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The Exchange
The Exchange 6/2/26
00:41:16
Listen to the day's top stories, the must reads & a whole lot more for today's modern investor.
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- [00:00]
Kelly Evans
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Kelly Evans
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subject to a service fee of $100. See details@fidelity.com commissions Fidelity Brokerage Services LLC Member NYSE SIPC. Thank you very much, Frank. AI headlines are very much dominating the markets again today with a surprise capital raise. The next trillion dollar contender. And Bitcoin has very much moved to the back burner. Welcome to the Exchange. I'm Kelly Evans. New highs as you can see there for the Dow and the S and P today everything is positive. The S and P is on track for its ninth straight positive session. In fact, the semi stocks continue to outperform with Marvell the notable standout up 30% today. We'll more on why ahead. Similar story for the hardware space, HP soaring 16% after its earnings last night. And new all time highs for the memory names once again including the likes of Micron, Seagate and Western Digital. All of this comes after huge news from Alphabet, Google's parent company announcing an $80 billion capital raise, one of the largest equity deals of all time, in part to fund its AI buildout. The stock is only down two and a quarter percent right now. So that's where we begin. Joining us in today's opening exchange, Rohit Kulkarni is Roth senior research analyst. And Laura Martin who's a senior analyst over at Needham. It's great to have you both here just to kind of hear multiple perspectives. Rohit, on the size and scale of this and why do you think they did equity Rohit, instead of debt?
- [02:14]
Rohit Kulkarni
Hey, thanks for having me. I think back in February they did 100 year bond. They probably wanted to feel like be a little bit conservative here and and go not affect any further credit rating risk. So go for an equity raise which was quite remarkable. I think the clear message from them is compute demand is not linear, it's going parabolic. And more importantly, I think from their standpoint, the internal hurdle rate of return that they are seeing is very attractive and getting even more attractive. Although investors would continue to debate whether AI RO is as attractive as they thought it could be.
- [02:57]
Kelly Evans
Right, to have 10 billion of that coming from Berkshire is I think to many a gold seal of approval. It suggests that they believe that the, the internal rate of return you're talking about is going to be incredible and that it's worth that. And as I understand it, part of this is going to cover the tax bill for stock options and that sort of thing. Is that right?
- [03:17]
Rohit Kulkarni
That's what they seem to have indicated. But again, I feel there is a bigger picture here. I think tax bill and tax options is just a small part of the equation. I think the, the bigger thing is that for the first time since the IPO or probably the second time this company has raised equity, I think there's a opportunity cost of capital that's extremely high in my opinion. And that's why they went to equity as well.
- [03:44]
Kelly Evans
Yeah, only the second time they've ever raised equity. I mean it's incredible to think about the first time being the ipo like you said Laura, what does it tell you?
- [03:53]
Laura Martin
So, three key takeaways. First, the access to capital is becoming a competitive advantage for these hyperscalers and it makes it really hard for people like OpenAI to compete when basically anthropic and Google will pay any price for energy, for compute, for back office and they have the capacity to raise the money. So that's the first thing. Second thing is all of our estimates are too low for capex. What this tells us, since they did equity first is they're going to do debt on top of this and, and they're going to raise their $185 billion capex not only this year, but I think it's going to be higher next year when many of us had the Capex spending going down next year that's going to end up being wrong. And the third thing is the government, like we have the FCC focusing on taking ABC's broadcaster away. Meanwhile Google is hitting 5,5 trillion and it's about to double if these bets on Jenny are correct and the government has no regulatory authority over these giants that are about to take over the world and retool. The global government's totally focused on the broadcasters which are 50 years old and they're not focused on these things that really are about to dominate commerce.
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Kelly Evans
So let's Laura, that point that you made about the implications for open air, super interesting. I mean, OpenAI is about to go with this mega IPO. Maybe it's not until the fall. Google meanwhile, is just turning around, snapping its fingers, collecting $80 billion. The current equity investors are barely sneezing at it. How do you compete with that?
- [05:20]
Laura Martin
Very hard. Especially because one of the things that feeds LLMs like Gemini is data. And between YouTube and Google search and AI answers, they really have a leg up on data similar to Amazon. Amazon also has excellent data, but you sort of need data to feed your LLMs. And then you need to be able to build sort of the back office infrastructure and pay. We're in an arms race and these guys can basically pay anything. And so that becomes harder for companies that cannot keep up. It becomes a moat, an additional moat in the next three years.
- [05:51]
Kelly Evans
Absolutely. Rohit, do you agree with that?
- [05:54]
Rohit Kulkarni
I would take that. There is, there is a very fierce battle for owning the frontier model and there is a very high price for that. And so far, anthropic and OpenAI so far, what we have seen year to date seem to be outperforming the likes of Facebook and Google. Google and Facebook, as Laura said, I agree that they have tremendous amount of data, they have fantastic distribution execution. But what we have seen so far, objectively speaking, the private companies are outperforming from innovation and research standpoint and the quality of frontier models.
- [06:27]
Kelly Evans
Well, since you raised it, maybe my team in the back can can pull up this quote now. We're going to talk about this a little bit later on, but maybe this is the right place to do it. This was a comment from Michael Semblis from JP Morgan that he made a couple of months back on a podcast, but to the point that the market is starting to differentiate and separate the winners from the losers. You know, when he was asked what he thought about whether we're in an AI bubble, he said, well, I think it depends on who you're talking about. And he said, when I hear Google's explanation for their capex, it makes sense. When I hear metas, it doesn't. Here's the whole quote from the podcast. He said, whenever I see Google explain what they're doing, it makes perfect sense to me. Again, this was in April, before today's announcement. Whenever I listen to meta saying what they're doing, it doesn't. As he notes, Meta is spending 70 to 80% of its revenues on capital spending, which is a number that's unheard of in the entire history of corporate finance. So Rohit, do you raise, do you mention Matter as well in order to draw the contrast between what you see in these two companies fortunes?
- [07:21]
Rohit Kulkarni
I think Matters wants to own the frontier model because they have the largest distribution and they have 4 billion users using the apps on a daily basis. They have almost 20 million businesses using their ad platform on a daily basis. So I think they have a lot to gain and also a lot to do. So they're betting the house over here. And if you objectively look at last 18 months, Meta was the best proxy for return on AI spend when the revenue growth went from 20% to 30% over the last 18 months. Next 18 months remains to be seen. That's why the stock is under pressure and people don't have the creativity and the outlook to kind of have a high conviction that matter is the stock to own? We believe so. And we should buy metal here.
- [08:05]
Kelly Evans
You still believe it is. It's down 8% year to date, Laura. It's only up 30% in the past two years. And they are literally Metta again is literally betting the farm. How would you contrast what you see in terms of Meta's bet in the way that it's approaching this versus the way that Google's approaching it?
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Laura Martin
Right. So the first key point we have to make is Matters CEO is, is really fast and he's not an idiot and he thinks that generative AI is the future and he's betting the farm on that. Okay, great. He's also going to go consumer first. He is laying off people. His we just did the numbers this morning. His total employee count is down 8% since 2020. As you know, he's about to lay off another 10% of his people. So he has the ability to act fast. He believes like Google does that AI is the future and he's accelerating his revenue growth. At the same time he's cutting full time equivalents replacing equivalence of technology. So the question is whether he can keep up. If capital becomes a moat, can he raise as much capital as he needs? He's got the data. Probably a smart idea for him would be to go and do a JV with open air after it's public where he supplies data and he puts his financial resources together with somebody else so they both win together. I am not sure even if either of them can win separately because OpenAI doesn't have the data flow and I'm not sure MET is big enough to compete with Google and Amazon and Anthropic in terms of access to capital.
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Kelly Evans
And Laura, I like the way that you said that and kind of the last question back and forth of both of you is we now we used to talk about the Mag 7 and this playbook needs to be completely rewritten, don't you think? Especially once these private companies go public. The new Mag 7 to you Laura,
- [09:41]
Laura Martin
is what Anthropic for sure open. I prefer to see open AI to combine with matter. But let's assume that's two companies. I'd still put matter in that. I would definitely put Amazon because of the data and because they are good with physical plant and a big buried big per chart here is getting the physical data centers built and not running out of memory or energy. And Amazon is best in class at that. Better than Google.
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Pippa Stevens
Hmm.
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Kelly Evans
So you would have Anthropic you'd like to see maybe a partnership with Open Air, but it's on the list. Amazon, you've got Google on the list presumably. I mean who else we talk about Nvidia, different story. Does Tesla become Space X?
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Brian Sullivan
I don't know.
- [10:19]
Laura Martin
You know, don't cover Tesla. Stay away from that answer.
- [10:22]
Kelly Evans
Yeah, understood. Rohit, what would your kind of new mag7 as putting taking this Google announcement, looking at the diverging fortunes between the old Mag 7 and the new players who are coming on the field, who do you think should be the new kind of leaders atop that list?
- [10:37]
Rohit Kulkarni
I would say from the top Nvidia, then Google, probably Microsoft, Amazon, Meta and then Anthropic. That would be the top of my list. We are forgetting other hardware companies like Broadcom that is building a bigger business based on what we hear from Google. So that would be how I would put it.
- [10:56]
Kelly Evans
All right, in the quick final follow up on that, you did put Microsoft in almost, I think the third position if I caught that.
- [11:01]
Rohit Kulkarni
I'm curious why Microsoft does have a lot of distribution mechanisms although they have been caught in between the sentiment turning positive to negative towards OpenAI. I feel over the medium to longer term they have the cloud business, they have the enterprise software business and both once they start kicking the right direction, probably Microsoft is the one will start to gain some positive sentiment.
- [11:27]
Kelly Evans
We'll see if Microsoft build can help with that. It's underway right now. Really appreciate both of you joining to not only talk about that news but it in some perspective appreciate it very much. Rohit Kulkarni and Laura Martin. Meantime check out shares of Marvell. They're trying to make the Mag 7 on their own here up 29% after Nvidia CEO Jensen Huang said they could become the next company in the trillion dollar club. And our next guest owns it. Vince LaRusso is the CEO of Cloud Capital Partners. Vince, welcome. Is this, is this Jensen making an AI prediction or speaking about the importance of the AI companies that Nvidia's success will rely on?
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Yeah. Hi, Kelly. Thanks for having me. You know, we, we think that overall you have this spending capacity into AI that touches just about everything. I mean, it's just really hard to think about an area of the AI infrastructure that does not need more supply, which means more funding, more money. And clearly what Nvidia and Jensen is signaling there is that, first of all, Marvell is an important partner to Nvidia, right? Not a rival in the GPU space, but, but somebody who's able to deliver the custom silicon that's needed and help with the networking and the connectivity and the speeds. And, you know, there's just going to be a proliferation of companies that are going to benefit from an extreme shortage. You know, it's a capex cycle maybe like the world has never seen. And the companies that are hyperscalers or the leaders of the semiconductor, you know, arena like Nvidia, the perfect example, they're going to be spending, you know, just hundreds of billions, potentially trillions of dollars to build this out. And a player like Marvell is a partner to that build out and they're going to benefit there.
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They were a smaller market cap when people were first looking at the kind of, what do they call the custom silicon providers or what have you? That was a year or two ago. They very, very quickly started to catch up. So at what point, Vince, does this to you become, you know, you have to think about this from your portfolio point of view. At what point do you want to take those gains and walk away or do you just stay in this because you, do you feel like you have clarity on how long this build out is going to continue to ramp up, or are you just going to wait until you know for sure that it's not ramping anymore?
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Yeah, it's a great question. And that's, you know, that's what makes us active managers, right? Constantly evaluating what is the risk and what's the, what's the reward of some of these positions? I would step back and say at cloud capital, we think this is one of the bigger themes we'll see in our investing lifetimes, right? The flow of funds and capital into AI and the beneficiaries. So I manage two concentrated ETFs, you know, one's long short, the other is long only. So when we talk about 30 to 40 positions, we've got the biggest overweight in the theme around AI. So the names we want to play are related to power management, cooling, optical networking, you know, these beneficiaries of the trillions of dollars in CapEx, we do have to think about risk reward. And right now I think we're in a difficult position here. We want to balance what really does look like parabolic moves. I mean, I think we'd be remiss to not acknowledge that technically in terms of flows and just the, you know, the overall proliferation of capital into these areas, it's creating, you know, parabolic moves. So we step back and say, look, the investment cycle to us looks like it's got years to play out. But how do you as active managers navigate the inherent volatility in some of these moves? And for us that's position sizing. It's thinking about how we can rebalance the portfolio into names that haven't moved as far. It's thinking about diversifying our position base. And specifically with cbls, which is a long short ETF that I manage, we have a short book to help manage some of that volatility.
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Yeah, it looks like, I don't know. But can you talk about what's in the short book that you shouldn't like that very much?
- [14:58]
Yeah, so our short book cbls typically runs a net exposure about 30 to 70%. And we do disclose the holdings every day@cloudcapital.com so. So folks can see exactly what we're short. But I would say, you know, in aggregate, if you look at the theme, some of the software names, we do think there will be some dislocation and displacement from AI. I don't think all software is at risk. And some of the usage based networking type companies may benefit if it's kind of more of like a metered software offering. We actually are inclined to like some of those names. But if you're a user based software company that might get dislocated by AI, those are short positions for us. Also some of the private credit companies we think are at a little bit of risk here. And then we think about that K shaped economy in which consumers are getting stretched more by gas prices. Despite this, you know, enormous flow of capital and the bull market with intact and AI and semis and beyond, we do recognize that some of the consumers here are a little bit more stretched. So we're finding some short opportunities in
- [15:51]
that cohort, it makes a lot of sense. And if I could kind of summarize it, I'd say that you're, you're very much playing the AI narrative all the way out, including, yes, it will displace certain software companies. You know, yes, this is all going to have that impact on private credit in the fallout. So just a couple of the names that you do like. A lot of our audience is already in these and familiar with them, but there might be a few that they're not. I'm just going to rattle tsmc, Lam Kla. Obviously we've talked about Micron Marvell. Monolithic Power is another one that you've mentioned. You've also got Vertiv. We just had Dave Cody on yesterday. Corning, Celestica, Solaris Energy Infrastructure, ge, Vernova, Bloom, Constellation. You do also have Freeport and Southern Copper. So there's a copper play there as well. Which others would you like to mention? Or perhaps, you know, are there still some that are less. The narrative's a little bit less well known. But you think they could be the next to put up, you know, mega gains?
- [16:41]
You know, I think that the sampling of stocks that you just mentioned there, Kelly, I mean it really does run the gamut, right from the infrastructure, the energy, mineral materials, names like copper and natural gas player like Solaris, right into who's building the data centers, who's going to power them. You know, I think of like a monolithic power because I think within this shortage discussion, right, that starts out as semiconductor chips and then, you know, GPUs turn into CPUs and then the memory needs and you know, within that I think companies that can deliver more efficiency. So maybe it's the optical networking type names or a monolithic power that helps with energy efficiency. That seems to be the bottleneck. And a lot of the hyperscalers, when they talk about their massive build outs of data centers, oftentimes they're quantifying them in terms of megawatts needed. Right. So you just get this clear indication to the markets, hey, we need semiconductor chips, we need to compute, we need memory, we need bandwidth, but we also need energy. And I think those are the names that are probably lagged on a relative basis. Some of the big moves in semis and optical networking.
- [17:35]
And it's odd because there's even a tension and I know we have to go, but within the portfolio where if that bet works out, then maybe some of the other bets don't.
- [17:42]
Correct. Yeah. So a diversified portfolio, actively managed, you know, we sometimes say that holdings are subject to change. I think in this environment I'm more inclined to say holdings are guaranteed to change the news flow and the price moves are, are pretty dramatic. And you know, that's why professional management, it really requires a lot of attention, especially in this market.
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All right, Vince, thanks. Good to see you again.
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Likewise.
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Vince LaRusso with Cloud Capital Partners coming up. He just mentioned it, but that software rally taking a breather after its best three day performance since 2001. Our next guest called the bottom back in April. We'll check back in with him now. Plus, People CEO Ron Krishevsky is here with his take on the build out rising debt levels. We've got Alphabet's equity raise and the upcoming IPOs. Is it all investing for growth or creating fragilities in the financial system? We'll ask Ron coming up after this.
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This is the exchange on cnbc.
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Kelly Evans
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Kelly Evans
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Kelly Evans
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- [19:02]
A key moment for the economy. How might the May jobs data influence the first Warsh? Fed decision numbers and analysis Squawk Box Friday 8:30am Eastern and streaming on CNBC. Plus.
- [19:31]
Welcome back. The software rally taking a little breather today with the igv down about 3% but it is coming off its best three day run since October of 2001. Our next guest called the bottom back in April. Jonathan Krinski is the chief market technician at btig. Jonathan, we just heard Vince over at Cloud Capital a few moments ago telling us he's still a little bit cautious about the software names, especially those that are user based. What are your thoughts on this rally?
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Jonathan Krinsky
Hey Kelly. So yeah, I think it all kicked off back in April when I had that false breakdown and we said from false moves come fast moves in opposite directions and we've certainly seen that. I think it may surprise a lot of people to Note that from April 13th through yesterday's close, the IGV software ETF was up about almost exactly the same as the semiconductor ETF SMH, about 38% over that span. So it's been a pretty nice recovery. I think what's interesting is the move it made on Friday. The gap up was basically it created this island of prices, where you had a bunch of trading from January through April, started with a gap down back in January and then the gap up on Friday kind of left that island of prices. And so that can be a bullish sign. So we think, you know, the fact that it held that gap, as long as it holds that gap around 96, $97 on IGV, I think you can target up towards 110, 115. Now it did reach 108 on Monday. So you're kind of, you got pretty close on Monday, but I don't think that necessarily means it has to be the end of the software run. I think maybe just time for a little bit of consolidation and allow things
- [21:09]
Kelly Evans
to kind of reset here and people will pick up. In your tone, you're not exactly pounding the table on this and you're describing it as lomo, meaning kind of low momentum upside. This is not an area that you think people should look for their next, you know, double or triple.
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Jonathan Krinsky
Well, yeah, I think what's. Despite the fact that it's had a significant almost 40% rally off the lows, most mental strategies will look at at least 6 month, if not 12 month prior returns.
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Commercial Voice
Right.
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Jonathan Krinsky
And so software is still significantly down from, from its highs and you know, has not done much over the last 12 months. So in the factor world, software is still a big part of the low momentum strategy. And I think what we're looking for in June, when you look over the last year, decade or so, June is one of the worst months for longshore momentum, often seen where you get a rally in the low momentum name. So I think we saw the start of that yesterday. I think what's unique about this period is we also have the high momentum. So the semis and anything AI related is, as many of you guys have mentioned, has kind of gone a little parabolic. So I think the setup for June is to see an unwind in both directions where you can get stuff like software, some of the crypto areas maybe seeing a counter trend rally further and some of the tech names to finally see kind of an exhaustion type pullback that's been seemingly relentless.
- [22:29]
Kelly Evans
Okay, well, is this just a near term reset, in other words? And just in case people miss that, you're saying you think we could see a counter trend rally in software and crypto? We're going to talk about that later in the show. And maybe a pause in this breathless move in the AI build out, broadly speaking, is that just a temporary pause?
- [22:47]
Jonathan Krinsky
Look, at this point, I think that's that's all we're looking for. You know, again, on any number of metrics those, those tech names are in pretty, pretty nosley territories. But you know, calling the final end I think is a little bit tricky and probably premature. What we note though is when you look at the high beta long momentum, so again, that's dominated by tech and I, you had a nine week gain of over 40% into a new high. The only two other periods you saw that was November and December 1999 and January of 2021. Now both of those periods did see further gains in the months ahead, but they were, you know, very close in time to the, you know, the final top for those rallies. So, you know, again, calling the final top is usually a losing battle. But I think from a tactical perspective we would expect some reversion here.
- [23:37]
Kelly Evans
All right, Jonathan, thanks. Appreciate it. For now. Jonathan Krinsky with BTIG coming up before that possible pause, the spending is spreading to names like Dell, HP and Lenovo each soaring double digits after their earnings reports. They're up 2 to 300% just over the past year. We'll have more on that next. And as we head to break Victoria's Secret, having its best day ever under its new CEO soaring 44% to a record after blowing past earnings estimates estimates they're raising sales outlook on better than expected sales and lower tariff costs. We'll have more of today's biggest movers right after this. I'm Kiana and I leveled up my business with Shopify. Once I figured out that Shopify was a thing, I never turned back. I can create a site with my eyes closed. Shopify thinks ahead of us, you know, and it thinks about the customer more than anything. Every day I'm thinking about some other new business, but Shopify is doing it to me because it's so easy to use. It's like I can't stop. I'm addicted.
- [24:42]
Pippa Stevens
Start your free trial@shopify.com a key moment for the economy.
- [24:47]
Kelly Evans
How might the May jobs data influence the first wash fed decision? Employment numbers and analysis squawk box Friday 8:30am Eastern and streaming on CNBC. Plus
- [25:01]
welcome back. We have record highs for the Dow and the S and P today. The S and P on pace for its first nine day rally since May of 2025. We should mention though, it's only up five points right now. The NASDAQ's up to keep an eye there. It wouldn't be hard for us to turn lower, although it's been hard to keep this market down, generally speaking, ST Microelectronics hitting its first all time high since 2000. The chip maker now forecasting $1 billion in data center revenue this year. It's roughly double its prior guidance. The shares are up 14%. They also said revenue could double again in 2027 if current demand continues. And Generac higher on an agreement to provide backup power for AI, a leading hyperscale data center operator. The CEO told Squawk on the street they're also courting another hyperscale customer right now and they hope to make that announcement shortly. Those shares are up 5% to a four year high. Elsewhere, HPE is hitting an all time high of its own and having its best day going back to its 2015 split from HP Inc. They reported their biggest earth earnings beat since 2018 last night with triple digit growth and server booking. You run out of things to say about this, Christina? Parts of this is here with crazy detail. I know, I know.
- [26:11]
Brian Sullivan
And the stock was actually up almost 30% this morning, even 30% post earnings. And I was, I was watching, I'm like, what? What happened? How did the market miss this one? But much like we saw with Dell, shares though granted have come down a little bit, up 14% after a historic quarter. And the move really doesn't exist in isolation. So what I mean by that, for the past last two years or so, the spending cycle was dominated by hyperscalers. What this crop of earnings is showing is that corporate customers are now becoming a meaningful contributor. So if you look at the numbers, HP server revenue beat estimates by nearly $1 billion. Dell's traditional server revenue hit 8.5 billion, up 92% from a year ago. And then you have Lenovo, which is more Asia focused. Its infrastructure revenue is up 37% year over year. And even with server prices surging, they did. Customers just are blinking. I spoke with CEO Antonio Neri just last night. He said agent, AI and inference are driving new products despite higher prices. Customers are just willing to pay more and still keep coming back despite these prices. And that spending has to go somewhere. More servers means more chips, more memory, more networking gear. Loop Capital thinks this is the front end of a three to five year growth expansion. But Morgan Stanley, a little bit more cautious, questioning whether this level of demand can last and whether HP is actually taking a share in the cloud market. Bernstein notes HP has rallied roughly what, over 50% since May 22, slightly behind Dell. But a lot of the upside to your point we started this conversation might be priced in, you know where can it go from here.
- [27:40]
Kelly Evans
But I like what you said, which is how do people miss this? And I don't mean that in an accusatory way, because we miss things all. It's just, it's, that's why we're here. Exactly. And these stories, even as we're watching what's happening with Nvidia, then you watch what's. And now it's in this segment of the market. And it's just so fascinating to think how much bigger is it going to get or where does it go next?
- [28:01]
Brian Sullivan
The thing with HP is that they provided insight into their fiscal 2027 year and they did that six months in advance, which I think is a really strong sign as to how bullish there. They also said that they saw limited demand pull forward. A lot of companies have been buying in advance because they're worried about prices continuing to rise because of memory and other input costs that keep going. Inflation, you just lump it all together. And so there's, you know, Intel. So many firms have talked about this demand pull forward. HP didn't. And the fact that they were incredibly bullish too, even when prices have climbed. I asked the CEO just yet, are you going to keep raising prices? Is memory going to come down? And he said he doesn't see memory coming down anytime soon. Of course, that's the narrative that every CEO is saying right now. But, but that is dollars that companies and corporate banks, institutions, you know, need to spend and pull up. So I think that's, I guess, speaks really volumes to how much people are willing to spend right now.
- [28:53]
Kelly Evans
Even we had a strong ISM manufacturing report yesterday and even there, people are wondering how much of that is pull forward. So I think when you say here's a company that saying, well, not so fast. Yeah, it's very interesting, Christina. Thanks, Christina. Parts and Evolis. Let's get to Pippa now for the news update.
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Pippa Stevens
Pippa.
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Commercial Voice
Hey, Kelly. Acting Attorney General Todd Blanche will testify before the House Appropriations Committee later this afternoon on the Justice Department's budget. Lawmakers will likely focus on the $1.8 billion anti weaponization fund, which the Trump administration signaled yesterday it was pausing. The fund would compensate allies of President Trump who believe they've been unjustly investigated and prosecuted. Seven Democratic controlled states are suing the Department of the States United Interior over its move to block a wind farm off the coast of New York. The suit seeks to overturn a $928 million settlement with total Energies. Massachusetts Attorney General Joy Campbell says the cancellation of the project will negatively impact climate change and public health. And the White House Correspondents association announced that its annual dinner will be rescheduled for July 24 after a shooting interrupted the initial event event in late April. An email sent to members said the dinner is expected to be smaller. Details on the venue and additional security measures will be released soon.
- [30:10]
Kelly Evans
Kelly, back to interesting move, Pippa. Thank you very much, Pippa Stevens. Coming up, job openings. Get this, we found out this morning job openings soared in April to their highest level in nearly two years. We'll ask Steeple CEO Ron Krishevsky about that and the costly buildout. That interview is coming up after the break. Welcome back. Alphabet's plan to raise $80 billion to pay for the AI buildout underscores the massive equity and debt funding that's underway. BlackRock CIO of Global Fixed Income, Rick Reeder addressing that and what it tells us in an interview earlier.
- [30:49]
This technology evolution is pretty incredible. I will tell you, I spent I don't know how much of the weekend, a lot of it going through new issuance that's coming. Debt markets, equity markets, converts different forms of loans. There's a lot of financing that's taking place.
- [31:08]
Pippa Stevens
Gives you a little bit of pause
- [31:09]
Kelly Evans
that it's all coming as fast as it's coming down the pike today is, you know, flows generally are pretty good. You still have to find room for for some of this, some of the supply that's coming. But listen, if you like, and as you know we've talked for a long time, I love technology and I love how things are changing.
- [31:28]
Joining me now with more on that and is Ron Krishewski. He is the chairman and CEO of Stifel Financial. He's joining us from the Stifel Cross Sector Insight Conference. Ron, it's great to see you today as you hear a little bit of that warning from Rick. We also had Goldman CEO telling Leslie Picker earlier that he thinks we're leaning towards the greed phase unlike the fear and greed spectrum. What are your thoughts?
- [31:51]
Pippa Stevens
Well, first of all, I agree with the concept about a lot of money being thrown at this issue. You know, Google was a small slice but they raised hundred million, I mean 100 year bonds to buy three year chips. It's, it's interesting. These used to be cash flow balance sheet like companies, the hyperscalers and they're turning into what feels like utilities a little bit. But we'll see. We also Kelly had an interesting jolts report today that I think caught some interest. Yeah.
- [32:25]
Kelly Evans
Two year high and job openings. And you guys are you've got your pulse on America. Does that make sense to you or do you think that's an outlier?
- [32:33]
Pippa Stevens
You know it's a little bit of an outlier because hiring was down. And so even though postings were up, hiring was down. But what it does mean I think is is rate cuts are off the table for this year. I think maybe people thought that anyway but that was a little bit of a surprise. A million more postings than expected. Those big number.
- [32:51]
Kelly Evans
Yeah, we are all afraid that AI is going to, you know, hurt the job market. Is that view concern panning out or is it as others would argue, like other innovations? I think this is what Dave Cody said earlier this week, going to create even more jobs and more employment in the long run.
- [33:11]
Pippa Stevens
Well, if history repeats itself, and it often does, this technology will lead to different opportunities, greater GDP growth. It doesn't have to be all doom and gloom. But Kelly, there is a lot of money. I'm looking at some of these numbers. I mean I think Morgan Stanley said they're going to spend 3 trillion, $3 trillion in data centers by 2028. These, they're spending almost all their free cash flow. So it's not necessarily is their demand, it's just how fast is this being built. And by the way, last I checked, AI is not a monopoly type business that you can just dominate. It's not like getting search or social media. This is a general purpose utility. So I am a little concerned not necessarily about the build out but the financing.
- [34:01]
Kelly Evans
Right. And I'd love your perspective on this. Is it, is it getting to crazy because and others would say how do you know if this ROI is justified other than relying on what the companies can foresee. But right now it's still a lot of survey based data and you know, consultant reports trying to figure out, you know, if these tools are making companies more productive. Can you share any anecdotes from your experience?
- [34:25]
Pippa Stevens
I don't think there's any question that that that generative AI and some of the genic agents will make us more productive. But so did the PC in 1981 and so did the Internet and so did email and so did mobile phones. This is a big technology, I'm not downplaying it but there is a gold rush at anything. I, I just feel like if I change my name to Stifle AI or stock would double for no reason. By the way, I got to tell you Kelly, can we just stop for a second? Did you just say that Victoria's secret was up 44% I. Is that, wait, is that an AI company? I'm just asking.
- [35:03]
Kelly Evans
Maybe people value the human experience more than ever in the age of AI.
- [35:07]
Pippa Stevens
Yeah, it's just good to see a company up 44%. That is not saying data center chip or AI demand. That's all I'm saying.
- [35:17]
Kelly Evans
Okay, it's. Your point is well taken. And I think that in some ways goes back to the consumer. Our guest earlier on was saying he's still short some of the consumer positions because we never talk about what's going on with energy prices in the Iran war anymore. This is other narrative is so powerful but that's still happening. So that's why I'm a little bit curious kind of what the read is on the broader economy.
- [35:35]
Pippa Stevens
Well, the read is, is that 10 stocks make up almost half of the s and P500 today. You've seen some of these names that are just exploding. It's all AI but if you take that out, the general business or the general economy is just kind of muddling around along. If you take out AI and energy, I'm not sure we have any real returns. So. But this is an exciting time. But you know, this history has a way of repeating itself. And I'm not suggesting this at all but I remember in 2000 we had to build data centers, Kelly. They had to be built for the pets.com and all of the consumer business to consumer websites. And what happened? Exodus Communications came out, got a $35 billion market cap and then were gone because they did too much build out. Now those data centers are still around railroads. The initial investors in railroad didn't make any money. So let's just. There is demand but let's keep an eye on whether or not these are going to ultimately be good investments. I think that is still a question.
- [36:37]
Kelly Evans
Are you doing anything with the firm to lean against this or lean into these opportunities? I mean you guys have to wake up and make these decisions every day about capital.
- [36:48]
Pippa Stevens
We do. And, and we're, I guess we're leaning in to, to the technology, we're leaning into the opportunity. We're being cautious. I, I am concerned. We've already had, you know, a few instances where agents don't exactly perform as we thought they might perform. And then we've all got to be a little concerned. But make no mistake, this is transformative technology. I question the fact that of the $4 trillion that needs to be raised about half, more than half, that's going to be raised probably through debt. And, and when you start throwing Money. When Wall street throws gobs of money at anything in history, it ends up usually not being the best investment the first time around. Technology can be great. We're talking about return on investment.
- [37:33]
Kelly Evans
Absolutely. Ron, quick final question. We've continued to see a series of headlines about companies that are paying too much for token usage, which I do think is an important part of this narrative and how long it continues. Are you guys at Stifel having any experience with that, the cost of tokens or looking at that at all?
- [37:50]
Pippa Stevens
Absolutely. And I think it's something that a lot of people are not fully understanding, nor do I think that they're fully priced. I think there's a lot of people giving away to get market share and so they'll be. It'll be interesting when you finally realize how much my generative AI actually costs. I'm not sure that I really know right now what the end game pricing is on some of these tokens, but I assure you that last I checked, companies want to make a profit and they're just not going to just throw, you know, they're not just going to throw everything at tokens. So I don't know though I will tell you, I think that's a great question. I think everyone using it should try to understand when they ask a question, how many tokens are they using and what does it cost?
- [38:35]
Kelly Evans
Right. No. And you guys are up there. Cross sector insight conference. 200 plus companies are in Boston. So maybe, maybe you can put on your journalism hat for me and ask them their experiences with the tokens and report back.
- [38:46]
Pippa Stevens
No, I will ask. And we've got about 2,000 people here. It's a great conference. Kelly, great to see you. These are interesting, interesting times indeed.
- [38:56]
Kelly Evans
Always indeed. Ron, really appreciate you making the time in the midst of that. Thanks.
- [39:00]
Pippa Stevens
Thank you.
- [39:01]
Kelly Evans
Ron Krishevsky from Stifel Financial. Coming up, shares of Microsoft down 3.5% amid some softness once again in software. But could that change in the next hour? Their developer conference is underway where Nvidia CEO Jensen Huang just spoke. Analysts are saying a show me moment is needed. We'll check in on that next. Welcome back. And bitcoin prices are down to $67,000 below 70 for the first time since April. On track for its worst first half start since 2022. The weakness has a number of investors reconsidering their positions, including billionaire entrepreneur Mark Cuban. In an interview with Front Office Sports, he said bitcoin has, quote unquote, lost the plot. For more, let's bring in Emily Parker. She's a strategic advisor at RWA X Y Z. Emily, it's good to see you. And I note that Tom Lee was asked this question on our air earlier today, and his defense was this is what always happens during crypto winters. And he calls them rage quitters.
- [39:59]
Emily Parker
Yes. I mean, people have been pivoting from crypto to AI for a while. Here's the thing. Bitcoin is a sentiment driven narrative. And it's a. It's a. I'm sorry, it's a sentiment driven asset and it's a narrative driven asset. And in terms of sentiment, you just have people excited about other things right now. They're excited about AI and they're excited about the stock market, which is largely driven by AI. There's also one really important difference between Bitcoin and AI, which is that I'm sure you've seen there's a lot of very smart people who still say, I don't understand how Bitcoin works. I don't understand what it does. And like, not that many people understand how AI works, but they don't have to because they're actually using it. It touches their daily lives. I think Mark Cuban was talking about the narrative problem. You know, as I said, bitcoin's a narrative driven asset. It came into the world to be this unique asset that was independent of banks and governments. But over the past few years, much of what's powered bitcoin's rise has been Wall street or the US Government. And it just doesn't really make sense as a story. And it's also the opposite of bitcoin's origin story. So it's kind of losing what makes its unique. And I think for Portfol portfolio holders, the idea was like, okay, bitcoin is so unique, it can act as a hedge against the stock market. So you should have Bitcoin in your portfolio. But with stocks soaring and Bitcoin plunging, basically it's the opposite. It's almost like you want to have stocks in your portfolio to act as a hedge against Bitcoin.
- [41:11]
Kelly Evans
Right. And I think, you know, I was talking to a few friends, a couple, but a year, year and a half ago, there was this first kind of conflict between Iran and in the Middle east. And bitcoin had sold off instead of rallying on that kind of along with the stock market. And they said, wait a minute, those, those correlations aren't what I was promised and saw that as an opportunity to sell. It was fortuitous on that. In that case, what would your Message be to those who are still in it. I mean, do they need to sell and get out at 67 and go put the capital into something that's actually going to grow over time and has a proven track record? Or should they wait here and hope that they can sell at 10% higher or that somehow there's going to be a whole new adoption story that drives it dramatically higher from here?
- [41:51]
Emily Parker
You know, as you know from all our conversations on the show, bitcoin is wildly unpredictable. I mean, just, it just, it always defies expectations. I personally do not think bitcoin is dead. I just think it needs to come back to what made it unique. You know, I think another thing to look at which is interesting, there's still a lot of Wall street energy and there's still a lot of energy in other aspects of this economy. For example, in real world assets, tokenized real world assets. This is like stocks, Treasuries, gold that are being tokenized and put on a blockchain. You have, you know, JP Morgan and Fidelity and you know, BlackRock all launching tokenized funds. It's like 30 billion in value, 300 billion in stablecoins. So there. And this is all, a lot of this is powered by crypto infrastructure, by the way. A lot of this runs on Etherium. So I don't think crypto is dead. I don't want to tell people, you know, this is over. But I do think that we need to reclaim the narrative and just again, come back to what made bitcoin unique.
- [42:43]
Kelly Evans
No, I think crypto, the infrastructure won. But that has nothing to do with the price of bitcoin. There's never been a compelling case if digital gold was the most compelling use case. And it's up to gold has thousands of years of history to prove that it's, it can hold up over time. And bitcoin remains an open question.
- [43:01]
Emily Parker
And also you mentioned gold. This is such a good point. I think this is, that's such a big part of the problem because I think bitcoin was supposed to be digital gold, you know, this hedge against global instability. But digital gold is being outshone by actual gold. I mean, I think the incredible performance of gold is a big part of the story.
- [43:18]
Kelly Evans
You're right, Emily, thanks for now. Appreciate it. Emily Parker joining us today. And that's it for the exchange. I'll join Brian for Power Lunch and we'll pick that up right after this break. When it's time to scale your business. It's time for Shopify. Get everything you need to grow the way you want.
- [43:38]
Commercial Voice
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- [43:42]
Kelly Evans
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