The Exchange – December 23, 2025

Host: Kelly Evans, CNBC
Main Theme:
A deep dive into the state of the U.S. economy as 2025 draws to a close, examining surprisingly robust GDP growth, the weakening mood among consumers, implications for Fed interest rate policy, the ongoing impact of inflation, key trades moving the market, innovations in AI and data centers, and a close-up on health and policy moves likely to shape early 2026.

1. Market Snapshot and Strong GDP Print

Timestamps: 00:45–03:32

• Host Kelly Evans sets the scene: “The economy is humming, but the consumer still doesn't feel great. And that could get worse in the new year, our guest believes.”
• U.S. markets modestly higher: S&P up a third of a percent, nearing all-time highs. NASDAQ similar. Short-term bond yields rising after a strong GDP print.
• Noteworthy moves in Bitcoin (down to $87k), gold, silver, and copper (metals complex roaring to year-end highs).

Key Data Points:

• Q3 GDP: 4.3% (vs 3.2% expected), driven by strong consumer spending in July, gains in equipment spending, and an uptick in government spending (especially defense).
• Inflation (Core PCE): Rising to 2.9% YoY (vs 2.7% prior quarter) – caught markets by surprise.
• Bond Market Reaction: Odds of a January Fed rate cut drop to 13% from 17%; March cut less likely, slight increase in probability for April/June.

Steve Liesman (CNBC):

• "The big reason for the [GDP] beat was that consumer spending number, concentrated mostly in July with new data on services. This will tend to raise the outlook for fourth quarter growth. But the strength waned as the quarter progressed…" [02:54]

2. The Core Debate: Can the Economy Run Hot Without Rekindling Inflation?

Timestamps: 03:32–08:28

Fed Policy, Productivity, and Market Reaction

• The "good news is bad news" paradox for markets: strong economic data raises fears of delayed rate cuts.
• Discussion shifts to deeper issues under the surface:
  • President’s frustration with Wall Street’s reaction to strong data (wants narrative of strong growth being compatible with rate cuts, "[the] message for investors, for these officials, for everybody to be strong. Growth is good, we can still lower interest rates and that will all work out just fine." – Kelly Evans, 04:22)
  • Liesman: “Can the economy run hot?” It all comes down to productivity growth. If productivity is rising, the economy can sustain faster growth without spiking inflation.

Memorable Quotes:

• Steve Liesman: "The most important question for investors right now is whether or not you take a flyer on productivity. ... Are you ready to take a flyer on productivity?" [06:09]
• Kelly Evans (clarifying): "Are you ready to lower interest rates even in the face of strong economic data and not worry inflation is going to pick up?" [06:22]

Neutral Rate Debate

• Higher productivity would require a higher "neutral rate" (theoretical stopping point for rate cuts).
• Discussion of market pricing for the 2026 Fed Funds Rate (“market sees end point three-ish … So the low, the bottom is a little bit higher.” – Liesman, 08:20)

3. Consumer Confidence and the Bifurcated Economy

Timestamps: 08:39–14:27

Key Guest: Steve Odland, CEO, The Conference Board

• Consumer Confidence: December sinks to its lowest since April. For the first time all year, consumers report their current situation as worsening.
• Income Disparity in Sentiment: Confidence down for those earning <$125k, but up for higher incomes. "There are two economies." (Odland, 10:23)
• Major Concerns:
  • Worries over job losses, income prospects, high food prices.
  • Tariffs and small business strain: “Tariffs are a regressive tax.” (Liesman, 11:23)
  • Small businesses especially feeling the pinch.

Memorable Moment:

• Odland: "The expectation index seems to have bottomed out and they're now starting to say I'm hurting. This is starting to feel bad right now." [09:36]

Service-Led Growth & Weakening Labor Market

• Unique nature of this recovery: surprise services strength is pushing growth, even as manufacturing lags and hiring slows. “This is a different kind of economy than we've seen in the past.” (Odland, 12:58)
• Conference Board’s Outlook: Two quarter-point Fed rate cuts expected in 2026, growth to “slow going into the first quarter of next year.” [13:04]

4. Housing, Rates, and Where the Money Is

Timestamps: 14:27–20:27

Key Guest: Bill Smead, Chief Investment Officer, Smead Capital Management

Homebuilding = Economic Multiplier

• Smead argues household formation and homebuilding have the biggest multiplier effect on the U.S. economy.
• “How soon Taylor Swift has a baby is more important to the economy than what the Fed does.” [15:21]
  (Memorable and tongue-in-cheek, capturing the demographic focus.)

Housing Market Challenges

• Suppressed gas prices give consumers a psychological edge but strategic reserves are depleted. Restaurant prices up 30% over two years.
• "There are $10 million homes being built in Phoenix like hotcakes. But the mortgage rates are too high to convince someone that has a 3 or 4% mortgage to trade up." [16:23]
  • Over half of mortgage holders are "locked in" at 3-4% rates.
• Smead's theory: Only a move away from the equities mania (S&P 500) can get long-run rates meaningfully down.

Market Message:

• Stick with “demanded” sectors: energy, homebuilders, healthcare.
• Skeptical of AI-led GDP growth, warning buildouts may artificially juice numbers but offer little lasting benefit to local economies.

5. Tech in Focus: Meta, Airbnb & AI Innovation

Timestamps: 22:09–27:14

Guest: Colin Sebastian, Baird Senior Internet Analyst

Meta: A Buying Opportunity or More Pain Ahead?

• Shares are down 12% in three months amid AI lag concerns.
• Sebastian’s take: “Look a little bit further ahead, especially given the importance of the theme. Metta will be launching a lot of AI product next year....could create more of a halo effect…” [23:30]
• Instagram’s robust ad business; innovation via large language models (Llama), Meta AI, and new wearables for 2027.

Airbnb: Unique Inventory, Unique Growth

• Airbnb is poised for further monetization (loyalty program, hotel listings, advertising).
• Unique inventory is a competitive moat, especially as the digital landscape shifts (“nobody’s surfing online anymore...Airbnb has that [unique inventory].” – Sebastian, 25:55)

6. Pharma Breakthrough: Oral GLP-1 for Weight Loss

Timestamps: 27:15–32:12

Key Topic: FDA Approval of Novo Nordisk’s First GLP-1 Weight Loss Pill

Guest: Annika Kim Constantino, CNBC Pharma Reporter

• First-ever oral GLP-1 weight loss pill in U.S., offering an alternative to injectables.
• Efficacy: 17% weight loss, equivalent to injectable counterpart – “I am very excited that no other phase three trials has been able to show this level of efficacy…” – Mike Dudstar, Novo CEO [30:23]
• Cost: Starting at $150/month (significantly less than ~$1,000/month for shots).
• Puts pressure on Eli Lilly, which has a slightly less effective pill pending approval.

7. Policy Watch: Tax Refund Windfalls, ACA Subsidies, and Risks

Timestamps: 33:41–38:26

Guest: Chris Krueger, TD Cowan

• ACA Subsidies: Set to expire next week; could pull $30B out of the economy, affecting 22 million households. Possible (but not likely) retroactive fix when Congress returns in January.
• Tax Refunds: Up to $135B could hit in March–April, a potentially significant consumer tailwind (“...could boost GDP by up to a point in the first quarter.” – Evans, 36:04)
• Uncertainty: risks of government shutdown, spending delays; possible positive or negative impact from tariff decisions.
• Krueger: "So TBD right now doesn't look great, but I'll end with a definitive maybe." [38:26]

8. AI’s Inflection Point: The Battle for “General Intelligence” and Capex

Timestamps: 38:59–42:14

Segment Host: Deirdre Bosa

Debate Among AI Titans

• Demis Hassabas (Google): Large language models (LLMs) are on the verge of general intelligence if scaled enough.
• Yann Lecun (Meta): Disagrees fundamentally: "There is no such thing as general intelligence. This concept makes absolutely no sense." [39:42]
• Stakes: The future direction and ROI of massive AI capex spend by tech giants.
• Elon Musk sides with Hassabas (“demos is right”), as does Sam Altman.
• Bosa: “If Hassabas and Altman are correct, the AI trade keeps working. But if Lecun is right… that payoff could get pushed out.” [40:16]
• Application focus: Whether advances need “more compute” or “different compute” is an open question.

Practical User Angle

• Kelly Evans: “I am a simple person… I’m using [AI] for that, you know, and so to me it’s like, who cares? Both these things keep getting better and… they’re useful.” [41:07]

9. Data Centers in Space: Science Fiction or Imminent Reality?

Timestamps: 42:14–47:31

Guest: Andrew Obin, BofA Equity Research

Drivers for Secular Shift

• Constraint: Earthbound data centers face massive energy costs, regulatory hurdles; energy and cooling are real bottlenecks (“...40% of operating cost of a data center is electricity.” – Obin, 44:45)
• Space Pitch: In orbit, abundant solar, free cooling, fewer regulations/NIMBY. Transition from impossible to plausible driven by falling launch costs (“If you can launch at $200 per kilo, the math starts working...” – Obin, 44:46)
• Key Developments:
  • Star Cloud project (Nvidia, first GPU in space)
  • SpaceX’s Starship Block 3 (potentially delivers required launch cost reductions)
  • Starlink V3 with AI capability (“all of a sudden it went from science fiction to … relevant for the decade” – Obin)
• Realism Check:
  • Scaling not likely before 2035–2040; existing Earth infrastructure still needed.
  • Even in space, must solve how to dump heat (“becomes a very sophisticated engineering problem because it’s vacuum.” – Obin, 47:13)

Notable Quotes & Memorable Moments

• Steve Liesman: "Are you ready to take a flyer on productivity?" [06:09]
• Bill Smead: “How soon Taylor Swift has a baby is more important to the economy than what the Fed does.” [15:21]
• Steve Odland: “There are two economies: one is feeling great, and one is not feeling so great.” [10:23]
• Annika Kim Constantino (re: weight loss pill): “…this is still a significant discount from the injections, which are roughly $1,000 per month.” [31:06]
• Yann Lecun: “There is no such thing as general intelligence. This concept makes absolutely no sense.” [39:42]
• Andrew Obin (on data centers in space): “…at first I thought it was bonkers…then you realize there are very specific developments driving the narrative.” [43:12]
• Chris Krueger (on ACA subsidy fix): “…I'll end with a definitive maybe.” [38:26]

Key Takeaways

• Economy & Market: Growth remains strong on paper but feeble consumer confidence highlights underlying disparity and “two economies.” Inflation remains sticky enough to reshape Fed cut expectations.
• Fed Debate: Central bank must weigh whether improved productivity allows for growth without stoking inflation, raising the stakes on how far, and fast, rates can be cut.
• Sector Outlook: Tech, pharma, and “real economy” trades (homebuilders, healthcare, energy) all jostle for position as 2026 looms, while AI and data center ambitions reach for the stars (literally).
• Policy Crosscurrents: Early 2026 will see messy, consequential developments – tax refunds, ACA subsidies, and tariff changes – shaping macro risks and consumer tailwinds.
• AI Future: Division at the very top of the field over how (and how quickly) AI might achieve general intelligence, with huge implications for continued capex spend.
• Space Data Centers: No threat to earthbound power or REITs – yet – but both the tech sci-fi and infrastructure realities are now on investors' radar.

This episode weaves together complex economic signals, policy uncertainty, and rapid technological change, aiming to equip investors and business leaders for what promises to be a volatile start to 2026.