← The Exchange
The Exchange
The Exchange : 12/30/25
00:42:47
Listen to the day's top stories, the must reads & a whole lot more for today's modern investor.
Loading summary
Transcript74 lines
- [00:01]
A
Introducing Fidelity Trader plus, the next generation of advanced trading from Fidelity. Customize your tools and charts and access them seamlessly across desktop, web and mobile. For faster trades anywhere you go, try the all new Fidelity Trader Plus. Learn more about our most powerful trading platform yet@fidelity.com TraderPlus. Investing involves risk, including risk of loss Fidelity Brokerage Services, llc Member NYSE SIPC.
- [00:31]
B
Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more@capella.edu. you're listening to the Exchange.
- [01:02]
A
Here's today's show.
- [01:04]
B
Thank you for joining us. A divided Fed, another AI deal and a trade to experience. Welcome to the Exchange. I'm Contessa Brewer in for Kelly Evans. Today stocks a little change on the second to last trading day of the year. The S and P currently on track to post back to back session losses but it's closed at record highs 39 times this year. You can see the Dow Industrials just off fractionally as well. Well big tech a mixed picture today. We're keeping an eye on Metta as it caps an aggressive year of spending with another acquisition today. And metals rebounding, silver up 10% following its worst day in four years. And we talk about a silver lining here. Gold and platinum also higher on the day we begin with the final fed minutes of 2025 and the growing divide within the Fed over rate cuts. Steve Liesman is covering this for us in Washington. Hi Steve.
- [01:58]
A
Hey contests the Wall street will look to the minutes today for clues about just how hard and fast the Fed Pause is about cutting rates. Looking for suggestions if there's any wiggle room for a nearer term cut that is priced into the markets. And let's look at what's priced in the market. A 16% January rate cut probability shows the market pricing is a sort of a hard stop, at least for next month. Then the debate begins with a coin toss. 48% probability of a March cut and 61% for April. Then there's an 84% chance for June showing the market believes that if Fed chair Powell doesn't cut on his way out, the new Fed chair will. What would lead to pricing an earlier cut? Well, a sense the Committee has more concern and is more united about the problems of a weakening job market. Less concern and is more united about inflation coming down, including greater confidence. Tariff inflation will pass through the system quickly. Confidence in productivity growth, which would allow the Fed to run the economy hotter. The rate outlook, just one area of uncertainty for 2026. The makeup of the committee is another. We have the President's pick coming for Fed Chair, maybe sometime next month. The Supreme Court decision on Governor Lisa Cook. They'll hear the case next month. Will the President have a majority on the board, which is linked in part to whether Fed Chair Powell resigns his term as a governor, which runs two years longer. And will the board fire bank presidents or reform the district bank system as suggested by the Treasury Secretary? Normally, the main question going in is the policy views of the new presidents who take office this year. The makeup of the Board of Governors is probably the most important aspect of the policy outlook.
- [03:29]
B
Contessa, you know, it's interesting because we hear from a lot of the guests here on CNBC that there's some concern about the independence of the Fed. Are you hearing that at all from the members of the Fed?
- [03:43]
A
That's a good question. I mean, I think there's concern about the independence. They think of independence being very, very important, but I don't think they're concerned about their own independence in the sense that they don't feel as if they're pressured to make or to rates in a way that is amenable to the President. I think that what you hear from them, them saying is they're going to vote the way they think the policy ought to be relative to the economic fundamentals and the data that they see and their forecasts and not concern themselves with the political process. I think the concern about the Fed independence is one that they share, but not when it comes to how they're going to vote.
- [04:20]
B
Interesting. Steve, thank you.
- [04:22]
A
Pleasure.
- [04:23]
B
Does this year's stock market rally need rate cuts in the new year for equities to keep climbing higher? Joining me now, Barry Bannister, chief equity strategist at Stifel. Barry, great to have you today. Well, does it, do rate cuts help fuel this rally?
- [04:40]
A
Yeah, the way we look at rates is to take the Fed funds minus the forward, not the trailing, but the forward core PCE inflation. And on that basis the Fed could cut two more times to 3%, 3.1, which is in the futures. And that would just take them to the Post World War II, 80 year median, the Middle of rates in real terms, the rate after inflation. So they're not overly easy now and they would just be neutral at 3% sometime in 26.
- [05:16]
B
Your, your prediction for next year, it sounds like regardless of rate cuts or not, you run between 6,500 on the S&P 500 to 7,500. We're almost at 7,000 right now. What could fuel that higher and what are the barriers that you see?
- [05:37]
A
Yeah, about 7,000 for the S&P 500, which I think, you know, the QS are popular now. So the QQQ would be somewhere between 575 and 650. But what we'd be looking at is a range bound market. Typically when price earnings ratios rise, you almost always have a really positive market. But when you have sort of normal PE compression, the PE ratio comes down. Even as the earnings grow, the odds of an outcome being all over the board go up a lot. You could be up or down on average about 13%. So we're in the digestion phase, a consolidation phase four years in a row in 26 of double digit gains hasn't been seen in decades and is very rare. So there's a lot of optimism going into next year and we're just a little more cautious.
- [06:32]
B
All right, so if you're seeing caution, especially you're saying around the big tech cyclical growth, where would you find opportunity moving into 2026?
- [06:44]
A
You know I would, I would hedge some of that big tech exposure with things like for instance in defense, it's waste, you know, waste management, Republic services, the charts look good in food, beverage and tobacco. Philip Morris looks good. Health care, biotech is going to be a big beneficiary of AI. It already is. And it's, it's got more defensive moats around their products, electricity, infrastructure. You know, we're going to have to do what's called T and D, transmission, distribution and hooking up capacity, capacity that was built particularly in alternatives that's just not on the grid. And if you want growth, you know, software looks better than some of the other Internet names.
- [07:29]
B
And when you look at the consumer, which is 68% or so of GDP, do you think that Capex and I can counterbalance whatever cracks there might be in consumer.
- [07:41]
A
Yeah, it's a great question. If you look at 2025, where we were wrong after April and what really saved the economy was two things. One, the capital spending on AI was very, very high, sort of saved things. And the other was this K shaped economy which is not politically sustainable and is, if I were in the administration I would have a five alarm fire. You know, we've got to do something about the fact that the top end is really all that's doing well. So if you're going to re accelerate the broad, you're going to bring back some inflation risk at sort of full resource utilization. So we're watching unemployment, it could go up, which would be a sign that you might be backsliding into a broader kind of recession. Or it could go down, which means that you're looking at risk of inflation and you would see that in the bonds and in the Fed's posture.
- [08:40]
B
Barry, thank you for joining us with your perspective on the new year and happy New Year to you.
- [08:46]
A
You too, Contessa.
- [08:47]
B
The US Markets have done well this year, but international markets, some of them have done even better. Sima Modi joins us now with a look at this global picture in 2025. Which regions in particular? This is a fascinating story playing out, Contessa. Nearly every international market have outperformed the S&P 500 this year. You asked which ones. It's China, Japan, Brazil, broader Europe seeing gains of 20 to 40% in 2025. I made this special graphic for you, okay. Flags the countries. It just shows you how big of an outperformance we've seen in countries. But the story could change next year, Contessa, if we zoom in on Japan specifically. It's benefited from a number of economic and fiscal reforms, excitement around its new prime minister, Sane Takaichi, her stimulus package. But experts at 10 Year Intelligence, they lay out some of the challenges, including tariffs tensions, recent tensions between China and Japan and how that could slow down the country's growth prospects next year. If we look at China, the big event both investors and foreign policy experts will be watching for is this potential upcoming summit being prepared in the spring, spring between President Trump and President Xi in Beijing that if that meeting happens, the expectation is that trade tensions will continue to be reduced, which will be positive for the broader country's growth story in Europe. Bank of America strategists, they think Germany specifically is poised to outperform as its government continues to accelerate spending on infrastructure and defense equipment. Elections. Contessa will also play a big role and one specific one we are watching next year is in Japan. On the left you have President Lula who is seeking re election. On the right, former President Bolsonaro, he's been ruled ineligible due to his prison sentence for plotting a coup, but his son recently announcing a run. And in the past stocks and Brazil have been heavily linked to politics and what we have seen is when there is a leader from the right who wins, Brazilian equities outperform. If it's the left, they tend to underperform. That's why we're watching that. You're focused there a lot on government policies and central banks and the impact that they have. I have two questions. One, what's your sense of the way that Trump's tariff policy juiced what happened with trade in other parts of the world? So this is an interesting question. One of the big surprises in 2025 to get to your question is the fact that so many international countries have done okay following the unleash of these America first policies. It really started when Vice President J.D. vance made that powerful speaker speech at the Munich Security Council earlier this year where he highlighted a lot of these America first policies. The expectation then was, you know, some of the countries overseas that were reliant on the US Perhaps would face some challenges. But in fact, the opposite has happened because it basically pushed them to invest in their own countries. You've seen huge stimulus packages across countries like Japan and Germany. And that's fueled into their, that's fueled their economic growth story. And the expectation is that that could potentially continue. And that's why so many economists that follow these countries, I was reading their notes these past couple of days. They're following the budgets of these countries so closely. I was talking to Barry Bannister about the consumer in the United States. When I was in China in October for the Macao and NBA China games, I was really stunned to see the health of the consumer on vacation for Golden Week in China. It does appear that there's sort of been a rebound with the Chinese consumers and the spending there. Macao is now on track to recover. The maybe what we saw before the pandemic. How much do you think you're, you're looking at consumers growing middle class, whether it's in India or China or Brazil, fueling some of the outperformance in the markets. An interesting point you make given the Macao and what you're seeing that color is so crucial when trying to understand the health of the consumer overseas because they tend to spend, you know, when they feel good about the economy, so specifically on gaming and hotels and hospitality. And so, you know, that's the type of data that I think we're going to be watching in the coming months to see whether this consumer specifically in the middle class and emerging markets will continue to spend. A lot of times it's directly linked to whether they're getting the support from the government, specifically in China. There's the subsidies, there's the different economic reforms that plays a role in whether they feel good about their pocketbook and whether they want to spend and also whether they're choosing to spend on extreme experiences versus say, luxury goods, which is something that we've seen happen and unfold here in the United States. And my sense from covering travel is yes, Sima, that was fun. Thanks. Always. Let's drill down on China, the potential changes to the investment landscape next year. Joining me now is Brendan Ahern, who's the chief investment officer of Crane Shares. The Crane shares China Internet ETFs K. Webb, climbing nearly 18% this year despite challenges from tariffs and that trade uncertainty. Both of those. Brendan, I just was talking about with sema. First of all, are you surprised at the resilience of China trade given the ratcheting up of tariff pressure?
- [13:42]
A
No, because I think China's really moved away from the US as its primary export destination. You know, its largest trade partner today is ASEAN. It's not, not the EU, it's not the U.S. so, so China is a big, big part of the Asian economic GDP of the growth of trade. So, so it's really a lot of these tariffs have really to seam his point, it's really pushed a lot of those goods into other parts of the world, particularly in Asia.
- [14:10]
B
When you looking at the health of the Chinese consumer, how much of that is linked to stimulus by the Chinese government and how much of it is because there are new opportunities for the Chinese middle class.
- [14:26]
A
Yeah, I mean certainly contest having been in Macao myself last year or this. This year. Earlier this year, you know, you just overwhelmed by the number of Chinese tourists in Macau and how crowded those casinos were. So the Chinese consumer has money. It's just getting it out of their proverbial wallet or purse that the housing crisis. We're upwards of two thirds of Chinese urban household wealth is invested in you seeing these big declines. So, so the issue is how does the government stimulate, incentivize those consumers to actually spend money? And that's where we've seen consumer subsidies. You're seeing a lot of the Chinese EV stocks. The ADR is rallying today because they announced that they're actually going to extend those auto and EV consumption incentives. And we expect very similar around electronics and home appliances. As we saw in 2025, China just.
- [15:25]
B
Mandated 50% domestic equipment rule for chip makers. What's the impact?
- [15:31]
A
I mean, certainly China has been kind of forced to rely on itself that that export controls a lot of that has kind of basically was forced onto them. So, so really on the lower end chips you're seeing a lot of that is going to be done domestically. Certain higher end, I think certainly Nvidia still. There's a lot of demand for Nvidia chips from, from the big buyers and that's where hopefully you see a Trump G deal in April. We can see this trade truce extended into something bigger.
- [16:08]
B
The Hong Kong market has rebounded. We've seen an increase of IPOs. Is there a real opportunity for investors?
- [16:16]
A
I mean certainly, yeah, we've seen about 118 IPOs year to date. They've raised about $36 billion US and I think you're going to start to see some really interesting companies. You've got this company, Mini Max is going to come public very likely next week. This is a pure play AI company. At the same time there's a lot of talk about Unitree, the largest humanoid robotics maker globally is talking about going public next year. And then I think you're going to see a lot of companies like Badu has spoken about spinning off their AI chip unit. So, so certainly very, very healthy capital markets. Good times to be an investment banker in Hong Kong.
- [17:00]
B
Today you're calling Baidu your sleeper stock for 2026. Can you give us a hint of some of your other top picks?
- [17:08]
A
Yeah, I mean certainly Baidu, like all of the companies we hold in K web the the founder is currently the chairperson or CEO. Certainly to your point, Trip.com is a great way to play that domestic and international travel time. Some of the online taming companies, companies like Bilibili, Kwashu, Tencent Music, but I think ultimately Alibaba is such a massive part of the MSCI China index which flows into emerging markets as well as all country world. So Alibaba's almost still 50% off of its all time high even though from 2020 they did revenue of 93 billion. They're expected to do 143 billion of revenue this year. And the stock again it's off 40, almost 50% from its all time high.
- [17:57]
B
Despite this revenue growth that is a juggernaut. Brendan Ahern with Crane shares, thank you for joining us. Happy New Year, sir. Yeah, likewise contestant coming up, Metta just made another acquisition to cap off an aggressive year of spending. This one could start paying off right away. We're going to tell you why what this could mean for the stock next year. Plus, ooh, Travis Kelce just juiced Six Flags stock when he took a stake in the company, decided to become a spokesperson. But talk about a roller coaster. This stock is down nearly 70% this year. Why? Investors just might find this the right time to take a ride. We'll take a look at opportunities and experiences ahead. The Exchange Back right after this.
- [18:38]
A
The heaviest metal credit card of all time. Rumored to be one of only 18 in existence. Plated with the very same tungsten that forged the International space Station and wielded at business dinners like a samurai sword. It's a classic corporate power move. But the real power move? Having end to end visibility on your most critical shipments. FedEx the new power move Is it.
- [19:09]
B
Time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at capella.
- [19:36]
A
Edu the McDonald's snack wrap is back. You brought it back. Ranch snack wrap, Spicy snack wrap. You broke the Internet for a snack? Snack wrap is back.
- [19:51]
B
Ba da ba ba ba. Welcome back to the Exchange. Meta is closing out 2025 with an 11th hour acquisition. The company announcing it's buying Manus, a startup founded in China that builds AI agents. Mackenzie Seagalos has more in today's tech check. Hi Mac. Hey Contessa. So Metta entered 2025 as an AI winner, but as year wraps, the company's direction has started to look less coherent and very expensive. Insiders and industry experts telling my colleague Jonathan Vanian the strategy has become scattershot, feeding the perception that Metta has fallen further behind rivals whose models are rapidly gaining adoption. CEO Mark Zuckerberg opened the year predicting Llama would become the most advanced model in the industry by the October earnings call. He barely mentioned it. The next Frontier model, internally codenamed Avocado, has been pushed into Q1 of 2026 and the AI team. It's been through four reorgs in six months. So this is met up buying what it couldn't build fast enough for the street. The company reportedly paying more than $2 billion for Manus AI, a Singapore based developer of general purpose AI agents. Manus, which was founded in China, launched its first agent earlier this year. Capable of executing complex tasks such as market research, coding and data analysis. Metta has spent heavily to chase OpenAI and Google, including the $14 billion June deal to bring in Scale AI founder Alexander Wang. Investors, though, they are still waiting for proof that the spending translates into products that people will pay for. Metis gives Metta a more direct subscription business with a path to expand tooling across WhatsApp. But shareholders, they are applauding the move. Metta adding around $18 billion in market cap today on a $2 billion deal. So far more than paying for itself. Contessa Mackenzie Seagallos, thank you for the update there. Appreciate it. Let's bring in Mark Mahaney, head of Internet research@ Evercore ISI. Mark, what does this Manus acquisition tell you about Met as a strategy?
- [21:54]
A
Well, I think McKinsey nailed it. You know, this company is sort of pivoting or extending to get even more aggressive in AI. And this has been pretty part of the course for Zuckerberg. He's, he's highlighted AI, deployed AI aggressively. He's already used it to over the last two to three years to materially improve his ad platform and his user platform. And it showed up in the metrics and more importantly in the financials. But he's leaning into it even more aggressively now. And we're all chasing, or their meta is chasing a superintelligence product cycle. And I think that's what investors are waiting to see, you know, what comes out of that and how expensive it's going to be. But, you know, he's doubling down, tripling down with this most recent acquisition. Although 2 billion is pretty small. And I love the data point you just throw throughout that, you know, you've already gotten, you've already got a return on that 6x in, you know, in the space of a couple of trading hours. That's a pretty good trick to pull off.
- [22:50]
B
Okay, so, you know, a small investment like that might be chump change. You're talking about Google, Microsoft, Metta and Amazon increasing their capex from $350 billion this year to $450 billion next year. There has been some concern on the part of investors about the amount of debt that's available, when they're going to get a return on this investment. Give us your sense of how far, how fast is still good business.
- [23:21]
A
Well, I think we have seen what I call rising roi, you know, roi, return on investment, roi, return on AI. You've seen that in kind of one of the simplest metrics. One contract, which is revenue per employee. It's really inflected up the last three years at all of the hyperscalers. There's a lot of things that go into that, but I am almost certain that one of those is just greater efficiency, both in terms of product development, revenue generation and in terms of managing costs because of AI. So I think you've had good proof points on the returns you can get on AI so far. But this capex spending is, you know, these companies are clearly leaning in and it's going to cause some free cash flow challenges for some of these names. At the top of that list is probably Metta. I don't think Amazon, but plausibly I don't think Google or Microsoft have any issues there and they've got tons of balance sheets are great. So there's not, not an issue there. It's just, it's just, it just highlights just how extensive the investment cycle is. I think the challenge just getting back to the product on Meta is you've got, and you didn't mention OpenAI. They've got, you got four or five companies that are all vying for the Frontier, having the leading Frontier LLM and Frontier model and they've all got a good shot at it. And I think the market sort of views Meta as kind of the last in the race. And that's a correct perception unless Meta can change that sentiment and really show us some great product coming out in the first quarter with Avocado. So that I guess that's kind of what the market's waiting for. We've seen that at least they're willing to cut expenses in other places. That's what caused the stock to lift up from 600. Now we want to see the product cycle.
- [24:49]
B
Is there any jeopardy, do you think? And they might be a small chorus, but they have so much insight and expertise, these engineers and designers and web developers and futurists who are calling on governments around the world to put some roadblocks in place to slow down the race towards superintelligence and put guardrails in place. Does that represent a potential profit pitfall?
- [25:20]
A
Oh yeah, sure it could. It depends how it plays out, Contessa. So I don't know about the value of slowing it down. That's a. You've got a lot of companies throwing a lot of money at this smart investment and smart investors throwing a lot of investing a lot against these opportunities. And just look at the product improvements that we've seen over the last year or two. I mean, it's kind of like this is your Google moment. You remember what life was like before Google? Do you remember what life was like before ChatGPT and Gemini and these products are still have a lot of improvement. We don't really, we're not really in the era yet of agentic commerce, but I think that's coming and it's probably going to probably come faster than we think, like in the next year. I mean, there's a lot of wonderful opportunities to create much better products and experiences with a lot of savings and a lot of revenue potential. I think this is on to come. So, you know, I'm more struck by the upside from Jenny. I. But yeah, do you need to have guardrails around it? I'm sure you do. I'm sure they're very interesting and important national security issues. I don't think that's going to derail the Jenny movement. It's possible that. Does that be a black swan event? It's unlikely to happen is how I'd phrase it.
- [26:29]
B
Mark, because I cover travel and leisure, I want to ask you about Airbnb and what kind of indications you're getting about the demand for travel next year.
- [26:40]
A
Travel is the space. I look at and I look at a lot of consumer spend. Travel is the most consumer discretionary spend. And we had some softness in the middle of 2025, though there was a lot of around the liberation day tariff concerns, macro concerns. That softness showed up in travel. And you heard it from the airlines, you heard it from the hotels, and you heard it from the Airbnbs of the world for about three, four months. And then we came back to kind of normal growth at the end or halfway through the September quarter. And as far as we can tell, that's continued into the December quarter, I think consumer travel spend, and I know Sima was talking about this earlier on your show, I think that that travel spend is kind of back to par, as far as I can tell. And that's the most discretionary sector I look at. The consumers seems to have stayed very resilient throughout the year. A couple of lumps in the middle of the year, but it seems like it's back, back at par. And I would expect Airbnb exp, my favorite stock amongst these and booking, I would expect all of them to have fundamentals in, you know, in terms of top line growth in 26, at least as good as what you had in 25. That's a, that's a solid, that's a solid read.
- [27:47]
B
And by the way, wrapping this all back around to AI, Airbnb booking, Expedia, they're all very much employing AI to improve the product, to accelerate their efficiencies. They don't anticipate AI is going to put them out of business, but rather that it will be harnessed to power their business. It's been interesting to watch. Mark, great to talk to you. Happy New Year.
- [28:10]
A
Thank you, contestant. Same to you.
- [28:12]
B
Coming up, a volatile year for commercial real estate, but there are reasons to be more optimistic for 2026. Ahead, we're going to tell you how to trade that sector. And as we head to break, take a look at bitcoin. Catching up a bit today. You can see it's in the green, up by 1.3%, trading around 88,000. The exchange back in two.
- [28:35]
A
What made you confident that you could.
- [28:37]
B
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, host, CNBC Changemakers and Power Players New episodes every Tuesday, wherever you get your podcasts. Welcome back to the Exchange. The commercial real estate market has faced multiple headwinds in 2025. Could it be setting up for a turnaround year? Diana Olive joins us with a setup into 2026 in this week's property Play. Diana? Well, Contessa, look, you know me, I always want to be optimistic heading into a new year, but unfortunately, commercial real estate leaders are slightly less optimistic than they were ahead of last year, at least according to a survey from Deloitte, 83% of respondents said they expect their revenues to improve by the end of 2026, compared with 88% last year. Fewer respondents also said they plan to increase spending. 68% said they anticipate higher expenses next year. But okay, let's drill down onto specific sectors, starting with office, which seems to have bottomed. That's a good thing. Vacancy rates are expected to drop below 18% as more tenants return to the market, according to Colliers. There will continue to be a flight to quality, as in class A buildings in many markets, which are now almost fully occupied. Office construction is also at its lowest level in over three decades, according to Yardi. Moving to multifamily rents are starting to ease as a record level of new supply continues to make it through the pipeline. Multifamily has led investments to sales volume since 2015, and there are no signs of this changing. But its share of total volume is expected to ease a little bit as investors allocate more capital to office data centers and retail. This according to Colliers. And speaking of data centers, which we can't get enough of, Deloitte called this sector a clear bright spot in the US commercial real estate landscape. It pointed to nine major global markets where 100% of the new construction pipeline is already fully pre leased. Data centers, though, do face some headwinds in financing, grid capacity, zoning and of course, local politics. Now we've got much more in the outlook for all commercial real estate sectors in the Property Play Newsletter, cnbc.compropertyplay you still have time to sign up Contessa. It's free. It's a great, great read, Diana. Thank you. Thank you. Let's get to Christina, Parts and Evilis now for a CNBC news update. Hi Christina. Hi Contessa. Well, Patriot star Stefan Diggs is facing strength, strangulation and assault charges in the Boston suburb of Deam, I should say dedham. According to Boston 25 News, the incident allegedly stems from an altercation on December 2nd. Diggs is due to be arraigned on January 23rd, two days before the AFC Championship game. The Patriots issued a statement today saying the team is aware of the accusations and is supporting Diggs, who has categorically denied the allegations. Ukrainian President Volodymyr Zelensky said today Kiev is discussing the possibility of US Troops in Ukraine with President Trump. He says it would be part of security guarantees in a potential cease fire deal with Russia. Zelensky also said he is ready to meet Russian President Vladimir Putin in any format. And New York City prepared its iconic New Year's Eve ball today for its upcoming midnight countdown. Organizers sent the brand new ball up the 130foot pole on the top of One Times Square this afternoon just to make sure the ball is ready for the big celebration this week. Contessa, the ball's a little bit smaller than previous years, but much brighter. So it does. It's really not the size that matters, it's how bright the ball is. Yep, that's exactly the words that I wanted to say. So you just took it out of my mouth and everybody watched it. Sometimes it happens. Christina. Coming up, this top S and P performer is up triple digits heading into the new year. Can the gains in our mystery stock continue in 2026 or will this year's high Flyers come back down to earth? We ask our trader next. Welcome back to the Exchange. This is the second to last trading day of 2025. Let's take a look at some of the top performers in The S and P. This year, Western Digital is up nearly 300%. Look at that. And you've got Palantir up 141%. Goldman Sachs and Caterpillar up more than 50% each. Are these the names to own heading into the new year, or will those gains just fizzle out? Let's ask our trader. Joining us now for more, Steve Grasso, CEO of Grasso Global and a CNBC contributor. Steve, the mystery chart here, Western Digital, is there still time to get in when you've already seen gains of this magnitude?
- [33:26]
A
Yeah, contestant, thanks for having me. When you look at the gains that you've seen, I mean, that is eye popping, jaw dropping gains. They spun out their flash business. It makes them a hard disk player that's really in the, in the focus or target for, for the hyperscalers. So hyperscaler Capex money has to go someplace. Weston Didge has benefited from that. But if you look at the multiple, the multiples trading at 25 times, trailing usually historically, that should be in the mid teens. So if you have some reservations about valuation, I think that's warranted. But this whole space has been tripping over itself. I'm going to say wait, let's wait a couple of weeks, see if it digests, comes in a bit and maybe get yourself a bargain. But I still think it's in a sweet spot.
- [34:18]
B
All right, Palantir, which is up, I said about 50%. Is there still room to grow here? And I know you're really focused on what the government is doing to keep Palantir on this upward trajectory. Where else could it find some momentum?
- [34:36]
A
Yeah, it's a great question. If you look at it, between 45 and 55% of the revenues come from government contracts in defense. Everyone knows about that. They're pushing into health care, they're pushing into enterprise. I this one, you showed a chart on it already. It's up there. Now. If you look at the pullback it's already had, it went from 210 or thereabouts down to 147 or.
- [34:59]
B
Steve, I misspoke. I said up 50%, but it's 100, almost 150% this year. 141%.
- [35:06]
A
Yeah. 140. 142%. Who's counting? Right. But it's only in three months. It's only up 2%. The other ones have really climbed dramatically. So the point I'm making is we've already seen the pullback in Palantir. So I wouldn't wait for a Pullback, I'd be buying it now.
- [35:23]
B
Okay, what about Goldman Sachs?
- [35:26]
A
Yeah, Goldman Sachs is another one. It hasn't really ripped as much as the other ones. If you look at the investment banking fees, they're up 50%. We're going to look at IPO markets, M& A markets. These are markets that should do well with the Trump administration. They're fic, they're fixed income trading, their equity trading, both at record highs. They have a $5 billion buyback. How much they actually execute is another story. But this is one that, you know, that was the whole way when Trump came into office. Financials ran. I would let this one breathe too. The only one I wouldn't let breathe so far is Palantir.
- [36:04]
B
Okay. And finally we have Caterpillar. Boy, it was a huge storyline when they talked about on their earnings call, the opportunity and getting their equipment out there and building these 10, 20, $30 billion data centers. Can Caterpillar keep digging at it?
- [36:23]
A
Yeah. Well, think about it. You asked the magical question. Is there going to be this AI data center frenzy going into 2026 and or perpetuity? Because that's the reason why Caterpillar is beaten. That's the reason why people have chased Caterpillar. People, investors ordinarily don't chase Caterpillar. It's reliant basically to the tune of 50% of revenues on AI data centers. So if that continues, you're in great shape and there is some deregulation angle there. There is infrastructure spend there. Their margins have been increasing. But when you look at the other stocks you mentioned, Western Digital has margins around 50%. Palantir has margins around 90%. This is one that I would pump the brakes on as well and see how it all flushes out first two weeks, three weeks of the new year.
- [37:13]
B
Steve, love hearing from you. Love that sweater. It is a beautiful day in the neighborhood.
- [37:18]
A
Professorial. I would opt for it.
- [37:21]
B
I was going for Mr. Rogers, but okay. Professorial. Thank you, Steve.
- [37:25]
A
Happy New Year.
- [37:26]
B
Coming up, it's been a brutal year for fast casual names like Kava and Chipotle. Is AI what could help serve up gains again, that industry is betting on it. We have those details next. Welcome back. Big tech may get all the attention but restaurant chains like Kava and Chipotle quietly but heavily have been investing in AI as well. The big question is, will it pay off for the industry? Can it revive these beaten down restaurant names? Kate Rogers has that story. Hi, Kate. Hi, Contessa. We got a front row seat to how you might see AI turning up at your favorite restaurant brands in the future, not yet replacing workers, but simply speeding up their production. Hyphen, headquartered here in San Jose, raised $25 million last quarter in a series B funding round that included Kava. And it also adds to prior funding from Chipotle to help scale its automated make line line. The tech combines advanced robotics with AI to speed up service times and free up workers to focus on hospitality. Hyphen CEO Stephen Klein says customers likely wouldn't even notice the technology because it's conveniently hidden underneath the Makeline countertop.
- [38:34]
A
We're probably making a bowl every 10 to 15 seconds at peak throughput. We have more capacity than, you know, usually they do demand, especially like, you know, for lunch and dinner rushes. We're definitely relieving that, that kind of bottleneck.
- [38:48]
B
Now, to me, what's fascinating is to see companies who are competitors in the same category essentially both putting money into testing the technology. And I asked Klein about that, he said it's clear that both Kava, Chipotle, and even others in this space see the challenges and bottlenecks in labor. They're recognizing ways that AI and robotics can help to solve for them but not replace humans, Just make it better overall, experience wise all around. These still are in test phase Contessa, but the new funding will help it scale and ramp up, not just at restaurants, but also, he says, food service providers in the future. Over to you. Okay, when they say that it's going to help with hospitality, most of the hospitality happens in the make line. So where do they see the hospitality happening? Because already if you go into McDonald's, for instance, you can just go in and put in your order, and the only time you see the human is when they hand over your bag. Yeah, so this is very different. He's talking about working with brands that are highly customized. So you're thinking, you know, Kava, Chipotle, sweet greens, the type of place where you can go in and heavily customize an order. And when he talks about kind of freeing up workers to have a better hospitality experience, these are being tested for second make lines, which are heavily used for the digital orders that are coming in for these brands. But in the future, he's talking about, you know, imagine being able to talk to someone while a bowl is essentially prepped underneath. And then you can customize it at the end so it frees them up from those initial base steps in getting a bowl or a salad prepped. And then you can add the customization to it, speed it up and hopefully have a better conversation, experience, et cetera, with the person behind the counter in the future. Fascinating. Kate, thank you. Thank you. Coming up, the Six Flags trade has been anything but fun in 2025, down nearly 70%. But it's one of three stocks our next guest says is worth owning in 2026. What makes him so bullish on the experience economy? The last two years have seen more consumers focus on the experience rather than the stuff people just flock to. Entertainment, travel, wellness. And those are driving growth among stocks like msg, Avis Cruise Lines and Hilton and Live Nation. So what will 2026 bring in the experience economy? Joining me now is Chris Waronka, senior analyst at Deutsche Bank. Chris, it's good to talk to you.
- [41:16]
A
Yeah, thanks for having me.
- [41:17]
B
We saw this little bit of a dip with hotels and cruises talking about some consternation they had. International travel for the hotels was a problem. We saw cruise ships go. Maybe this part is we're not seeing forward bookings as much, but spending has been there. How are things looking going into 2026? Are people still going to put their money where their fun is?
- [41:44]
A
Yeah, we think travel's alive and well for the most part. There's always going to be a value conscious customer out there. But you, we think at the, at the higher end of the spectrum, spending is going to continue. And you know, a lot of the cruise lines specifically are focusing on kind of out of cabin spend. So these are things like private island destinations and restaurants and spots. I know you follow Las Vegas. It's not too dissimilar from what those guys started doing probably 20 years ago or more, getting people out of the cabin, out of the room and spending that way. And I think that's, that's going to continue. There doesn't appear to be a lot of price sensitivity among most cruise customers. Again, there's always a value based customer that you work more closely.
- [42:36]
B
We're showing the cruise stocks right now and you mentioned that the, the private island experiences and the even on board people paying for the upscale foodie type restaurants or the extra experiences that has done very well for these cruise lines. Is there the bifurcation in customers, high end versus budget travelers that we have seen in so much of the other parts of the economy.
- [43:08]
A
Yeah, to an extent there is, we like to say everybody has to go on vacation. Even in 2009, people took a lot of vacations. They can do it differently. There's budget options available if you're a cruise customer, a lower end customer, so to speak. Might choose an interior cabin, which sounds difficult, but those exist and people fill them. They might not spend as much outside. So the higher end is clearly going to outperform in a cruise. For most cruise customers, the higher end customer is going to continue spending. Yes.
- [43:39]
B
Interestingly, your top picks for 2026 are theme parks. You've got Six Flags on here, which puts you in good company with Travis Kelce and United Parks, which we used to know as SeaWorld Entertainment. Tell me why you like them.
- [43:55]
A
Yeah, so even though those might be viewed as being a little bit more towards the lower income spectrum, we wouldn't necessarily call them low end businesses. But more importantly, we think these companies are evolving. Specifically in the case of Six Flags, which has a new CEO, John Riley recently appointed. Travis Kelsey's part of an investor group and also kind of a spokesman. These parts are evolving their content. We think they're going to evolve content next year. The roller coasters are still going to be there, but we think there's going to be more immersive entertainment. Things like pop up concerts, perhaps some celebrity appearances, perhaps some different ways to enjoy dining, kind of the comfort food theme. And we think that can kind of appeal to everybody. These are mostly seasonal businesses that tend to be most popular in the spring and summer months. And so we think there's going to be a more diverse offering in these theme parks. And that's really, in our opinion, not being appreciated by the market currently. So we'll have to wait and see what next summer brings.
- [44:54]
B
Also interesting that you're not really hot on snow that you think affordability is an issue for vail. I've got 20 seconds here.
- [45:01]
A
Yeah, it is, it is. These are expensive passes and unfortunately there's just not a lot of snow right now. The snow is great. People are willing to spend and wait in line, but when there's not a lot of snow, which is the case now in most of the Western U.S. it's difficult to get people out there on the slopes.
- [45:15]
B
Well, they should try upstate New York because upstate New York got a lot of snow and it was like skiing in Vail or in Tahoe. Chris Waronka, thank you for joining us. Happy New Year. And thank you for watching the Exchange. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [45:34]
A
What made you confident that you could.
- [45:35]
B
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.