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The Fractured Tech Trade, Memory Momentum, and remembering Alan Greenspan 6/22/26
00:44:14
Every Mag 7 stock is down over the past month, while memory names keep rallying. We look at the fractures in tech, and what’s the better AI trade from here. Plus, a look at Alan Geenspan’s influence on Fed policy.
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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. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.
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Kelly Evans
Thank you very much Scott, and welcome to the Exchange. I'm Kelly Evans and as you can see, the markets are running out of steam somewhat today. Although the Dow is higher as the tech trade becomes more fractured, Caterpillar is helping the 210 point gain we see for the Dow. The small caps are up as well, but the S and P is down a third of 1%, the Nasdaq is down more than 1% and Alphabet's having its worst day in a year. We'll have more on that in a moment. We are still seeing gains in the chip and memory space. The stocks index up 1% in 13 of the last 21 trades trading days. SanDisk right now up 5% today is the most overbought stock in history according to Oppenheimer. But as mentioned, the Mag 7 names are slipping and the trade that defined last decade continues to fall apart with every name down for the month. Take a look at Google, down about 6%. It was down 7 at the lows and that's a big shift from when the Mag 7 drove the market and outperformed the S and P in every positive year since 2015. Software, by the way, is not catching a bit either. Quick look at The IGV is off 13% for the month and on top of all of that, Space X not giving the bulls much to cheer about. Off 10% today, down three days straight. It had a high of 225 last week and is back to 165. And that's where we begin today with the company reportedly exploring a $20 billion bond sale. Sima Modi is here with more of what we know. Sima Normally new companies don't do bond sales, but this company is a big one and it's not. It's Been changing so much of what we think we know about ipo.
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Sima Modi
Yeah. The speed at which is going towards this bond sale is pretty unprecedented. Here's the latest Kelly. What we're hearing according to two bankers we spoke to is that Space X is exploring the prospect of this mega bond sale that could kick off as early as tomorrow, reportedly raising as much as $20 billion. Late last week Space X received investment grade credit ratings from the top three agencies. S&P, Moody's and Fitch, all three agencies citing several strengths that Space X has including profits that it derives from starlink, Satel Network and its reusable rocket technology. But also noting a few risks including that Elon Musk's control and the capital intensive nature of Space X is many businesses like xai. In fact Standard and Poor's flagging its AI bet as the riskiest of the three business segments due to its massive upfront upfront investments and the unclear monetization path. Investors see this bond sale as one way to continue funding Space X's goal to buy more chips, compute and invest in its large language model Grok which faces fierce competition from the likes of OpenAI and Anthropic. If SpaceX is able to raise 20 billion, it would come less than two weeks after securing over $75 billion in its initial public offering. There are fixed income calls we're told between management and investors right now, which would imply we could see this bond sale happen as early tomorrow. Just as we watched the stock Kelly fall Now by around 25% from the high it hit up to 25 a share.
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Kelly Evans
What else are you hearing about the declines that you know, look, name this volatile, this large, this unprecedented, it just can't keep going up. But what are you hearing about this reset?
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Sima Modi
Two things I would say. First, nearly every technology company has tapped the bond market to raise funds to fund the AI build out. It's capital intensive. You look at Nvidia last week with a $25 billion bond sale. Google, Matta, Amazon as well. So this is certainly not unique. The timing actually you could say is very good because there's a lot of interest right now in getting exposure to the infrastructure trade, whether it's equity or debt. However, as we' also seen with other high profile IPOs that see that big one day pop Kelly the three to six, three two months and six month performance. These stocks tend to underperform. And I also think back to the day the company went public when we were on the ground and I spoke to a select group of Space X employees who had shared, they're now worth a lot more on paper and that when that first lockup expiration comes at the end of August, early September, they're looking to sell a little bit and
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Kelly Evans
that will be a hangover essentially for the stock. So Seema, thanks very much today. Sima Modi sticking with the mega caps. Google parent Alphabet down 6% today for its worst day in over a year. It's also the worst performer in the mag 7. MacKenzie. Seagallos has more on that. Mackenzie what, what, what are they saying? Why the big decline today?
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Mackenzie Zagallos
So broadly speaking, we're looking at Mag7 as a cohort down every stock down over the past month. But the pain has been concentrated in the spenders Microsoft, Amazon and Alphabet while investors rotate into the suppliers getting paid by that build out like Micron in the memory names. Alphabet though, it is the hardest hit of that cohort today with shares on track for their worst day in more than a year with several AI concerns hitting the company all at once. First is power. Microsoft's 20 year Chevron deal underscores one of the biggest bottlenecks in AI right now, which is energy. It gives Microsoft dedicated power for its AI data centers, bypassing congested grids and potentially speeding up Microsoft's infrastructure build out. Then there's talent. Google DeepMind senior scientist John Jumper leaving for Anthropic just days. Gemini co lead Noam Shazir said that he is leaving for OpenAI. Jumper was part of Google's push into a coding tools, an area where Google has struggled with enterprise adoption and finally model pricing. Chinese AI labs like Deep Sea, GPU and Minimax are leveraging open source models to aggressively drive down costs and this creates a structural risk for Google. Alphabet is spending heavily to build its own vertically integrated AI stack precisely when these lower cost alternatives are raising fundamental questions about the economic value of any single proprietary model.
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Kelly Evans
Model Kelly and you think that's been a big part of it, a part of it today or the reason why these names are broadly lower? When you look at it, it's the
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Mackenzie Zagallos
spenders that are getting hit. You've got Google between a mix of debt and equity, raising $141 billion just since October to pay its capex bill, which is just shy of 200 billion. 200 billion. We heard from CEO Sundar Pichai that that number is only going to go up in 2027 and so the overwhelming and overarching concern here is that the names that are spending big are going to are the ones that have been punished most.
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Kelly Evans
Yeah, I Mac. I still think about the, you know, the Ed Yardeni line which is, this is from last fall when he said AI is going to make the Mag 7 turn on each other. And they used to be in their own pretty little lanes with their protected moats and their, you know, kind of great businesses and now it's kind of a free for all.
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Mackenzie Zagallos
And the outsized concern with Google here is the fact that they are not model agnostic like they are. They're behind Gemini. They've built an in house proprietary silicon chip that competes with the Videos GPU specifically to power Gemini. Yes, they now have outside customers and it powers Google cloud but it's really a big part of optimizing their own model. And then you have Satya Nadella telling the Wall Street Journal that models are becoming commoditized, that they're more model agnostic. That's certainly the path that Amazon has taken with its marketplace bedrock. And Google's making the opposite bet and getting punished for it today.
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Kelly Evans
Exactly. And as people look to towards those lower, whether it's the Chinese models or otherwise, it's going to put a lot of pressure on these businesses for Mackenzie Banks. Appreciate it. Mackenzie Zagallos. Let's turn to our next guest who still owns Google along with other Mag7 names and says he'll add more given the right opportunity. David Katz is the chief Investment officer at Matrix Asset Advisors. You're not selling here, David. You're not worried about that narrative or the idea that these companies are turning into commodity producers. They have, you know, huge investment costs, huge fixed costs and as we know from that famous bet in the 80s, commodity prices never really rise over a long period of time.
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David Katz
These are dominant franchises that have great long term growth prospects and as a result of the recent pullback, you're buying them 18 to 22 times earnings. So we like these stocks. You know, in terms of Google, we probably are up 500 to 800% on the initial investment. We thought it would take a breather this year. It's taken the breather at this point. We think for New money is a great time to be adding to the whole group. We think they're selling at very attractive valuations. Clearly they've lost investment investor momentum. But we think if you have this six month time horizon, you're buying this really good businesses at good prices.
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Kelly Evans
I'd love to, if you don't mind, just walk through each of these. You like Google, Metta, Amazon and Microsoft. So you talked about Google kind of in passing, especially on the valuation point Metta. Why do you like it here?
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David Katz
So Zuckerberg runs a great business. Metta, Facebook, Instagram are dominant global franchises. The bad part about Zuckerberg is he doesn't care about investors sentiment in the short term. He's on a spending binge and investors are angry about that. Stock has gotten down to a point where it's really attractive again, it's at 17 times earnings. If you look at matter over the long term, it swings about 30 to 70% in given years. After it pulls back 30%, it's generally for the last decade been a great time to be adding to it. We do think they're a long term winner. It's a little bit tougher to see exactly how AI is going to be sold as an outside platform. But within Facebook and within Instagram, having AI is going to really improve the advertising. So we think they're a net winner. We hope at some point the lower stock price forces them to have better discipline.
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Kelly Evans
And what about Microsoft and Amazon? Are those as high conviction for you as Google and Meta?
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David Katz
They absolutely are. Amazon is a very prudent company. When they built the cloud business they had negative cash flows. Everybody was questioning it. And longer term that's been the best investment ever. They say they have a greater conviction in building, building out AI. We think the proof is in the pudding. They've done it before. We have great confidence that they're going to be a winner on a long term basis. And Microsoft, we think Copilot, which right now is the weak player in terms of AI, is incorporating Claude into it and Chatty Betty, even at that, they're not as good as getting Claude Direct. We think ultimately they will win with that. And Apple got a pass for the last 18 months without having a great AI product. We think at some point people are going to look at Microsoft and say, okay, they might not be exactly where we want to be right now, but they're going to be and get a much higher valuation. So we think all of those companies are really good places to put money right now. By the time sentiment changes, they're going to be 20% higher at least.
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Kelly Evans
What do you make of this pullback in Space X from the highs?
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David Katz
We think it makes enormous sense in gravity ultimately will drive the stock price lower. We think it came out at a very rich valuation and then went up 50 to 60%. It seems. It seems like a lot of investors that bought Space X on the IPO are just buying the concept really didn't look at the actual valuation. And as the stock gets weaker, you're going to have people that are saying, okay, I made some money, let me get out. We still think it's pretty richly priced. So this is one that we're not interested in. Even though it's down 25% in the last three days. Five days.
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Kelly Evans
And finally, as we mentioned, the chips and memory names especially are still catching a bid today. But I know you're becoming more cautious on some of your exposure there, like with Applied Materials Tech, Texas Instruments in Qualcomm. Why is that?
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David Katz
You know, we really like these businesses for the last few years, but they're up 50 to 100%. AMAT is up 200 to 300%. So again, very good prospects over the near and intermediate term. But the valuations are getting fuller. So we're still holding them, but we're much less enthusiastic about the upside from here. I'd say we're looking at them in the same way we looked at some of the mag seven, six and nine months ago that we were still holding. We like them but we didn't expect great things on a go forward basis. Our expectations are lower for some of the really exciting semiconductor companies right now because they are cyclical and you're paying a peak price with great sentiment and momentum and that changes.
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Kelly Evans
Some say they're not cyclical anymore, but it seems like the kind of cyclical, the highs. Yeah, David, thanks very much. We appreciate it for now and have a great interest asset advisors, you too. Coming up, investors may be rotating out of some tech areas, but not the memory stocks. As you mentioned, these high flying names continue to rise. We'll have details on that ahead. Although Western Digital is down today. But first, former Fed chair Alan Greenspan. Passing today at the age of 100. He left his mark after 18 and a half years at the helm of the central bank. A look back on his life and legacy.
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Eamon Javors
That's next.
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Kelly Evans
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- [13:39]
Sima Modi
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- [13:40]
Kelly Evans
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- [13:43]
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. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.
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Kelly Evans
Welcome back. We learned this morning that former Federal Reserve Chairman Alan Greenspan has died at the age of 100. Greenspan served five terms as Fed chair under four presidents, starting with the end of the Cold War in 1987 to just as the dawn of the iPhone age came upon us in 2007, 2006, he presided over the Fed during one of the longest economic expansions in U.S. history. As the Washington Post wrote in 1997, with a couple of choice words, alan Greenspan can momentarily send the stock market to heaven or hell. Joining me now with more on Greenspan's legacy is Greg Epp, the chief economics commentator at the Wall Street Journal, NBC CNBC senior economics reporter Steve Liesman. Welcome to both of you. Steve, I'll begin with you. Your reflections and what look, his legacy has changed many times and shifted a lot over the years. You know, there were many who crowned him as maestro just as the financial crisis came upon us. It was said that his reputation would never recover. And now, of course, we've had some time to think about whether that's really true.
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Steve Liesman
Yeah, I think time has gone by and we've recognized that Alan Greenspan was human. Some people said he was God's gift to central banking. Other people called him, you know, whatever they called him, they really criticized him. But look, he was definitely a great man who left a mark on central banking, one we're still living with today. The idea of the Fed backstopping liquidity in markets, it wasn't his idea, but he exercised it and exercised it to great effect. I think another thing, Kelly, that we live with from Alan Greenspan is this notion of not addressing bubbles before they happen, but the Fed standing ready to address them after they happen. And I think one of the interesting contradictions about Alan is that he was a person who took pride in speaking opaquely and not so you couldn't understand him. At the same time, he began A trajectory that ultimately resulted in the Fed becoming much more transparent. He's the one who put out the. The statements. First one to put out statements, tell the Fed what the Fed had done and kind of also suggest where the Fed was going. I think he maybe, maybe thought it all went too far, but he started the Fed on the trajectory. And also, and I think another thing, and I'm sure Greg has thoughts on this. Part of what the Fed became was in, I want to say contradiction to the way Alan Greenspan, where he brought it, Alan sort of created a larger than life sensibility. Bernanke tried to bring it back to the committee, as did Yellen and probably Powell. So they had to kind of step away from what Alan had become at the Fed.
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Kelly Evans
And Greg, I was looking back and thinking how many different Wall Street Journal reporters might have covered him. And Alan Murray was the one at the helm in 1987, ma'.
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Greg Epp
Am. And David Wessel came after him. Jake Schlesinger did that for a while. I covered him for five, five years, yeah. And that was great fun. I really enjoyed it. I enjoyed covering the effect as an institution. I love covering Greenspan as a person. I have many fond memories. We had long conversations that often wandered far beyond the traditional sort of thoughts about where interest rates going. I mean, the thing about Greenspan is that like this is a man who had been studying the economy since 19, every single business cycle. Nobody else brought that kind of historical perspective to the study of the economy. When you combine that with the obsession with the data and knowing what it said, knowing what was missing from it, his appreciation for models, but his refusal to be bound by any and his understanding for the psychology of animal spirits. You know, the fact that human nature, as he used to say, was a fundamentally immutable and never changed. It was just an extraordinary combination of things that he brought to a feel for the economy. Now, he did not. He was not single singularly responsible for why the economy did great. And for the same reason, he was not singularly responsible for why there was a financial crisis after he left. But the world felt it had to personify those things in one person. And for better or worse, Greenspan was that person. But what I really think of him as he really did create the mold of modern central banker, one that Kevin was all the successors, including today Kevin Warsh, have sought to emulate, Right?
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Kelly Evans
And in many ways we now are talking about Greenspan again with the briefcase indicator and you know, trying to scrutinize what he said in public and probably bringing More of that with WARSH now and we can all figure out what that means for volatility in the financial markets. Greg. But I'm also struck to sort of reminisce on, you know, he'd look at train tables. What was it that he would take into the bathtub? He had, he, he had such a, a maverick mind for economic data that we often now think of the covering the Fed as this formulaic thing. Oh, you just look at jobless claims here and then you just look at that, this and it's like he really tried. And back then it was, it was much less, you know, formulaic than it is now to figure out how do you actually learn about what's going on with the economy. I mean, he was much more of a unique person in that regard than I think we just think of him now as. Oh yeah, he was just a central banker.
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Greg Epp
I remember one of his staffers once told me that Fed, that Greenspan was an accountant, not an economist. And he meant that in a good way, by which he meant that Greenspan had, was obsessed with making sure that the numbers added up. Did spending equal income, did mortgage finance equal equity, housing price values and equity and wealth and so forth. His great insight about productivity in the 1990s came about from a realization that something wasn't adding up in the income and productivity and inflation data. And I think it's. He made it sound mysterious, but it really wasn't. And the people who studied him realized that it wasn't. He was just asking people to make sure that everything added up. Yes, there was kind of an inscrutability about it. But Paul Volcker was also inscrutable as well, though I don't think that was really the mystique. It was really kind of the obsession with wanting to be true to the data. All of his successors have been the same way. Ben Bernanke, Janet Yellen, Jerome Powell, they all sort of committed to making the data central to their analysis and not being bound by ideology or models. That I think is really the legacy of Greenspan and it's one that I think that in time, Bush will seek to emulate as well.
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Kelly Evans
Steve, what would you add?
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Steve Liesman
Well, I think it's interesting that he was the original data guy. Look, we're all these days, I think, beginning most especially with the pandemic, but looking for other ways to understand what's going on with the economy apart from the official data. And the way I remember the story was this. He looked around. I'm just sort of putting details on What Greg was talking about looked around the economy and he saw all of this investment in tech and he said, wait, why are they all investing in tech here? And remember that was a sort of market oriented thinking that he had. If the companies are doing it, there must be a reason for it. It must be productivity. Well, why is the productivity in the data? And the great decision he made counter to his colleagues at the time and really conventional wisdom in the economics world was to not raise interest rates and keep them steady during the productivity and the technology boom, which is something that Kevin was thinking about now. Now it's also well to say that perhaps his reliance on markets was part of the criticism that he had at the end of his career when he thought the derivative world world and the real estate world will be self correcting by markets and there was no intervention necessary. He later went on to acknowledge he was wrong about that. So a brilliant market based call in 1995 and maybe one that was much less so in 2005.
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Kelly Evans
And finally Greg, just going back to that period in the 90s because it's analogous to the market behavior today, this new technology on the scenes, we're all, we think it makes people more productive. We're just trying to figure out how there was a lot of criticism that Greenspan didn't do more to lean against the formation of the dot com bubble. What is the verdict now and how would that apply to the chapter we're living through where there seems to be a two speed economy? You know, the, the stuff might need to be slowed down a little bit. Everyone else seems to be suffering somewhat from these high rates.
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Greg Epp
No, I think that that is a wrong reading of history. The idea that Greenspan did not lean enough against the tech bubble. He did that is true, not lean against it in 96, 97, but from 98 onwards after the short cut to rates, after the Russian default and then the reversal from those rates, he did tighten. And I distinctly that he played this intellectual game with his staff saying how do I make the case for why all this investment actually needs higher interest rates? And the, and the conclusion they came to was that in the long run this tech stuff created more supply, more capacity and lower inflation. But in the short run all the investments strained the ability of the economy to produce enough goods and services without causing inflation. That people acting on the assumption of future profits would drive stock prices up, up and do a lot of spending that the economy couldn't tolerate. And so greenspan tightened from 98, from 99 onwards. And in that tightening actually precipitated the popping of the NASDAQ bubble. So that is an important lesson to remember today. In the long run I might indeed increase economy's growth rate and reduce inflation. But in the short run it could actually be inflationary.
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Kelly Evans
Quick last word, Steve.
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Steve Liesman
Greg. Yeah, just real quick, Greg. Maybe another topic for another time, Kelly. But, but in anticipation of this segment I looked it up. What was really interesting was the investment in the tech boom happened later. This tech boom we're having right now is very front end loaded. You need to do this incredible investment to get this stuff out there to create a product. If you look at for example intellectual property investment from the national accounts, it went like this towards the end of the 90s and that's what Greenspan later addressed. And of course you had a surge of inflation along with it. This is happening now. You have the inflation. So the question is why doesn't Wash emulate Greenspan? Hold the line. Well, because you have this massive upfront investment in AI. So I think it's important to go back and listen to the history, watch the history, learn the history and see what Greenspan did. But things are different this time and it's worth thinking about how I love
- [24:49]
Kelly Evans
the idea that he was an accountant as much as he was an economist and looking for where things added up and where they didn't. And be fun to hear more from. You know about that from Fed officials now to the extent that we will. Gentlemen, thanks. That was fun. Really appreciate it. Greg and Steve Liesman looking back on the life and legacy of Alan Greenspan who passed away today at the age of 100. From college sendoffs to retirement dreams. Life is filled with many important milestones and making sure you have a plan in place to protect the people you love can give you confidence for whatever comes next. State Farm Life insurance can help protect your family's financial well being through life's milestones. Your State Farm agent can help you choose flexible coverage. You can adjust as your family's needs change. Contact your local State Farm agent today. Like a good neighbor, State Farm is there.
- [25:40]
Venture Global Narrator
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Steve Liesman
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- [26:40]
Kelly Evans
welcome back. Despite the soggy broader markets today and some trouble in the tech trade, we have the Russell at a record high, the S and P and Nasdaq still on pace for their best quarter in six years. It's the Dow's best quarter since the end of 2023, and Caterpillar is helping today by hitting another all time high. On the flip side, Communication Services is the worst performer, thanks in part to Alphabet, as we mentioned. But Netflix is also weighing on the group. It's down almost 7% today to its lowest level and more than a year and a half. It's at $72 and change. It's down 16% in June. It's having its worst month in more than four years, and this would also be the ninth month of declines for Netflix in the past 10. Elsewhere, oil prices are lower as the US and Iran have agreed to a roadmap for a final deal to end the war within the next two months. WTI under 75. Eamon Javors is at the White House with the latest Hi Amen, Kelly.
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Eamon Javors
We heard From Vice President J.D. vance this morning in Switzerland after a topsy turvy weekend of negotiations between the United States and Iran in Switzerland. And the vice President said that one of the developments he was most encouraged about was this agreement by the Iranians to allow nuclear inspectors in. Here's what he said.
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Kelly Evans
The Iranians have agreed to invite IAEA inspectors back into their country.
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Venture Global Narrator
That is a major milestone for the
- [27:57]
Kelly Evans
American people and the first step in permanently denuclearizing or permanently ending a nuclear
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Venture Global Narrator
weapons program in Iran. And that's exactly what we wanted to do.
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Eamon Javors
So a couple of hours after we heard the Vice President say that, we heard the Treasury Secretary Scott Bessen, say that the United States, as a result of that concession by the Iranians, would be unveiling sanctions on the Iranian oil market and allowing Iranian oil to flow freely for the first time since the war. So that sets up an important development for oil. But after all, all of that we heard from the Iranian Foreign Ministry. The spokesman there said, in fact, his understanding was that the Iranians had not negotiated on the nuclear issue at all. And nothing would change in terms of IAEA inspectors in the country. So it's a little bit of a muddle right now. Kelly, we just had a social media post from the president who said that everybody agrees that Iran will allow massive nuclear inspections in their country. So the US Side saying one thing, the Iranian side saying something quite different. And we'll just have to muddle through and figure out exactly what's happening on the ground in Iran in the days to come.
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Kelly Evans
Becca and the theatrics over the weekend, Eamon, with the meeting in Switzerland and J.D. vance trying to, you know, talk to Bosan, who snubbed him and who what did all of that add up to as all was said and done? Because a lot of the information was also coming from the Iranian side pushing their version of the agenda. And as you mentioned today, right here we look at the markets, the oil price is lower. So it tells you they're still seeing some signs of forward momentum.
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Eamon Javors
Yeah. I mean, clearly the oil market, you know, I would think is responding to what the Treasury Department did in allowing those Iranian oil sales. But the theatrics were theatrical, as you as you point out. And I think one of the things that was happening with all of that over the weekend was this idea that the Iranians are trying to push a wedge between the United States and Israel. They see some political advantage for their side by the frustration that you've heard Washington expressing about Israeli criticism of the deal that President Trump is trying to engage in here with the Iranians. And I think the Iranians are trying to drive that wedge harder by making the Lebanese issue front and center in their negotiations and therefore forcing the United States to really lean on Israel to dial back back its enforcement operations in Lebanon. So I think, you know, they see a tactical advantage there to press what they see as an advantage. And the US Is going to have to respond to that.
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Kelly Evans
All right, for now, Eamon, thanks very much. Eamon Javors at the White House. Let's get over to Contessa Brewer now for the CNBC news update.
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Contessa Brewer
Contessa, yeah. And Kelly, in a similar vein here, Secretary of State Marco Rubio is heading to the Middle east as the Trump administration is looking to sell its memorandum of understanding with Iran to Gulf allies. The State Department says Rubio will travel to the United Arab Emirates, Kuwait and Bahrain Tuesday through Thursday. But of course, these Gulf leaders are concerned about the possibility of a $300 billion reconstruction fund for Tehran. Legendary music executive Clive Davis died today at the age of 94. Davis helped guide the careers of dozens of stars, including Whitney Houston, Aretha Franklin, Janice Joplin and Alicia Keys. Most recently, he served as the chief creative officer for Sony Music Entertainment and previously led Columbia, Arista and Jay Records and ESPN said Michigan men's basketball coach Dusty May is leaving the team to become the next head coach of the NBA's Dallas Mavericks. May lead the Wolverines to a national title this year. Recently, he'd signed a new multi year deal to stay with maybe Michigan. He's the first coach to leave immediately after winning March Madness since Larry Brown in 1988. But you know, if the Mavs come calling, who's going to turn him down?
- [31:44]
Kelly Evans
Some people do great making that transition. Some. Some go back to college. So he's got to take his shot. For sure. We'll have to watch and contest the banks.
- [31:51]
Contessa Brewer
Sure.
- [31:52]
Kelly Evans
Coming up, the memory stocks up again today as SK Hynix overtakes Samsung to become the most valuable company in Korea. Korea and Micron getting a couple of big price target hikes. We'll talk about how much fuel is left in this rally next. Plus, Pennsylvania Governor Josh Shapiro will join us with the flurry of deals going on in his state. And it's not just a data centers, although they're involved. We'll have those details next. Come back to the Exchange most of the memory names starting the week on another high Note. Micron up about 5% SanDisk 6 after major price target hikes from Bernstein and Needham while overseas SK Hynix overtook Samsung as South Korea's most valuable company though shares up five and a half today. Our next guest is waiting for a pullback to get in, surat said. He is DCLA Managing partner and a CNBC contributor. Sir, I'm actually glad to it's good to see you and I'm kind of interested to kick it off this way for the following reason. I think of the memory trade a little bit like a roller coaster. Like you either want to get in when it's up and then get out when it's going down, but do you want to get in when it's going down?
- [32:55]
Surat Study
I think we have to wait to see what the fundamentals are going to come out of these earnings calls. I mean, right now we see the demand is there for at least a couple more years and you're absolutely right when it comes down you want to get out of the way. But the question is is a short term blip on the way to a higher which right now looks like it's going to be but some, you know, if you look at these stocks, I mean micron is 800, 800% last year, so definitely a little bit ahead of itself. And then when you do get that pullback, that could be the opportunity because Kelly, when we look at the long term demand for any of the chips that these companies feed into and also any of the companies, whether it's Apple data centers, etc. It's still there. It's going to be a question of pricing that's going to be really important.
- [33:36]
Kelly Evans
So let me ask this then. Let's say Microns, around eleven hundred dollars a share or what have you. And I know the answer is to some extent, it depends. But I just want to hear your thinking through this. Let's say it pulls back 10 or even 20% but the reason is because prices are softening and capacity is coming online. Do you still want to get in to the trade?
- [33:53]
Surat Study
I mean, yeah, if that, if that is the case, there's a fundamental change in the thesis. If the case is hey, we are hitting our numbers and we're exceeding guidance and the Stock pulls back 20, 25%. It's just that the quick fast money in the last month has kind of come out of it.
- [34:11]
Kelly Evans
I see.
- [34:11]
Surat Study
And you've seen that if you look at track the Nvidia's of the world over time too. If on the other hand you see, okay, fundamentally we are seeing our demand slow down, our key customers are not ordering anymore. That is the knockoff effect that you normally see in semiconductor companies. And actually you'll see that kind of the microcontroller companies like a microchip. So you could have a proxy in the memory stocks similar to the microcontroller companies. And that's where we're going to be watching for as investors.
- [34:38]
Kelly Evans
How about the Software names, the Mag 7? Where are you frustrated and where do you see opportunity?
- [34:45]
Surat Study
Well, super frustration in the software names because the, you know, they're like super inversely correlated whether it's salesforce, work day into it, even servicenow as they go down, you know, the semiconductor stocks go up in that way. So now they're trading at below 10 times cash flow. So the question is, you know, what is the bottom there? But they're going to start buying back a lot more shares. They don't really have a lot more debt on the max seven sides. Interesting to see how Google's trading today just with kind of a little bit of news. We still like that. I'm not frustrated with Google's of the World at this point. Amazon I'm a little frustrated with. I think, you know, they're in this really sweet part of the business stock really hasn't reflected kind of where they should be. So those would be kind of the top two on the Fab seven that I would like to hold for the long term.
- [35:29]
Kelly Evans
And what do you make surround of the cheaper Chinese alarms, the AI models which are as it sounds like making some inroads. I mean do you think that's why the US kind of trade is struggling today? Because there's this idea that, you know, fundamentally you can kind of get the product and it doesn't necessarily have to involve our MAG7 and Nvidia and all the rest of it.
- [35:54]
Surat Study
I think it's larger than that. It's not just the Chinese. It's kind of what we've been saying about the labs. If they're not proprietary models, anybody could start using them. And then how do you incorporate them into the larger companies? The question is going to be around security. How are you going to actually implement it? Who's going to have access to the data? But this is just kind of what we're seeing over time that you'll see more and more and it's like what happens when, you know, we saw with Gemini and Claude etc. So more and more of these become more commodities. What's the cost going to do? You're going to see more pressure on some of the bigger companies because they will eventually be something that we can all use. Just like kind of search was that we can all use now too.
- [36:33]
Kelly Evans
Yep, absolutely. And I know like you said, are looking for kind of more downside in the oil price post conflict if we're moving into that stage which should help the economy more broadly surround. Thanks very much for, for the time being, we'll leave it there. Good to see you.
- [36:45]
Surat Study
Thank you.
- [36:45]
Kelly Evans
Sarat study from DCLA coming up. Eli Lilly recently choosing Pennsylvania for the site of a new manufacturing plant. Governor Josh Shapiro joins us to discuss that and his broader efforts to attract business to his state. That's. Pennsylvania is one of the states looking to attract new business investments by cutting red tape and regulation. And it seems to be working. Eli Lilly recently announced it'll build a new 3 1/2 billion dollar plant there citing red tape reduction for its decision. Our own Scott Cohen is in Philadelphia with Pennsylvania Governor Josh Shapiro. Excited for this conversation, Scott. But we haven't announced the top states yet. Right. This is kind of a build up.
- [37:50]
Scott Cohen
That's right. We milk this for all we can. Kelly and Governor Shapiro, I know you just came from the FIFA fan fest here. This is another FIFA World cup venue and there's a lot of excitement there. And also, just to set the stage, we're in a place called the Bellwether district, which used to be a refinery, now it's being redeveloped. And the window behind you is a, I understand a one and a half million dollar, A million square foot, I should say drinks, drinks packaging facility where I understand they got the building permit in 30 days. And I guess that's what we're talking about.
- [38:23]
Josh Shapiro
Look, Bellwether is a great example of what we're doing here in Pennsylvania. Converting old sites that weren't generating economically, moving quickly, using our fast track permitting process, and attracting, you know, world renowned businesses to set up shop right here in Pennsylvania when they could choose anywhere. And Bellwether is a great example of that.
- [38:44]
Scott Cohen
And you really identified, I think from the get go, this whole idea of speed to market, which is what everybody is telling us about.
- [38:50]
Josh Shapiro
That's exactly right. I mean, Look, I called CEOs right after I got elected governor who hadn't chosen Pennsylvania to set up their new warehouse or their new headquarters and said, what are we doing wrong? And, you know, they gave me a whole litany of things that hadn't been going right. The number one thing I heard over and over and over again was speed. We were just too damn slow. We completely reformed our permitting process process, and now we're a national model for speed. Our fast track program, which is what we have here, gives a CEO not just speed, but absolute certainty in the process. And I want to be clear, you still need to adhere to strict environmental standards, public health, public safety standards, but it doesn't mean it needs to take forever. We're a government that now works to get to. Yes, and works quickly.
- [39:35]
Scott Cohen
But I want to ask you about that. You're a former Attorney General. You know that one person's red tape is another person's smart regulation. You've run into a little bit of a pushback with your, with the Amazon AI announcement. $20 billion, great win for the state. But there's been pushback and now you have instituted these, these grid standards. So can you have it both ways? Cutting red tape but also imposing this whole new layer of scrutiny, at least for data centers?
- [40:03]
Josh Shapiro
Well, let me address both parts here. Your question. First off, just because something took a long time to go through the bureaucracy didn't mean that the bureaucracy was working effectively. You can move quickly and still protect the environment and Public health and public safety. It's a matter of mentality. I made clear to our 80,000 strong workforce, we got to move quickly. We got to generate jobs and economic growth. We got to give certainty. It doesn't mean we give a pass to CEO CEOs who want to build a building and haven't earned that permit, but it doesn't mean that we have to create artificial slowdowns as it relates to data centers. We've been incredibly transparent. My grid standards make very clear. You want to build a data center here, you got to generate your own power, you got to pay for it. You got to be transparent with the local community. You got to make sure you're engaging the local community with a community benefits agreement and hiring local labor and you've got to make sure you protect, protect our water supply. These are all standards to try and frankly root out the speculators who are never going to build a data center but are wreaking havoc on our communities and instead creates an opportunity for someone who's serious to try and do it the right way.
- [41:10]
Scott Cohen
The industry doesn't like it.
- [41:11]
Josh Shapiro
That's not true. When you talk to serious players in the industry, they appreciate that we're being transparent. We've got about three projects that we've permitted in Pennsylvania. End there's probably 100 projects out there, 90 plus percent. 90% of them are speculators who are never going to get the energy, who are never going to be able to work with the local community and who don't have an end user. The serious folks understand they've got to bring power, they got to pay for it and they got to treat the local community with respect.
- [41:40]
Kelly Evans
Governor Shapiro, thank you, Kelly. Back here in studio. This is a bit of a sore spot for me because my, my closest friends in the neighborhood are most moving to, you guessed it, Pennsylvania. I'm in New Jersey. They, they're getting, you know, they got the bigger house, it's got the, they've got the land. It's a, you know, there, there's proximity to still.
- [41:58]
Josh Shapiro
Kelly, you can come to Pennsylvania too.
- [42:01]
Kelly Evans
Well, it's a bit of a further commute I'd like to know more about is the state. You know, people are already talking about how you don't get income tax on your 401k distributor. There's so many things that the state has that make people kind of glance over there and go, you know, could you talk more about those efforts? And when we hear about Florida trying to literally do away with property taxes, is there hope for us up here in the Northeast. Could Pennsylvania become a version of that?
- [42:27]
Josh Shapiro
I think we're a model of effective government, by the way, bipartisan government. We've made historic investments in our schools because every kid deserves a foundation for success and opportunity, by the way. And we've doubled the amount of funding for Votech and apprenticeship programs and non college pathways to success. We've invested in hiring 2,000 more police officers, a billion dollars in violence prevention initiatives. Violent crime is down 15%. And then we make sure that in the community where you love to live, you can afford to live there. We've cut taxes seven times on my watch. And you can find a job in your communities. I want you to think about this for a second, Kelly. We have done more economic development in the last three years than the prior 15 years combined. Moody's just said we've got the only growing.
- [43:15]
Kelly Evans
You're just bragging that now. Now you're just making me feel bad. Okay, so let me ask you something on a much harder topic, which is I'm going to ask you about the situation in Iran right now at vis a vis Israel. We just talked to our reporter Eamon Javers last block who said, look, to some extent Iran is now trying to drive a wedge between the US And Israel. Obviously, it's a huge hot point what's going on between Israel and Lebanon right now. What do you think the US can reasonably hope to achieve given the state affairs in Israel with Netanyahu right now? How should we both make sure that they feel protected and that we can try to find an end and a resolution to this war? And what do you think of the way the administration has handled this so far?
- [43:57]
Josh Shapiro
Well, I think what's clear is the Trump administration, the president specifically chose to enter this war and had absolutely no plan when he went in. And that's why he's got no idea how to get out. He's created chaos in the region, not just in Israel, Lebanon and Iran, but in the entire Arab world and the entire Gulf region. I think the president wasn't clear with the American people, wasn't clear with, with the world community what the specific task was. And now look where we are. Months later, we swapped one ayatollah for another who's about 30 years younger and arguably more dangerous. The highly enriched uranium is still not under control. And out of Iran, Iran, who really exercised no control over the Strait of Hormuz, is now controlling it, wreaking havoc on not just the American economy, but the global economy, forcing the American people to spend billions more on energy, making it much harder for businesses. The president created a mess and now he's dispatched J.D. vance over to Pakistan to try and figure out a way out of it. And seemingly both of them are getting played by the Iranians. It doesn't bring me joy to say that I'm on Team usa. I want us to win. But this is the problem. When you have a problem president who is just hell bent on creating chaos around the world. And what we need instead is steady handed leadership and we don't have that right now.
- [45:22]
Scott Cohen
Governor, I want to kind of bring this all back together with what you were just talking about now, what we were talking about, about sort of this pragmatic approach to business. And I don't know if you have anything that you want to announce here you're more than welcome to. But, but just is this what it's going to take, this kind of, kind of approach for a Democrat to win in 2028, for the Democrats to take back the White House?
- [45:45]
Josh Shapiro
Well, look, I'm a pro growth Democratic governor. I'm a pro growth governor who likes to cut taxes, create jobs and economic opportunity. If you put more money in people's pockets, if you've got good schools, if you've got safe communities, good things are going to happen. We're proving that here in Pennsylvania. I think that's a recipe, recipe for success. Whether you're in the swingiest of all swing states in the country here in Pennsylvania or any others. I'm proud of this success and I think Pennsylvanians are better off as a result of our work. We obviously have a lot more work to do. I'm going to continue to stay at it, but I'm proud to be a pro growth governor.
- [46:21]
Scott Cohen
Josh Shapiro, 48th governor of the Commonwealth of Pennsylvania. We thank you for taking the time. Glad to get you out of the rain. Kelly, back to you.
- [46:27]
Kelly Evans
All right, I heard that answer. 2028 I think is already no. Governor, thank you very much. Josh Shapiro, Scott Cohen, thank you as well. And we're back with more right after this. Signing a new compute agreement with artificial intelligence startup Reflection AI. And the deal comes at a pivotal moment. Deirdre Bosa has more in today's tech check. Deirdre. Hey Kelly.
- [46:51]
Contessa Brewer
So Reflection it is Space X's latest compute customer following anthropic Google Cursor as Musk builds out his data center business business. Now Reflection though, it introduces a new element, the open source push which is gaining a lot of momentum after Anthropic cut off access to Fable and Mythos and as Chinese labs really close the gap in terms of capability. Net reflection valued at $25 billion. It's trying to be America's answer to deep seek, building frontier open source AI models that can be customized and run with more control. Reflection, however, hasn't yet released released a public frontier model and the Chinese competition it is moving quickly people. I talked to Kelly here in Silicon Valley. They've been pointing to Jeep, whose latest GLM model as a real contender, potentially even another deep sea moment. So this deal is important for both sides here. Reflection gets access to the compute it needs to try and catch up and Space X well, it gets another sign. It's another sign that Colossus can become a business line of its own for the trade at large. The the pressure is growing for an American alternative to both closed frontier models and China's open source push.
- [47:57]
Kelly Evans
Kelly Excellent.
- [47:58]
Mackenzie Zagallos
Excellent.
- [47:58]
Kelly Evans
More to come on this story. Deirdre thank you very much. Deirdre Bosa Power Lunch after the break.
- [48:07]
Venture Global Narrator
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Landsford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com market update podcast or find Schwab Market Update. Wherever you get your podcasts.