The Exchange – September 3, 2025

CNBC

Episode Overview

This episode of "The Exchange," guest-hosted by Dominic Chiu, dives into the day’s top market stories with a focus on Alphabet’s major antitrust win and the implications for Apple, AI, and broader tech and market sectors. The episode also examines the ripple effects through Big Tech, AI competition, market interest rates, the looming government shutdown, tariffs, and a sector spotlight on Industrials. Notable guests include analysts from BofA Securities, CNBC reporters, and strategists from Morgan Stanley and BCA Research.

1. Market Snapshot & Main Theme

• Market Status (00:20): Stocks are mixed, with the Dow in the red, Nasdaq leading gains on the back of Alphabet's 9% surge.
• Main Theme: Alphabet’s antitrust court win and how it reshapes tech competition, especially affecting Apple, Google, AI partnerships, and market valuations. Broader discussions involve treasury yields, the labor market, and economic policy risks.

2. Alphabet’s Antitrust Win & Implications for Apple and AI

[00:50–18:30]

Segment Highlights

• Alphabet Avoids Forced Chrome Divestiture: DOJ sought break-up; ruling blocks exclusive default search contracts but allows annual negotiations.
• Apple’s Position:
  • Continues to receive up to $20B a year in Google “TAC” (traffic acquisition costs)—a fifth of its service revenues.
  • Gains negotiating leverage as AI search becomes key, engaging OpenAI, Anthropic, and Perplexity for future Siri partnerships.
  • BA Securities raises Apple’s price target to $260, citing avoided earnings risk and new upside from diversified AI search partnerships.
• Broader AI Context: The ruling is seen as lenient, helping major AI players and opening M&A pipelines in Silicon Valley.

Key Quotes & Timestamps

• Steve Kovac, CNBC Tech Reporter:

  "This gives Apple a chance to continue to collect that $20 billion a year or more... That's about a fifth of total services revenue for the year." (03:40)

• Wamsi Mohan, BofA Securities Senior Equity Analyst:

  "On total company it could have been 10 or 12% of earnings that could have gotten washed away if the ruling was adverse... So that's part of the reason we raised our target price to $260." (07:00)

  "Apple will strike a partnership to have these models ultimately run on Apple servers within Apple's own data centers so that they are the keepers of users information. Remember privacy is super centric to Apple." (10:35)

• Steve Kovac on Apple AI & M&A:

  "That conversation is over now effectively because of this decision. They don't need [to make a big acquisition] because they can continue their search relationship with Google." (14:33)

  • He predicts the upcoming Apple event to focus on hardware rather than AI partnerships, with the “iPhone Air” design refresh expected to be a major highlight (15:20).

3. AI Landscape and Startup Outlook after Alphabet Ruling

[18:30–22:35]

Segment Highlights

• Impact on AI Startups:
  • Ruling is "a slap on the wrist" per one ex-Google exec; market remains highly competitive.
  • Google retains control over Chrome, Android, and can renegotiate default search status with Apple.
  • The rise of GenAI competitors (OpenAI, Anthropic, Perplexity) cited by judge as evidence of competition.
  • Private AI giants continue raising vast sums (OpenAI’s secondary deal at $500B valuation), while smaller startups face tougher conditions.

Notable Quote

• Mackenzie Sigalos, CNBC Tech Reporter:

  "In practice it does translate to no real changes in how Alphabet already operates, which ultimately bodes well as it battles for share in the AI race." (19:32)

4. Policy: Tariffs, Government Shutdown, and Market Impact

[22:35–35:50]

Tariffs & President Trump’s Trade Agenda

• President Trump: Pledges expedited Supreme Court ruling; underscores tariffs as crucial for economic stability. (23:10)
• Tariff Scenarios (Megan Casella): If the court rules against the president, alternative pathways exist (Section 338, Section 232, etc.) for imposing tariffs without Congress (25:00).

Government Shutdown Prospects (Emily Wilkins)

• Deadline: About two weeks before government funding lapses.

• Obstacles: Republicans require Democratic votes in Senate; Democrats demand health care protections and assurances on fund appropriations after White House canceled $5B in foreign aid.

• Bipartisan negotiations hang on Medicaid, ACA tax credits, and spending levels.

• Emily Wilkins: "The short answer, Dom, is a handful of Democrats. They need a handful of Senate Democrats to get that 60 vote threshold..." (31:30)

Market and Macro Outlook (Marco Papic, BCA Research)

• Yields & Equities: Focus should be on bond yields and fiscal policy; if tariff revenue disappears, yields rise, risk to equities increases.

• Comparative Investing: Suggests U.S. equities are not the best place to invest versus international markets due to currency risk and fiscal policy. (35:10)

• Marco Papic: "For the economy to avoid a recession, we need the consumer to transition from a cash driven world to one of leverage. And that requires borrowing costs to come down." (34:10)

5. Sector Spotlight: Industrials and Broadening Market Leadership

[38:40–43:20]

Sector Analysis (Katerina Simonetti, Morgan Stanley)

• MAG7 Stocks: Outperformance inconsistent; a new bull market may be underway with a broader array of buying opportunities beyond big tech.

• Industrials: Outperforming both tech and financials; positive cash flows likely to accelerate with infrastructure and AI data center investments.

• Interest Rates: Lower rates critical for the thesis; market is pricing in cuts, but portfolios should still be diversified in case of delays.

• Simonetti: "It is absolutely our top pick for the year... We think that that is the sector to focus on and to represent in the portfolios." (41:20)

6. US Open Tennis: Business Boom and Social Impact

[44:15–47:50]

• Alex Sherman on US Open: Tennis prize money and sponsorship are driving a wealth gap in player performance; event has become a major social and media happening, not just a sport.
• Maria Sharapova: "It's a pretty intense payroll and I think the better and the bigger you are, the more flexibility you have to help shape your team." (46:15)

7. Gold Market Rally & Technicals on Nvidia

[48:50–52:20]

• Gold Surges: Hits a new record above $3,600/oz, miner ETFs outperforming due to operational leverage and cost control.

  • Tim Seymour: "The outperformance of the miners to the metal is something that really only started in earnest in 2025..." (49:30)

• Nvidia Technicals: Falls below its 50-day moving average for the first time since April. Semiconductors sector is showing slight relative underperformance but long-term fundamentals remain robust.

• Seymour: "No, I'm not worried about Nvidia. I thought those numbers were fine, especially given the momentum into the stock. I'm not surprised we've pulled back a little bit." (52:10)

8. “Taylor Swift Tax” – Wealth Taxes in Property Hotspots

[53:05–55:20]

• Robert Frank: Wave of new taxes on luxury second homes in wealthy enclaves, exemplified by Rhode Island’s “Taylor Swift tax,” Montana, Cape Cod transfer taxes, and LA’s mansion tax (underperforming on revenue promises).
  • Taxes target places where the rich congregate: "I would say the places where the rich like to vacation is going to be where the money is." (55:05)

Notable, Memorable Quotes

• "This gives Apple a chance to continue to collect that $20 billion a year or more... That's about a fifth of total services revenue for the year." —Steve Kovac (03:40)
• "On total company it could have been 10 or 12% of earnings that could have gotten washed away if the ruling was adverse..." —Wamsi Mohan (07:00)
• "...in practice it does translate to no real changes in how Alphabet already operates, which ultimately bodes well as it battles for share in the AI race." —Mackenzie Sigalos (19:32)
• "For the economy to avoid a recession, we need the consumer to transition from a cash driven world to one of leverage. And that requires borrowing costs to come down..." —Marco Papic (34:10)
• "It is absolutely our top pick for the year...We think that that is the sector to focus on and to represent in the portfolios." —Katerina Simonetti (41:20)
• "No, US Markets are not the best place to invest. Absolutely not." —Marco Papic (36:55)
• "It's a pretty intense payroll and I think the better and the bigger you are, the more flexibility you have to help shape your team." —Maria Sharapova (46:15)

9. Additional Headlines

• Fed Nomination News (Steve Liesman, 53:00): Stephen Myron, a nominee for Fed Board, pledges to defend institutional independence. Confirmation could be contentious but likely (given short-term role and Senate priorities).
• Florida Vaccine Mandates: Florida to end all vaccine mandates in public schools, making it the first state to do so.
• Met Opera-Saudi Arabia: New winter residency deal to address financial issues post-pandemic.

10. Closing Market Check

• Dow: Down approx. 0.5% (at close)
• S&P: Flat
• Nasdaq: Up ~0.66%, led by Alphabet
• Small Caps: Down 0.5%
• 10-Year Yield: 4.2%

Summary

The Exchange 9/3/25 episode centers on Alphabet’s antitrust victory, the changing power dynamic with Apple and AI players, and market ramifications both on earnings and policy. Crucial themes include Big Tech’s enduring leverage, the still-vibrant AI competition, policy risks from tariffs and government funding, and a sector rotation into Industrials. Guest insights and memorable quotes bring clarity to a fast-evolving financial landscape.