B
That's President Trump signing the order to officially reclassify marijuana. Our Brendan Gomez is standing by. He's not standing by. We just know that the signing happened, let's put it that way. The stocks have been on the move for about a week now since this news first came out. And today it's now official. In the meantime, both Robinhood and Coinbase are pushing further into prediction markets and their customers love it. Mizuho's Dan Dolip told us yesterday that coin and hood users are nine times more likely to participate in prediction markets than non users. And the wild popularity of these markets is now leading to some, well, wild predictions. Contessa Brewer has more. Contessa. You know, in some cases, Kelly, that really makes sense too because if you're someone who is into crypto markets, it makes you more likely to want to entertain risk. And we have a brand new prediction here. $1 trillion in annual trading volume before the end of the decade. That's the prediction from Eilers and Krijic which is a gaming research firm. Sports is really fueling that growth. It's forecast to remain the anchor category, making up 44% of the volume when we start hitting that trillion dollar trading volume point. But sports also presents the most risk for regulatory or legal crackdowns. The profit potential here is real. Eilers and Krijic projects ebitda margins between 25 and 45%. Why? In large part it's because the prediction markets avoid state gaming taxes. I mean take New York for instance. That's 51%. And for sportsbooks, it's the most dominant cost of revenue. Plus prediction markets have launched in all 50 states where online sports betting is available only in about 31. What's more, they're diving into parlays which are the profit engines for sportsbooks. So you can see why investors consider Robinhood, Kalshi and crypto.com a competitive threat. And then you have the ICE, CBOE, Coinbase, CME all diving in because financial and crypto markets are forecast to make up $310 billion of that trillion dollar trading volume. News another 160 billion. Culture and other niche markets making up the rest. Citizens yesterday estimated that the prediction market's revenue right now is at $2 billion. So it's at 400 million at Robinhood alone. That's the fastest scaling business business ever at Robinhood and Citizens projects it will be five times that by 2030. Now remember, CNBC and Kalshee do have a business relationship here. It is worth paying attention to how fast these other businesses, Kelly, are entering this playground. So a sports parlay could be considered both a sports bet but also a prediction bet. Well, when you do it on Robinhood for instance, and they've just been able to go in with NFL bets, it looks so you're. Because you're combining your trades, it's not gambling. They say you're combining your trades but the outcome is going to be a bigger, a bigger jackpot. And that's what Customers like about the parlay bets in sports betting, even though your likelihood of winning is less because you're stacking your bet bets, the jackpot is so much bigger when you do it and it makes up more than 50% of sportsbooks profits these parlays alone. So, so that's the where prediction markets see it and they're like we can copy it and maybe do it more simply. Absolutely. Contessa, thank you very much. Appreciate it. Speaking of that rapid growth, Robinhood reporting its November event contracts. Trading volume was up 20% from the prior month to a record $3 billion. And as Hood expands its prediction market features this week to essentially allow users to put parlay bets on NFL games, will those levels climb even higher? Let's bring in Steve Cork, the chief brokerage officer at Robinhood. Steve, do you talk NFL parlays now? Is that going to be part of the job? Welcome.
- [43:02]
A
Thank you. Appreciate it being here, Kelly. Yeah, I think we, we talk about like we have over 1500 contracts across a variety of, of economic indicators, political elections, you know, whether cultural indicators. So I think sports of course is a big component of it. But we, you know, the way we're looking at this and the way that we're seeing the growth of this is really, I think there's so many other places where this is going to go and it's going to be, allow people to be a little, have a little more precision in what they want to put their investment thesis on or protect a portfolio, hedge themselves or even speculate.
- [43:47]
B
Yeah, you want to hedge against, you know, your day trade with an NFL parlay or something like that. I'm just teasing, but what I think is interesting from a user point of view and I haven't done this myself, so you have to tell me if I'm thinking through this correctly, would you, you know, I might be in the, in the app already so I can go place a bet that I might not have placed otherwise. Otherwise if I'm going to go use DraftKings or whatever have you, are you giving me better a bigger paid day? Are you giving me better pricing? You know, you obviously have to compete against them on something.
- [44:15]
A
Well, I would say there's a couple major differences if we're just looking at the sports component of it. The first major difference is we're not the book. All we're doing is matching customers with each other. And so, you know, there's no benefit. We want everybody to be successful. We're not benefiting by having people not be successful. That's A big difference in the way that we do it. And we do what we do across every asset class, which is try and create the best experience and drive the margins down so that the customer can have more in the way of returns. Yeah.
- [44:52]
B
Do you think that. Yeah, go ahead.
- [44:54]
A
No. So to answer your question, like a good way to think about it at least, and this one's outside of sports from a utility standpoint, would be our entry point into the prediction market, which was the election. And here's the scenario which many customers had. I'm not sure who's going to win the election, but I know it's going to impact my portfolio. Now I have to parse through every segment of my portfolio and say, is crypto going to be a winner or EVs going to be a winner? Consumer staples going to be a winner? As opposed to trying to do that and then hedge myself accordingly or take an opportunistic approach. I can just express my opinion on the election.
- [45:35]
B
Right.
- [45:35]
A
And cover myself so that, that kind of utility. Think about that. Across the span of everything that you're investing in, it becomes really powerful. Even, you know, is the Fed going to. Is the Fed going to lower it three times next year? That's going to have a big impact on the market. Sure. I can just express my opinion on that.
- [45:53]
B
I love the prediction markets because in the news business, it's just a tangible way to summarize, is kind of the current guessing game, basically. And sometimes people have inside information you can, and you want that to show up in the markets anyway. So just going back to the sports betting, for instance, do you think the people will get better odds or have a substantially different experience on the platform? Or are you saying that you're just going to kind of match what they might get elsewhere?
- [46:18]
A
I mean, the economics are slightly different. You know, again, I don't, I can't say with precision of, you know, that we're better, you know, we're giving better odds than any, any of the others, but we're, we're very competitive. We try to be very competitive and deliver the best margins and experience for customers across every asset class. So it's not dissimilar here, Steve.
- [46:39]
B
We got to go. Most popular ticker or thing on your platform right now is all the most popular?
- [46:46]
A
I think it's probably, probably Amazon.
- [46:49]
B
Wow. Interesting. Laying bets for 2026 on a stock that's been sort of flattish. All right, Steve.
- [46:55]
A
Well, you know, you know what? They rolled out a Rivian rolling into something which wasn't moving.
- [47:01]
B
Steve thanks, Brian Sullivan and Power Lunch right after this break. At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the courseroom to the workplace. A different future is closer than you think with Capella University. Learn more at Capella. Eduardo.