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The Exchange
The Exchange 6/1/26
00:52:04
Listen to the day's top stories, the must reads & a whole lot more for today's modern investor.
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- [00:01]
Venture Global Narrator
Never bet against American Grit or American Energy through innovation. Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost in a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.
- [00:30]
Eamon Javers
Hey, Fidelity. Can I get a second opinion on stocks in the Fidelity app?
- [00:35]
Kelly Evans
With Fidelity, it's easy to get an outside opinion from independent experts in a single score. And then when you're ready, trade US stocks and ETFs with no commissions.
- [00:46]
Eamon Javers
That's right.
- [00:47]
Kelly Evans
I am always right.
- [00:48]
Dave Cody
Investing involves risk, including risk of loss. $0 commission does not apply to customers
- [00:51]
Venture Global Narrator
designated by Fidelity as a professional equity trader.
- [00:53]
Dave Cody
A limited number of ETFs are subject to a service fee of $100. See details@fidelity.com commissions Fidelity Brokerage Services, LLC. Member NYSE SIPC.
- [01:00]
Kelly Evans
You're listening to the Exchange. Here's today's show. Thank you very much, Leslie. I'm Kelly Evans, and we're going to scrap the plan that we had and begin this hour with some breaking news out of the White House. Our own Eamon Javers just got off the phone, as I understand it. Amen with President Trump. What can you tell us?
- [01:22]
Eamon Javers
Kelly? That's right. I called President Trump a short time ago and he picked up to talk about the negotiations over the weekend with the Iranians. We had this report at the top of the day today that the Iranians were actually breaking off negotiations with the United States that moved oil markets. And so that's what I asked the president about. I said, do you think the negotiations are over now or is this a bluff by the Iranians? The president said, I don't care if they're over. Honestly, I really don't care. I couldn't care less if they're over, they're over if they're not. You know, I think they took too much time, frankly. I think they started to get a little boring. The president said he thinks that the Iranian side was tapping us along, that is, that they were stalling for time. Ultimately, on oil prices, the president was confident that he said oil will be dropping like a rock. He said, ultimately, if the Iranians want to try and have a nuclear weapon, I will blow them up to kingdom come. He said what this is all about for him is a strongly held conviction, conviction that the Iranians should not ever be allowed to have a nuclear weapon and that American voters will tolerate higher gas prices as long as they know what the goal is here. I also asked him about Netanyahu and the Israelis. I asked, it seems to be that the Iranians are saying they're not going to negotiate until Israel stops attacking in Lebanon. Have you talked to Netanyahu about it? I asked the President. He said, this is about 40 minutes ago. He said, no, no, but I'm going to ask him what's going on with Lebanon. They've been fighting for a long time now. Since our call, just in the past couple of minutes, we've seen a report on Reuters that crossed the wires a short time ago, suggesting that the President has now called Netanyahu to discuss that. But at the time that he and I spoke, he suggested that, in fact, they had not talked yet. So then I asked him, you know, what is the end game here in terms of the Strait of Hormuz? How ultimately are we going to get out of the situation that we're in? The President said he thinks that NATO should come in and help the United States out. He said, they're the ones. He said, we don't use the strait. We don't need it. We have a lot of oil. And I said, have you talked to anybody at NATO about that? Have they changed their tune on coming in to help the United States in the Strait? He said, they would if I wanted to, but we don't need them. We don't need NATO. They were very weak and very sad. And the last thing I would leave you with is this idea of, you know, where we go from here. I asked the President, when all this is over, how do you bring this to an end if negotiations are not happening and the ceasefire is in place? I asked him, is it time to end the ceasefire? And the President said, we'll see. Let's say I knew exactly what, you know, what you're asking me to do, and I sort of do know it. Why would I tell you? So the President there suggesting that he does have a plan that he's not going to talk to the media about, naturally, to end this situation, but clearly the president suggesting that he doesn't care that negotiations have wound down with the Iranians, and he thought that the Iranians bringing the US along in the first place and that those negotiations took too long. So there you have the US Response, Kelly, to what we saw this morning from the Iranian side saying that they were breaking off negotiations. Back over to you.
- [04:41]
Kelly Evans
Of course, we'll show Amen the price of oil, both WTI and Brent, which were up about 76%, respectively. And haven't moved too much in response to this because we're kind of getting both a hawkish and a dovish turn of events here, if I could kind of put it that way. The hawkish one being the president's rhetoric about Iran in which he's sort of suggesting to you he doesn't care where this might need to go next because he wants to prevent them from getting this nuclear weapon. The dovish outcome being you might have inadvertently helped him broker, you know, at least place a call over to Netanyahu to discuss the issue that he previously hadn't discussed. So I'm sure to many, that would at least be seen as some kind of progress.
- [05:15]
Eamon Javers
Yeah, it's very interesting, Kelly. I mean, I literally asked the president, have you talked to Netanyahu about that? He said, no, but I'm going to ask him what's going on with Lebanon. And then shortly after we hung up the phone, while we were sort of typing up our transcript and getting prepared for this hit on tv, we saw a wire flash that the president had talked to Netanyahu. So clearly, all this is happening in real time. These calls are ongoing in the Oval Office, and the president is touching base with world leaders here. I do think that the news out of this call, to the extent there is any, is that the president is effectively acknowledging that negotiations are over with the Iranians and says he doesn't care. And so that leaves the open question of what happens in the Strait. And the president said that if he knew the answer to that question, which he says he sort of does, he wouldn't tell the media. And you can understand why you wouldn't tell the media that. So, you know, we didn't push any farther on that question.
- [06:11]
Kelly Evans
But to his point, he wants NATO's help to reopen the Strait and continues to say, to quote your phone call, he says we don't use it, we don't need it.
- [06:20]
Eamon Javers
Yeah, he said both things, Kelly, which is interesting within the space of two questions. The first was, you know, NATO should come in and help us out. And then I followed up on that and I said, have you talked to anybody at NATO about that? And then he said, we don't need them. We don't need NATO. So he's both saying that NATO should help the United States out and also saying that the United States doesn't need NATO to resolve this. But it's just unclear as of right now how this gets resolved. Right now, the president, you know, I asked him about the oil market and the spike that we saw in oil earlier today when the Iranians broke off the negotiations and the president, I asked the president, have the Iranians told you that they're not going to negotiate? What is your sense of what's going on? He said, no, they haven't. That is, the Iranians haven't communicated that break in negotiations to the White House. He says they told you they only want to tell the fake news. So he's saying that he's complaining there effectively that the Iranians are negotiating through the media and issuing these statements to the media that they're not going to negotiate. But he said that the Iranians had not told the White House that directly. He says the Iranians don't have any cards. And he said he was, as we were talking, he was looking at the oil market and looking at the stock market, and he said, well, the stock market is just down a little bit. And he was predicting that oil would come roaring back whenever this does get resolved.
- [07:47]
Kelly Evans
And both the S and P and the NASDAQ turned positive a little while ago prior to that call, staying up there. And again, it all goes back to the trade, seemingly. Amen. Just a quick final question. We're talking about this, if you'll stay with us for a moment. But the tone in Washington, I mean, there's been a lot of, you know, almost frustration and mockery of what Washington is doing on the Iran question. And maybe it's as Brian Sullivan keeps reporting, there's simply many different parties who are kind of in charge in Iran. And so you get one story and then you get another. But what would you describe as both his frustration level and the read that you're getting from administration officials about how you hear one thing going into the weekend and then you come out of the weekend and you have this sort of big escalation?
- [08:29]
Eamon Javers
Yeah, I mean, look, that was one of the things that I was left with. And a couple of us were talking about this call just before I came on the air with you. And one of the things we were all kind of struck by is that, you know, this last week we were talking about this memorandum of understanding that both sides had apparently agreed to, at least according to some public media reports. The president didn't mention that at all in my conversation with him. He didn't talk about a memorandum of understanding. He didn't talk about a deal that that's coming. He this was a president, to my ear, who sounded resigned to the fact that negotiations have broken down and, you know, suggesting that he doesn't care about that and that he thought the negotiations were going on too long anyway. So I think that, you know, we either the reporting last week was just wrong or something dramatic changed over the weekend in which both sides didn't feel like that they could ultimately sign off on whatever had been contemplated behind the scenes. Yeah, I will say, Kelly, this is my analysis now, just, you know, taking off my reporter hat and putting my analysis hat on real quick. It feels like the oil markets have assumed and the stock market by extension has assumed through this whole process that at some point this ends and oil situation globally will snap back to where it was in January of 2026. And it's sort of a binary on off situation. I think what this is all pointing toward maybe is a non binary kind of outcome here where there's sort of a muddle through outcome where the, the war doesn't quite end, the negotiations don't quite get anywhere and the strait doesn't quite open and we end up with some kind of continued throttling of the strait by the Iranians, continued taxation of shipping that does go through and we end up with, you know, less supply and higher expense for that supply for some much more extended period of time than, you know, a lot of folks in the markets have assumed until now.
- [10:32]
Kelly Evans
I think that's exactly right. In fact, Eamon, if you'll stay with us, we're going to talk a little bit more about that. If the war does continue or even if just the strait remains in a state of shall we call taxation or partial closure for a while, how will the markets ultimately digest it? Katerina Simonetti is executive director at Morgan Stanley Private Wealth Management. Katerina, it's good to have you here. You know, we look out in those futures contracts. October WTI is now trading around 84. You've probably seen the warning from Exxon about, you know, how the inventory situation has gotten us through a lot of the tough times until now but is running out. And yet the the stock market broadly is looking past it. Certainly the sectors are, you could argue, argue consumer and others are feeling the pain a little bit more. What happens now?
- [11:16]
Katerina Simonetti
Kelly, thank you for having me on the show. Of course, AIR means a dominant factor as investors keep leaning into the companies all across the sectors that are implementing AI and are using the technology to grow their business and improve the earnings and the pricing power as we across the board. But with that this ever changing geopolitical backdrop is something that we cannot lose track on because we're looking at the scenarios, one that is possibly that this gets Resolved quickly, which seems at the moment unlikely. That is going to be a more drawn out type of situation as as you mentioned, the traffic in the Strait of Hormuz is inconsistent and as Iran maintains the leverage over the area. So we have to assume the scenari where oil prices are going to be consistently higher, which means interest rates are going to be higher. And that higher for longer scenario is what investors will have to take into consideration, you know, while managing their portfolio for the remainder of the year.
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Kelly Evans
Does that make you want to, you know, get away from consumer areas, hold energy facing areas? Katerina? I mean that would be one kind of obvious place to go here with this if it's, if it's going to remain kind of sticky and drawn out for some time.
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Katerina Simonetti
Well, the most important part would be to focus on companies that are presenting themselves as, or positioning themselves as some type of an inflation hedge that can continue to remain profitable with higher order oil prices. And that's where I truly takes takes place now. We're telling investors to try not to trade headlines and try to do risk the portfolio, improve the income representation on the portfolio and use the backdrops in the market to take advantage of, advantage of the buying opportunities because they still are out there. But this might change the algorithm as we approach the market in this environment where interest rates might be higher and where oil prices are not just temporarily up, but might be higher for a longer period of time than initially expected.
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Kelly Evans
Amen. We're at 432 on the national average. So we're down about 20 cents, maybe more, almost 30 from the recent peak. Are you hearing anything about, you know, gas tax holidays and such policy gestures as might be needed to kind of get consumers through this period of consumer confidence at record lows or does the president kind of maintain this posture of consumer can handle it? We're going to get through this. They understand why I'm doing this and we're not going to go through any kind of special one offs to get through it.
- [13:47]
Eamon Javers
Yeah, I think that's, I think that's right, Kelly. I mean, when I asked the president about gas prices specifically, he said he thinks that Americans can handle the higher prices. I mean, I said what's your message to Americans about the price of gas? He says it'll go down very quickly as soon as it's over and Iran will not have a nuclear weapon. Once you explain that this is all about Iran having a nuclear weapon, people are willing to pay a little bit more. It'll happen very quickly. And as soon as that Happens gasoline will get down to $1.85 like it was in Iowa three months ago. So the president there saying basically he feels like the American people are with him and are willing to tolerate these higher costs, you know, in what he describes as a short term period of time in order to get to the end goal, which is a non nuclear Iran. So, you know, the political question there is, you know, is that correct going into the midterms? And I think the economic question is, you know, for markets, how long does the president give himself here to continue this conversation? Because with negotiations broken off, no military solution presenting itself as possible after months of war, you know, how do you resolve this? Markets are going to look at that and say, you know, is there an end game here?
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Kelly Evans
Right. Katerina, any answer you'd venture to that from your point of view, the US
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Katerina Simonetti
Consumer has proven itself time and time again is extremely tolerant and extremely resilient. And in this market the question is what areas if we are going to be in the higher interest rate environment, in the higher oil environment will benefit. And this would be the financials that consistently do get in, do do well and perform very well in the higher interest rate environment. Industrials that are not only benefiting from AI infrastructure buildup but also just, just general infrastructure buildup in our country and consumer staples that once again is something that the US Consumer is consistently supporting. So, so the strength of the consumer here should not be underestimated.
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Kelly Evans
So in other words, Katerina, there is no time frame even we're looking at the out contracts. We've got oil at 93 right now to use WTI 96 for Brent, you look out, we're in the 80s kind of through the end of the year. Is that any problem to consumers or the stock market at all?
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Katerina Simonetti
Well, the stock market is going to expect for the oil prices to normalize and that of course is going to be driving the policy for the Fed specifically policy where they're most likely going to hold for the year end, but going into 27 when they will have to make decision on whether to start cutting interest rates or not, that's going to play a significant role. So this is where we have to wait and see on the action in Iran and what's going to happen with oil in order to really devise the, you know, to figure out how the policy is going to affect the performance of the market. Market is pricing and seemingly pricing in the lower oil prices and normalization in the area.
- [16:50]
Kelly Evans
All right, Katerina, thanks very much for joining us. Katerina Simonetti, Amen. Thanks very much for calling the President and reporting back to us. His thoughts on this situation. It's incredible to have that this hour. Thank you. Amen. Jabbers over at the White House. As mentioned, stocks are kind of where we were before, a little bit lower on the Dow, about 162 green for the Nasdaq and the S and P, which had gone that direction an hour or two ago. Coming up, Honeywell's Continuum is set to IPO this week just after receiving a cash infusion from Uncle Sam. Is Quantum the next? I will ask former Honeywell CEO and current chair of Vertive, Dave Cody about that ahead. But first, software stocks rebounding in a huge way, coming off their best day in over a year. But veteran tech investor Gene Munster says they are not out of the woods yet. He'll explain why next.
- [17:43]
Eamon Javers
This is the exchange on cnbc.
- [17:50]
Venture Global Narrator
At Venture Global, we think about what can be done, not what's usually done through innovation. Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost in a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.
- [18:20]
Kelly Evans
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- [18:31]
Eamon Javers
Hmm.
- [18:32]
Kelly Evans
That's music to my ears. I can only talk.
- [18:36]
Dave Cody
Investing involves risk, including risk of loss. 0 account fees apply to retail brokerage accounts only. $0 commission does not apply to customers
- [18:41]
Venture Global Narrator
Designated by Fidelity as a professional equity trader.
- [18:42]
Dave Cody
A limited number of ETFs are subject to a service fee of $100. See details@fidelity.com commissions. Fidelity Brokerage Services, LLC Member NYSE SIPC
- [18:51]
Kelly Evans
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- [19:04]
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- [19:47]
Kelly Evans
Ask a rheumatologist about Cosentyx. Welcome back. Despite a 6 or 7% pop in the price of oil today, stocks are still largely brushing that off. Even with those renewed signs of conflict with Iran. They're focusing instead on the AI story. Nvidia unveiling AI chips for the PC today that has its shares up nearly 5% while ARM is jumping 16%. Dell's up another 9, Salesforce up about the same amount. And it's also that news putting some pressure on intel and Qualcomm. Intel down about 3 1/2 percent, still around 110. Qualcomm and AMD slightly selling off as well. And in just the past hour, Anthropic confidentially filed its ipo. Let's talk about all of it with Gene Munster, Managing partner at Deepwater Asset Management. And Gene, perhaps before we get into that, I mean, look, I have people texting me from France. They're so excited about the software rally. Okay, so why don't you cool their enthusiasm a little bit?
- [20:43]
Gene Munster
Well, it's obviously an endorsement from Jensen when he talks about this explosion of agents having an impact on software usage. And I want to just kind of go a little bit deeper into effectively what he's saying about that. That's kind of triggered this reality. What he's suggesting is that these software companies that have been around for a long time are going to come out with more agents that people, humans will have hundreds or maybe thousands of agents that they'll be using on these software platforms. Built into that is this idea that usage needs to increase kind of exponentially. Currently, the software world is largely built on a per seat model. There has been a shift over the past few years to embrace more usage based models. But that's essentially the kind of the rub here is that how fast can these companies really shift from a per seat model to a usage based model? And I'm reminded of what happened 20, 20 years ago as software went from kind of desktop local software that was sold on upgrade basis every once or twice, every one or two years. That moving to kind of a hosted and the cloud based models is there is a period where the market needed to kind of adjust what the impact to that model is. Now I'm going to go back to one data point that we got. When Microsoft reported their March quarter, the stock was generally doing okay until the very end of the conference call and they started talking about potential changes to their model in terms of moving towards more of a use space and shares dropped a few percent based on that comment. And my point Kelly is. Yes, is right. Is that AI is going to create an explosion of agents. A lot of those are going to be doing software related, but it's still to be determined. One last piece. We're either going to go down two roads. Road number one is the software companies need to shift to usage based models. Number two, if they stick with their per seat model, that's going to draw the question of what happens with knowledge worker employment. Not suggesting that we're going to see, you know, a massive drop in employment. I think employment will go up, unemployment will increase, but just the idea of how do you grow a business? If you need smart people, you need knowledge workers using these. How do you grow it if the growth in those knowledge workers is flat or declines? And I think that still is a headwind. So putting all that together, Kelly, I think we're still not out of the woods. I can speak from our perspective. We expected a reversion trade in software. We've got it. And I don't think there is much to do here going forward.
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Kelly Evans
Hmm.
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Dave Cody
All right.
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Kelly Evans
We could argue more about not argue, but I could, you know, play up some devil's advocate and, and put on my technician hat and all of that. But I wonder if we should kind of back out for a second and talk about some of the other parts of the market, the more surefire trades which have been around the ecosystem, around the chips. Obviously we have this in video news today. How big a deal is it this chip that they're making for the PC? And I mean to see Nvidia shares up 5% is really something.
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Gene Munster
Well, from Nvidia's perspective, you know, the stock is essentially in line with what the NASDAQ has done over the past week. And that's an important piece to keep in mind I think separately as we got a little bit of this on their May 20th earnings call when Jensen talk about what they're doing in CPUs. That of course is related more towards via Rubin, Vera Rubin. But it does have an impact in terms of what's going on on the, on the PC side. And that of course is that the impact of this is probably adds. I mean this Type of these type of arrangements they're having with LNHP could add like 5, maybe 10% to their business. So it is measurable. It's, it's not going to be a game changer. We're not talking about like physical AI, for example, could add 30% to Nvidia's business. In the case of these, they're, they're relatively small. But I think what is most important, the biggest takeaway from today related to if we look at Jensen's comments with software and then look at the announcement on the CPU side, the biggest takeaway is that it's going to become more clear that localized inference. Localized inference is going to be one of the kind of the key themes that I think companies and investors are going to get behind next year. So if we're going to rewind to a year ago, we'd have been talking about 20, 26 and 20. Late 25 is the year of the agents. And at that time a lot of people didn't really understand what agents were. Now what we're seeing today, this news with Nvidia, is that this concept of localized inference and what that means essentially is that your computers are going to be able to do more AI. These are small language models and that has just a ton of impact on everything we're talking about from anthropics, IPO to the growth in terms of PCs. And I'll get to the kind of, the substance of the question, what does localized inference mean? Is that there's going to be a growing debate about how much inference is going to be done on the cloud or how much can be done for far less with some of these smaller markers on a machine. And so that's going to be kind of, I think today is an important day in that sense that we're really kind of officially starting what I think is the conversation around localized inference.
- [25:51]
Kelly Evans
Yeah, no, and listen, we're going to talk to Dave Cody in a little bit. I'm curious if he has a point of view on that Anthropic filing its ipo. You just heard Oracle CEO talking to David Faber earlier on about how they're still. It's completely changed the way that they code, the way that they do business. It's different now than it was a year ago. All of these tools. Is the, Is anthropic a no brainer for you in terms of wanting shares of that? I mean, does it still come back to valuation, which is high size, which is large and how would you rank that vs space x and OpenAI well,
- [26:24]
Gene Munster
the first thing, first exercise is to try to build some line between hype and substance. And when you look at what, you know, the talk of anthropic going public, you look at what's happened with, you know, Micron up 25% in the past week, Nasdaq's up 2%, up 335% in the last three months, that feels very hypey. And I would say, Kelly, first is that I think that even though it looks like hype, I think there's substance. I think that ultimately the substance of AI will exceed all this hype. And so I think that's an important piece, an important takeaway from Anthropic, them getting ready to ultimately go public. I'll talk about the SpaceX anthropic comparison, but I do also want to mention is that your previous segment, you talked about what's going on geopolitically and the impact on it, inflation and all that. And of course the air trade is saying that that's becoming less important, that other stuff. And I would agree with that. I don't think we're going to see a deep seek moment and inflation impact. The biggest geopolitical risk is going to be related to Taiwan, what happens there. And I don't think that's going to happen. Anything's going to happen the next year. And so said another way is that it's unlikely we're going to get a crack in this AI theme. And ultimately that's good for Anthropic, it's good for Space X. As far as comparing the two, now we're SpaceX investors and comparing the two, I think that SpaceX is a much bigger upper hand, even though many will look towards Anthropic because it's a more profitable business, seemingly more reliable. But if you just think about when you are changing the world and you want to change it and have big ways where you can sleep well at night knowing that there are big opportunities ahead of it. There's no company like SpaceX that can offer that. I mean, it just simply stands alone.
- [28:04]
Kelly Evans
No, I'm surprised to hear you got to go for anthropic, gene. You're like SpaceX, come on, that's, that's a surprise. Surprising. But don't worry, we'll have days and weeks more to talk about it. Months, really, with all of these coming down the pike. Jean, thanks for making the time today. Really appreciate it. Gene Munster of Deepwater there. Speaking of David Faber, he'll be excluded exclusively. Speaking with OpenAI CEO Sam Altman, next hour around 2pm Eastern Time, they're out at that data center site being developed in Michigan for Oracle as part of the Stargate partnership. Again, looking forward to that. Coming up in the next hour or so, let's turn back to the big political story of the day. President Trump telling our Eamon Jabbers just a short while ago that he doesn't care if negotiations with Iran are over. Charles Kupchen, a senior fellow, Council of Foreign Relations. He joins us now for more reaction. Charles, what does this tell you?
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Charles Kupchan
What it tells me is that the Iranians are not budging. You know, they keep saying they want control over the Strait of Hormuz, that they want a windfall of investment. They have said basically nothing on the core issues that matter most to Trump, which is what happens to their highly enriched uranium and what is the future of their nuclear program. And so Trump is basically saying, I'm ready to walk away. If I'm not going to see movement on these core issues, there is no deal. I think Trump is to some extent trying to kind of increase his leverage. Does, does he really not care? Of course he cares. You know, he's not a creature of the Republican Party. He's not running for reelection. But many Americans, including Republicans, are not happy with this war. And he does need to find a way of bringing this to an end and opening the Strait of Hormuz sooner rather than later, certainly before the midterms.
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Kelly Evans
What other options does he have to force that outcome?
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Charles Kupchan
Well, the main option that he has is going back to the battlefield. Since the cease fire began, I think Trump's strategy is we hit them hard militarily, now we're going to strangle the economy and eventually they're going to cry uncle. Well, the strangle part isn't really working yet. It needs more time. I don't think Trump is really ready to go back to the battlefield. He has had many opportunities to do so because we see on an almost daily basis US Forces and Iranian forces exchanging fire. The fact that neither side has said this is a breach of the ceasefire, we're going back to war, says to me neither side wants to go back to war. So I do think that Trump is just going to sit tight for now, try to keep up with the pressure militarily and economically and hope that he can get the regime in Tehran to make a better offer on the core issues.
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Kelly Evans
All right, there's the dow only down 90 points. Maybe making a run at going positive this afternoon, Charles, as they focus on both, hopefully some pragmatic solution here and obviously some of the things happening in the AI space completely unrelated to it. Charles, thanks so much. We appreciate your reaction today. That interview even had President Trump Carl's chep chin with the Council on Foreign Relations. Meantime, the IPO market is heating up and it's not just Space X Anthropic and the Trillionaires. Another company debuting this week is Continuum. It's a quantum computing company bolstered by a cash infusion from the US Government to develop a supply chain for quantum chips. And it's a spin out of Honeywell, which itself is planning to divide into three independent publicly traded companies. In fact, that's part of a slew of companies pursuing split ups, especially in the wake of that hugely successful breakup of ge. And our next guest knows all about that. He was CEO of Honeywell for 15 years during its hugely successful turnaround which saw the stock surge 273%. His next move, becoming chair of a SPAC that became the most successful of the whole crop of 2023 Vertiv, the maker of power and cooling infrastructure for AI data centers. Those shares have doubled in value just this year. Joining us now is the man with the golden touch, Dave Cody. Dave, it's great to see you and welcome to the exchange.
- [32:16]
Dave Cody
That's very kind you to say, Kelly. It is appreciated.
- [32:19]
Kelly Evans
We want your perspective. I want to go back in time to if you knew that Chatbots was coming, Vertive would have been a more obvious play. What was the, what was the plan in a world where I was never invented? In other words, it's so easy now to jump on the industrial bandwagon and say we are off to the races with this mega build out. But nobody saw this coming. Did you see this coming?
- [32:43]
Dave Cody
Not that, but use the same approach that we did with Honeywell and 100 acquisitions that we did there. And looking at Vertive and how we've started our new company, gpgi, which stands for great positions and good industries. And one of my learnings was always to position yourself in an industry where you had a tailwind. And I'd run businesses that had a tailwind and didn't have a tailwind at ge. And I could tell you that having a tailwind made it a lot more fun. And when we looked at Vertiv for what made sense for the spacious, really struck by how 20% a year yet data centers were only growing 4% a year. And interestingly, nobody had ever asked vert of that question before. And when they did the research, we Found that there were several mitigating factors that were all going to disappear within the next few years. So I felt like, well, you know, at some point this is going to be an industry that's growing more like 10 to 20% and without knowing anything about AI and a big believer that we're only 40 years into the digital age, it just seemed to make a lot of sense to position ourselves there. And of course it worked. I didn't predict AI but did put myself in a position where a tailwind is something we could take advantage of. And man, it turned into a more of a jet stream tailwind. It's been awesome.
- [34:10]
Kelly Evans
Given the vision that you see of how big this technology is going to be and where it's going, do you worry about data centers going to space the space space X ipo? The announcement from Nvidia today that it's going to put AI. This is the new buzzword, localized AI. It's on your PC. I mean, does any of that eat into the vision that you see for these companies?
- [34:30]
Dave Cody
The more technology changes, the better it is for us. We've worked very hard to increase our old R and D spend from about 3% to 4% even while we're growing sales about 30% a year. So that the R and D budget has just been growing like crazy because it's important to stay ahead. And the more technology changes, the better off it's going to be for Vertiv because there's just a lot of fun stuff coming.
- [35:00]
Kelly Evans
And how short are we in terms of the build out that's needed, do you think? I mean look, you can wear so many hats. Looking at the electrical demand that's needed in this country, I don't know how we scale it. The some of the blowback frankly against data centers that could potentially slow that.
- [35:17]
Dave Cody
Yeah, the blowback is something that will have to get addressed over time. A lot of it is just silly and it's really important that we get ahead and stay ahead as a country. This is a phenomenon that's not going to change, it's going to accelerate. And you think about it this way, the industrial era lasted for, I don't know, 150 years. We'll say we're only about 40 years into the digital era. This has a long way to run and we've talked about AI as the next step. But there are steps coming beyond this, like quantum, like we've talked about before. This is something that is going to continue for a long time. And the more we try to retard it the less productivity we're going to have, which means less standard of living for those of us in the US and that makes no sense at all. As I understand, we got to stay ahead.
- [36:08]
Kelly Evans
Absolutely. As I understand it, Quantinum itself goes back to maybe 2015 or so. I mean, this was. There were opportunities that were kind of recognized within Honeywell. It's been part of the company for a long time now. It's spinning out. We had the CEO of Perplexity on Friday who told us about Q Day and he says Q Day could happen in 2028. Encryption won't work anymore. I don't understand whether I should believe whole hog all of these claims about how Quantum is going to break Bitcoin and break encryption. If it's really that powerful or if it's. If I should just see it as an extension of AI because I'm not a scientist, I don't understand how the computing works. What's your take on it?
- [36:47]
Dave Cody
It's transformational. Quantum working will be transformational. And yes, before you ask, quantum computing requires data centers also because a lot of the data has to be stored digitally. So this, this would be also a good thing for virtuous. But yes, it will transform and it will work. I'm not actually worried about that. I mean, there's always the naysayers who point to the technology issues that have to get sorted. They will get sorted. And you can see the progress that's been made in, you know, since I left Honeywell with everything that's been done there. And Quantinuum next year is going to have a 100 logical qubits quantum computer. And they already shipped the 50 last year. Now, what's the significance of 100? What people would tell you is that one computer will have more capability than all the compute power that exists today. That's just incredible. And yes, that's absolutely correct on cryptography. And it's why you see government, banking, drug discovery already being at the front end of trying to figure out how to use quantum. It will work. I think it's another one where it's a mistake for anybody to think, well,
- [38:00]
Eamon Javers
yeah, I'll worry about that later.
- [38:01]
Dave Cody
But this is coming. I get excited about it, as you can tell, because I just think all of this is transformational. It will be disruptive. There's no doubt about that. All major changes. It's Joseph Schump, Peter in Creative Destruction. But what can do for the productivity of the planet? Improve people's standard of living.
- [38:22]
Kelly Evans
Right. And I can understand the government. Dave, stay right there. We're just going to break back to Eamon Javors in Washington for a moment. He's got another update from the president. Eamon, what can you tell us?
- [38:31]
Dave Cody
Kelly?
- [38:31]
Eamon Javers
That's right. We just have a new social media post here from the president about a phone call with Bibi Netanyahu. He says, I had a very productive call with Prime Minister Bibi Netanyahu of Israel and there will be no troops going to Beirut and any troops that are on their way have already been turned back. Likewise through highly placed representatives. I had a very good call with Hezbollah and they agreed that all shooting will stop, that Israel will not attack them and they will not attack Israel. So an interesting update here because, Kelly, when I spoke to the president on the phone at about 12:15 and I asked him, given that the Iranians are saying they're not going to negotiate if they're still fighting in Lebanon, I asked the president, have you talked to Netanyahu about that? The president said at that time, no, but I'm going to ask him what's going on with Lebanon. So as of 12:15, the President had not made that call. He then did go and make that phone call and is now reporting out to us the results of it. And it would seem here, Kelly, that the result of the call with Netanyahu is more or less in line with what the Iranians were demanding. Right. The Iranians are saying they won't negotiate until there's the Lebanon issue has been settled. What the president is saying on social media is that the Israelis have agreed to dial back their attack there or turn around their attack if it's already underway. So that would seem to be something of a concession toward the Iranian side maybe with an eye toward getting these negotiations back underway. But as I said, the president told me earlier today that he doesn't care if the if the Iranians have broken off negotiations.
- [40:07]
Kelly Evans
Incredible. Ayman, thank you. Of course, we're watching equities kind of drifting towards session highs. Not an extreme move, but certainly cheered, I think, by by what you're reporting and the geopolitics. Politicians can work out the details, I think for now. Eamon, thanks very much for those details. Amen. Jabbers, you want to turn back to Dave Cody? Dave, a couple of other areas I just wanted to ask about before we let you go today. And one of them is, you know, you had said a lot when you were turning Honeywell around about how the culture of the company way at the time we're talking 2020 five years ago was very much about making the quarter and as. And I love the story about people selling off, you know, timber from their factories in order to generate enough earnings to, to do what Wall street analysts and the financial team wanted. You've probably seen the announcements. The SEC is trying to make it attractive for more companies to go public. Obviously we're seeing little bit of that this year. They're trying to make it easier and less burdensome to file these quarterly results. But would going towards just twice a year reporting be the correct move or not? I've just. How can we get a more vibrant ecosystem of big S&P 500 companies that everybody can own and feel great about?
- [41:16]
Dave Cody
Yeah, I don't think reporting semiannually will make a difference. It's, you know, might make our lives a little bit easier. But investors thrive on information, so you've got to provide them at least a modicum of information to say we're not telling you anything for six months. The importance for companies to be able to accomplish both short and long term is not going to disappear. And it's one of the foundations that we've got for gpgi with a company that I recently started with my partner Tom Knott to figure out how do we find these companies? And we found two so far, Compost Secure and Husky, where they really don't have as much culture change as required in order to really become a great short term, long term company. There's a lot of room there if you start looking for businesses that fit the six criteria that I always look for. Great position, good industry, tech differentiation, inorganic organic sales growth and margin expansion. And you get the cultural transformation that you need so that people have that sense of urgency and understand it's not just about making the quarter, it's about making the same quarter three years from now, five years from now. So what do you need to do and making that happen with these monthly growth days that we do. Well, by golly, it works. Worked at Honeywell, worked at Verdev, it's working at Compost Secure, it's going to work at Husky.
- [42:46]
Kelly Evans
Darry. It sounds Berkshire esque to be my words, not yours. I'm just saying when I hear about kind of identifying those kinds of companies, incubating them and all the rest of it with the issue of spin outs, as we've now seen, these become a lot more commonplace. And look at GE's and what an incredible success that is. Again, maybe some good timing from the AI boost boom there. Should we expect more of this? I mean, is this part of the answer is breaking up some of these companies that I even hear people talking about Space X. You look down the road, you know, they, they bring it all together. Maybe for the near term, maybe you spin it back out again. But this seems to be a moment where the market is saying, yeah, we need more spin outs.
- [43:23]
Dave Cody
Yeah, I'm of two minds on that one. So at the end of the day there's a big focus on industrial consumption conglomerates. But conglomerates exist in a bunch of places. You don't see investors complaining about media conglomerates, financial conglomerates. I don't know why industrial are a focus, but that being said, they are. At the end of the day, the only reason for any conglomerate to exist is they have to be able to beat the S&P 500 because otherwise investors look at it and say, hey, you're obviously not very good at picking sectors and making them one work together. So let us make do that. Choosing ourselves. Best years to be.
- [44:15]
Kelly Evans
I like to give it a second to see if it'll unfreeze. You know, these are the problems with Zoom connections. Dave, come back. We appreciate it. We'll do it on set. Dave Cody joining us there, talking again. Like you said, if your conglomerate can beat the s and P500, great. And if not, well then maybe it's time to think differently. Really great to hear his thoughts on that and so many of the other topics we talked about over the past few minutes. Speaking of AI, David Faber will be sitting down exclusively with Sam altman. He's the CEO of OpenAI. Of course that'll take place around 2pm Eastern time out in Michigan at the data center that is being developed for Oracle Again. That's coming up here in just a few minutes time. We have some movie theater stocks on the move as well today with AMC recording its highest moviegoer attendance in May in seven years, more than 25 million people. The horror film backrooms had a lot to do with that. It's also showcasing something else which is the influence of YouTube creators. Julia Boorstin is standing by with more on that story in today's Tech Check.
- [45:12]
Julia Boorstin
Julia Kelly, a 20 year old director with a massive of YouTube fan base broke records to dominate the box office this past weekend. Backrooms cost indie studio 824 just $10 million to make. It grossed 81 1/2 million dollars at the domestic box office this weekend. With 86% of ticket buyers under age 35, this shows the power of YouTubers to monetize their audience in new Mediums and audiences hunger for authentic voices and fresh ideas. Now this phenomenon is also evident in the number two movie at the box office, Obsession. Released by Focus Features. It cost less than $1 million to make and has crossed about $105 million in the box office in its first two weeks. It's directed by a 26 year old with a huge following on YouTube and Tik Tok. Now, while those two films soared, ticket sales for Disney's Mandalorian dropped 69% from its first weekend to the second weekend. Now all of this reflects YouTube's power as the biggest media company in the world. Number one in streaming watch time for three years ahead of Netflix, Disney and Prime Video, with more than 2.7 billion monthly active users as of May 2026, according to Global Media Insights. And those people are watching billions of hours of video every day, according to YouTube. Now the pull from YouTube to the big screen is benefiting the theater chains. Cinemark says it reached an all time high in terms of its domestic box office. For May we see Cinemark shares up nearly 11%. AMC shares up more than 15%. I have IMAX shares up to only 2%, but those shares are up about 44% in the past 12 months.
- [46:54]
Kelly Evans
Guys, is there, Julia, a sort of pipeline now of these projects where these kind of trial balloons. Is there more to come?
- [47:02]
Julia Boorstin
Well, I would say what's interesting here, Kelly, is that it's not like there was some strategy from YouTube to Focus Features to a24. This was not an industry wide strategy. This is just reflecting what's happening in the culture. And I think what's really notable is there's a lot of hope in the industry from the studio executives that I've been talking to as well as folks in the theater industry that now that you have young people coming to movie theaters, maybe coming two weeks in a row, they are seeing trailers. And that means maybe they're going to want to come back a lot more this summer than they came last summer. There are some big movies coming up, including a Scream movie that's part of a longtime Scream franchise, which is all about the horror movie industry. And the question is whether that franchise continues to resonate with these younger viewers or whether what we're seeing here indicates they just want something really different and fresh and new.
- [47:55]
Kelly Evans
Well, I was about to say that the novelty is a draw, but then maybe the Scream franchise suggests that there's still some market out there for these franchises. Just go on and on and on.
- [48:05]
Julia Boorstin
Yeah, we'll see. I mean, that's the question. Scream opens on Friday. Then we have a big spiel Steven Spielberg movie opening a week later. There's A Toy Story 5 coming up. The question is whether there's a nostalgia factor and all the young people who saw this movie as the, you know, former four movies as kids want to come out and see five. What we're really seeing here as well is this, this interest in being together in a theater, seeing something that feels authentic. It's notable that these two low budget movies were made without a lot of AI. And while we're seeing a lot of AI used in more expensive movies, these are really more gritty and just low budget.
- [48:45]
Kelly Evans
All right, Julia, thanks so much. Appreciate it. Julia borson, Coming up, we're keeping an eye on the cancer related trade this session with the biggest cancer conference underway out in Chicago. Moderna is preserving presenting and the CEO joins us live from there next. Plus, a very special and rare moment at the conference that has everybody talking. That's after this.
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Kelly Evans
Ask a rheumatologist about cosentics. S and P up half a percent. Now some more breaking news out of Washington. Eamon, what now, Kelly?
- [51:30]
Eamon Javers
We've got another social media post from the president who says talks are continuing at a rapid pace with the Islamic Republic of Iran. Thank you for your attention to this matter. Now, obviously that follows off of the news of earlier this morning where we saw a statement out of the Iranian government saying that they were breaking off negotiations because they were unhappy with Israeli attacks in Lebanon. And then at about 12:15, I spoke to President Trump on the phone and I asked him if the Iranians had told him whether or not they were breaking off negotiations at 12:15. The president said, no, they haven't. That is, the Iranians hadn't told him that negotiations were off. He said, they told you so. They only want to tell the fake news, Ayman, and they only want to tell cnn. He said, I'm just looking at oil prices and oil went up 7%. So the president was saying at 12:15 that he had not heard directly from Iranian negotiators that the negotiations had been broken off. I asked him, do you think the negotiations are over now or is this a bluff? And he said, I don't care if they're over. Honestly, I really don't care. I couldn't care less. Now, at whatever time we're at now, 1:53 East coast time, the president says talks are continuing. So clearly the president continuing to make calls inside the Oval Office and has gotten a sense either from his negotiations, either from his negotiators or a direct conversation with the Iranian side that those talks are ongoing. Obviously that is bullish news for the markets. Kelly, back over to you.
- [53:00]
Kelly Evans
And they are reacting that way. As I mentioned, half percent higher for the SS&P right now. Amen. Thanks. Meantime, Moderna in partnership with Merck, is presenting results of a personalized cancer vaccine for patients with high risk melanoma out at the major cancer conference. And news this morning, it's also part of a working group on an Ebola vaccine. Let's go live to ASCO, where CNBC's Angelica Peebles is standing by with Moderna CEO Angelica. Hey, Kelly. That's right. We are here with Moderna CEO Stephon Bonsell. Stephane, thanks so much for joining us today. So you're presenting five year data today for your personalized cancer vaccine, or INT as it's now called. So tell us about those results and what we should expect to see from the phase three based on these phase two results.
- [53:41]
Stephane Bancel
Well, good afternoon and thank you so much for having us. So indeed this morning we presented very exciting data for five years of our phase two study. I remind you it is a randomized study against Ketugram, the standard of care. And what is exciting this is morning is we show that at five years the hazard ratio of the improvement versus cathedral is the same than at three years. So there's duration of efficacy which of course is great news for patient. And because as time has gone by the P value, the statistical power of analysis is actually stronger than it was at three years. So now we're all waiting for five phase three data. The phase three data should come this year with confidence, confirmed it again recently. It's an event based study. So it is difficult for us to precisely know when, but I promise you that as soon as we have a data we will of course share them publicly.
- [54:30]
Kelly Evans
And how widely used do you think that this, this approach could be whether not just outside of melanoma, but do you think it will only be in the adjuvant setting? Like how big of a drug could this become?
- [54:39]
Stephane Bancel
So I think over time it could become a pretty large drug because we are starting to go earlier in disease. We are now a month ago at our earning call that we're starting a phase three study for stage one patients with lung cancer as a monotherapy. So we're doing monotherapy, but also Intismeran plus Ketudra. But we want to try Intisamiran alone because we believe that in the early setting it should work better because we rely on your immune system. What we do, Intisamaran is we code the drug just made for you based on the DNA of your cancer cell to try to teach your immune system to recognize the cancer and to go eat the cancer. And we think that as you are earlier in disease, your immune system is stronger. So our drugs should work better and you have also less burden of disease which should also help. And I think that would be wonderful in lung cancer. If you think about lung cancer today in this country the center of care is surgery and weight. But some patients have cancer coming back and sometime coming back, you know, in a pretty late stage way. And so we think that if you could have following an X ray, because that's how you diagnose lung cancer following an X ray screening especially former smokers, you could see very early stage 1 cancer, be able to do a surgery. Plus in Tismaran alone, the beautiful thing of Intis Maran, it's the same technology as our vaccine. So the side effect profile is very unique for cancer. It's a very, very low side effect profile.
- [56:07]
Kelly Evans
And really quick on vaccines, we have to ask about Ebola because you announced this partnership this morning. So how long do you think it could take to develop an Ebola vaccine and how confident are you in that prospect?
- [56:16]
Stephane Bancel
Yeah, so we wanted to be helpful given of course the crisis happening in Africa. We have already worked on Ebola vaccine in preclinical setting. We've never been into the clinic. And so the team is working as we speak to make material. If you look during the pandemic, it took us a couple of months to start clinical study, so I'd be hopeful I would be able to do the same.
- [56:34]
Kelly Evans
Great. Well, Swan, that's all we have time for. Thanks so much for joining us. Stephan Bonsal, CEO of Moderna Kelly, we'll send it back over to you. Stephane and Angelica, thank you so very much. We really appreciate it this afternoon. And that's it for us on a busy hour. Thanks for watching the Exchange and I'll join Brian Sullivan for Power Lunch right after this quick break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [57:06]
Eamon Javers
Building a portfolio with Fidelity Basket Portfolios is kind of like making a sandwich. It's as simple as picking your stocks and ETFs, sort of like your meats and other topics, and managing it as one big juicy investment. Now that's pretty good. Learn more@fidelity.com baskets Investing involves risk, including risk of loss. Fidelity Brokerage Services, llc Member nyse, SIPC.