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TikTok's U.S. Investors, Private Equity Falters and OpenAI Continues Spending 9/25/25
00:46:56
David Faber has new reporting on who will control TikTok's future in the U.S. Private equity firms struggle to deploy capital. And is OpenAI's massive spending sustainable?
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- [00:00]
David Faber
And now a next level moment from ATT Business. Say you've sent out a gigantic shipment.
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Melissa Lee
Of pillows and they need to be.
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David Faber
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David Faber
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Melissa Lee
Hey Fidelity, what's it cost to invest with the Fidelity app? Start with as little as $1 with no account fees or trade commissions on US stocks and ETFs. Hmm, that's music to my ears. I can only talk Investing involves risk.
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Mike Santoli
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Melissa Lee
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David Faber
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Mike Santoli
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Melissa Lee
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David Faber
Details at fidelity.com commissions Fidelity Brokerage services LLC Member NYSE SIPC.
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Leslie Picker
You'Re listening to the Exchange. Here's today's show.
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Melissa Lee
Thanks Scott. Welcome to the Exchange. I'm Melissa Lee along with Mike Santoli. Stocks under a bit of pressure today but off the lows as potential fatigue in the trade overshadow some positive economic data this morning. Big tech mostly lower. Oracle among the biggest drags there. Intel though the standout to the upside, rallying on reports of an Apple investment, the S&P 500, Nasdaq now down three straight sessions. But worth noting, the pullbacks have been.
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Mike Santoli
Fairly shallow have the S and P is like a percent and a half off its record high. Energy continues to be the standout despite a small pullback in crude prices today. The sector up more than three and a half percent this week, Oil hitting a seven week high yesterday and we.
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Melissa Lee
Are watching yields ticking higher on the back of the better than expected GDP and claims numbers. A 10 year holding just below 4.2%. Investors now waiting for tomorrow's PC report, of course the Fed's favorite inflation measure. But it seems like the path of least resistance is lower at this point in the markets.
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Mike Santoli
There is this window that's opened up seasonally and because the market got overbought and because we're starting to have this little bit of a rethink of the AI drivers for some weakness. The issue is is it going to be finally the first 3% s and P pullback in five months or is it going to continue to rotate around as we've kind of seen, you know, semis are getting hit today. The whole food chain that that goes into AI is having a step back off massively high elevated levels. And then some of the alt energy stuff, you know that we've talked about that's adjacent to that trade, it's getting hit. The hot economic data has yields higher or at least the upward revision to gdp. All of a sudden we're taking Fed rate cuts out and it just isn't one of those kind of moments to start to stop and say maybe we, we overplayed our hand in terms of how great the environment was going to be in the short term. But so far, no, not to great net effect on the index level.
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Melissa Lee
Yeah. We had Goolsbee reiterate the notion that the Fed, he doesn't believe the Fed should be front loading. All the rate cuts is less sort of, you know, so path of least resistance is lower for the markets because we don't really know what the course of Fed cuts will be. Yeah. Let's take into the tech headlines this week which seem to be dominated by spending. No surprise, Open air committing to $850 billion in spending this week alone. That's more than the GDP of Singapore. Meanwhile, Cor we've expanded its partnership with a startup with a new $6.0 $2.5 billion contract to power next generation models. And Apple may reportedly invest in intel, which got a cash infusion from Nvidia just last week. So just how sustainable is this level of spending? Joining us now is Gene Munster, managing partner at Deepwater Asset Management. Gene, it's always great to chat with you, but on a day, you know, past couple of days where some are wondering about these headlines, how do you somebody who is an analyst who looks at these stocks and companies, how do you sort of think about all these headlines of guarantees, of commitments, of money not yet spent? And you know, we don't know what the ROI on all of this is still.
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Gene Munster
I mean you hit it right there. The money not spent. And there's this disconnect between what the headlines have said since September 4th and Zuckerberg's comments at the White House about 600 billion. And then you adjust that for the hot mic. And then Susan Lee's comments at Goldman still 45% capex growth. You look at what OpenAI is talking about with core weave, what they're doing with Oracle, all these, whether it's met as comments or Core Weave or what's going on with the Oracle announcement and also the OpenAI Oracle Tour that they had in Texas this week is all about things to come. And I think that the market is really telling us that ultimately they want to see some substance around this. They, they are impressed at where we've come. But for this market to move higher I think they need to get greater credibility. And let me frame that just in a slightly different perspective is that if you take what has been said by these companies over the past three weeks at face value of where things are going, the market and these companies in particular should be I think measurably or dramatically higher. I think that the market is heavily discounting this type of growth. I just want to put one kind of metric around. What it all ultimately means is that next year capex for Meta or for Google, Amazon, Microsoft call it plus 7%. If you play this in what we've heard from these companies over the past few weeks you should see capex growing closer to 50% for the next several years. And so massive disconnect there Melissa and understandable given where we are from the, from where the market's at.
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Melissa Lee
So do you think that the discount that we've seen being put into some of these stocks is adequate? Especially because it's not just the asterisk to growth, there's another asterisk in terms of the bottlenecks, the external bottlenecks that this growth could face like power for instance. Let's say there was a demand for all this capacity and there was, there were the dollars spent on chips and infrastructure etc. There's still money that needs to be spent on generation, on power and all of those things that we may not be factoring into these eye popping numbers.
- [06:13]
Gene Munster
I'll come back to this all has stuff on the Come here Melissa. We've got to build the power, we got to build the infrastructure. This is all things on the come and I think that that's what the market's having a really hard time digesting is that the power needs of this, the compute Nvidia. Great news for Nvidia over the past several weeks the stock's up 1 plus percent, Nasdaq's flat. I think it all comes back to this concept of just the unbelief about where we ultimately are going and I think that that's, I mean I would put just a slightly a different perspective on it. This unbelief around this is that if we look at the comments from OpenAI this week and just zero in on that, we look at what they've done to their revenue outlook for calendar 30. So we're still five years away. They've raised that from 175 to 200 billion. Everything we're hearing from these companies is that that numbers, those numbers are going to continue to move higher than where I think investors are at. And it is understandable, given what you just described at the infrastructure buildout level, what's needed. But ultimately that is going to come to fruition. I think this spending, whether it ends up being 2028 or 2032, I think it's relatively a rounding error. The big news is that our lives are going to be dramatically impacted by AI and these companies are going to benefit from it.
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Mike Santoli
Jane, one thing that I keep trying to sort out is what to make of the extreme level of corporate urgency that we see. As you're describing here, every single company keeps raising its estimates for how much it's going to have to spend, how fast it needs to move. If it's all about moving towards something wonderful, that's great. If the pie is getting that big, if they also feel defensive about it, if they're also fearful about where their moats are, if they don't invest this way, I think that's a little bit different. Or at least it's not as much of an everybody wins type of story. Right? I mean, I keep saying if matters paying $100 million for talent, it must mean that the risks of not having that talent are really extreme on the downside.
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Gene Munster
So there are two forces in play here, Mike. At the first is at this, the large cap level. This is where a lot of that infrastructure spending is being done basically spread out across different tech companies. These are the hyperscalers spending money. They have an opportunity to have an outsized reward here. And as they look across the table, I do strongly believe that this essentially arms race effect is in play here. And the fact that those companies I mentioned were looking for a 7% increase next year in their capex, and I think that number needs to be dramatically higher if they decide to pull back some of that spending to the benefit of, let's say, an extra 50 billion a year in cash flow. It really doesn't add much if in fact AI does present the opportunity that they believe it is today. And so I think the end game here is that we're going to continue to see this investment. And to answer your question, those companies will benefit, whether it's through tokens on the model side or selling infrastructure. And then I think there is going to be this widespread benefit of all the applications that are built on top of that. So I don't see this trade, if you will, being dedicated to the largest companies over the next several years. I do think it's going to spread out to smaller companies and a lot of startups that many people haven't heard of today will eventually become household names in the future.
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Melissa Lee
Gene, we're showing intel up on the screen right now. It's higher by about 7% building on some gains in yesterday's session on this report that Apple may be investing in it. It's not clear what Apple gets out of this. Gene, I'm wondering what you think of this sort of headline and if it makes sense, if this is just sort of Apple's way of getting in further good graces with the Trump administration. They don't want to give them another bar gold so they're going to buy some Intel.
- [10:06]
Gene Munster
That's exactly it. I mean this would be a weak deal from my perspective. I don't know the details of it, but just Apple giving any money to Intel I think would largely be a mistake for strategic reasons. Of course. Their silicon is better than what intel has. So from a product development standpoint there's little to offer there as tsm. Their foundries can build chips that are two to three years more advanced than what Intel's nascent foundry can build. So there's not a particular advantage there and that kind of leaves the kind of the political card on the table and there's a lot of pressure on that. I think what Nvidia did last week related to, to their investment in Oracle, I think is, is, I think speaks to this environment. So I hope nothing comes out of it. If something does come out of it, I hope it's a small number, $5 billion. And ultimately I think that if it does in fact come to fruition, it's, this is just all about, I think testimony of how treacherous the political environment is for these tech companies.
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Melissa Lee
Gene, great to see you. Thank you. Gene Munster. Well, nuclear startup OCLO getting caught in the unwinding of the trade falling 10% today and now 18% off yesterday's record intraday high for its worst two day move since March. Goldman, Nishin and coverage today with a neutral rating, a $117 price target or about 11% downside from yesterday's close. Analysts say its valuation appears full. Its fuel strategy needs some more de risking. There's also some big insider selling over the past few days. About $20 million worth of shares sold but shares are still up more than 1300% over the past year. And of course, Mike, this has a Sam Altman tie, which is one reason why it was so popular.
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Mike Santoli
Exactly. No, there's been massive sort of stampedes into all of these very leveraged plays on the power side of this story. And because the benefit or the build out is over so many years in the future, like if you're discounting some big estimate of what you're going to earn tomorrow, back to today, the variation in fair value today is massive. You know, we talked to Bloom Energy CEO yesterday. That stock's down 20% this week.
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Melissa Lee
Take a look at today.
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Mike Santoli
Same kind of a deal. Also some insider selling there. So obviously this is one of those, you know, kind of gut checks in a vertical trend in a lot of these stocks. And I'm sure it's not the last one.
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Melissa Lee
Yeah. So. Well, let's turn to Washington where the countdown to a potential government shutdown is back on. Emily Wilkins is there with that story. Emily, what's the latest?
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Mackenzie Sagalos
Melissa? Well, right now, six days away from a government shutdown, and right now the White House is upping the ante for Democrats who might be considering going into one. Now the White House is threatening massive federal layoffs if a shutdown occurs. It's unclear at this point exactly how many employees would be impacted. But in past shutdowns, hundreds of Thousands of employees, 2013, you had 850,000 employees were furloughed. But to be clear, the guidance that went out last night from the Office of Management and Budget, it does shield workers in prediction agencies and programs that are consistent with the president's priorities. Doesn't go into too much more detail than that. And at this point, if this event is meant to be a way to intimidate Democrats into voting, it doesn't seem to be working for them. Democrats are remaining firm that they will not agree to a temporary funding bill unless it has something on health care. Now, several Democratic senators have doubled down after the White House's threat to fire employees. You're seeing Senator Elizabeth Warren. She recently tweeted that Democrats think the American people deserve health care. Republicans would rather shut down the government than lower health care costs. And this is an argument that Democrats are hoping eventually wins out. And there are a number of health care related items that Democrats are asking for. Most notable here are really extending those premium tax credits for Americans who get their assurance through the Affordable Care act marketplace, you know, saving some Republicans. They're open to a partial extension of those credits to keep insurance cost costs low. But with Only six days left. Again, it doesn't seem like there is going to be time for an actual compromise here. We'll see what happens when senators return on Monday. But at this point, it seems more likely than ever that we will be headed towards a shutdown, guys.
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Mike Santoli
And Emily, this always seems to come down to each party trying to do the calculus of, you know, who will get blamed and whether people care more about the shutdown than what's said to be at stake in it. So right now it's, it feels as if both sides think the other one's going to wear it.
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Mackenzie Sagalos
That's absolutely the case, Mike. I mean, Democrats, they do believe they saw what happened with that one big beautiful bill, the Trump megabill debate that they really talked about health care, they talked about the cuts that were happening to Medicaid, and they saw a really positive response from a lot of their constituents. And remember, if you're a Democrat, you have to keep in mind what happened in March when they did vote with Republicans to keep the government funded. Senator Chuck Schumer got a lot of blowback for that decision. And they've heard from their constituents that they want to fight. That's what they're trying to deliver. Of course, Republicans are saying, hey, this is clearly in the Democrats court right now. In the past, Democrats have supported a, what's known as a clean stopgap, something that just continues current government funding while they work on the more detailed funding breakdown. And Republicans are saying, look, Democrats support it in the past. There's no reason they shouldn't support it now.
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Mike Santoli
Yeah. All right. The current fight till the next fight. Emily, thank you. All right, coming up, President Trump expected to sign an executive order facilitating the sale of TikTok later this afternoon. A lot of the details remain under wraps or not yet settled. We'll look at the fallout to the digital advertising landscape next.
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Melissa Lee
Plus, Robinhood's chief brokerage officer will join us with the firm's latest trading trends and to reveal the stock that for the first time in five years is no longer its customers. Top holding, the exchange is back right after this.
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Mike Santoli
This is the exchange CNBC Morning, Zoe. Got donuts.
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Melissa Lee
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- [18:03]
Mike Santoli
Welcome back. President Trump expected to sign an executive order later today facilitating the sale of TikTok to a group of mostly American investors who would control about 80% of the business. With Oracle slated to oversee the app's key algorithm, shares of both Metta and Alphabet lower today along with the market, but Bernstein recently warning if TikTok users are required to rebuild their accounts from scratch after the sale, there could be a mass churn event and our next guest here agrees. Joining us now to discuss what all this means for the digital ad market is Mark Douglas, CEO of advertising tech firm Mountain. And Mark, it's great to have you on this. Is this a genuine concern among advertisers that essentially this magic ad targeting algorithm is all of a sudden not going to be as useful, at least for for a while?
- [18:50]
Mark Douglas
Yeah, I mean, it's a legitimate concern. My opinion on this is is everyone is so focused on where the data is that they're forgetting where the money is and the money is in all the engagement. If you have to basically install a new version of TikTok app, not a new version, a new app like the US App, that would be a massive churn event. The other thing that I'm concerned about is in terms of where the money is, is TikTok shop. A lot of people don't realize that TikTok shop generates a lot of the influencer engagement, which is what keeps the users engaged and generates a lot of the revenue. So I think both of those things are big concerns. The latter one I haven't seen discussed anywhere and it's my biggest concern.
- [19:39]
Mike Santoli
So what would you do in anticipation of that possibility if you're that concerned about it? Are. Are advertisers, our influencers, trying to diversify away? Is there really money in motion here toward other apps and other sites?
- [19:53]
Mark Douglas
Yeah, well, that's already been underway. I think it was either late last year, early, very early this year where TikTok was, you know, off for like 12 hours or something like that. And a lot of influencers never recovered from that. A lot of the advertisers basically decided this platform is like they can't count on it. And influencers have been hurting ever since. If TikTok shop for some reason was disrupted, it would create a second event like that and then the third event is basically. If I had to basically install a new app, I don't think you're going to get every. A lot of people would decide that's a good moment to basically try to wean off TikTok, not aggressively reinstall essentially.
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Melissa Lee
Or you can have like a Jimmy Kimmel live moment mark where you have a lot of, a lot more people taking a look, more people downloading the app just to see how different it actually is. So there could be that sort of beneficial PR aspect to TikTok.
- [20:53]
Mark Douglas
Yeah, well, you just stated the first rule of marketing, which is you can never predict consumer behavior. So the. So you're right. But I think generally the view is, is that like if the current TikTok you have installed on your phone needs to be the TikTok tomorrow, not even if it works differently. It's not like there's TikTok that, you know, slash us or something like that.
- [21:18]
Melissa Lee
But in terms of advertisers pre new launch of US TikTok, do you think there's going to be a mass migration to other platforms? So will we see that at least initial benefit to meta to a snap to all the others out there as people don't Want to figure that out first. We'll let the US Tick Tock launch, see how it shakes out. But we're going to go to these other places with our ad dollars. Maybe they don't go back.
- [21:43]
Mark Douglas
Yeah, well, what, what I believe is going to happen is this like transition, whether it's to a new app or essentially even in the Oracle and these other companies that are rumored or are going to be running it. That's not going to literally happen tomorrow. So it would be a, and it would be a disaster to do this at the start of the holiday season. It would just decimate TikTok sales and revenue because, because people won't run towards uncertainty during the holidays. And yeah, I do believe that Meta Mountain, Google would, you know, any, all other performance marketing platforms would be a beneficiary of that. But I don't think that's going to happen during the holidays. I think we're looking more like early next year. So there is time for retailers to adjust and they are going to get cautious unless they know the exact details.
- [22:34]
Mike Santoli
And just quickly, Mark, even absent, you know, any need to go to a new app just as it is right now, has Tick Tock's advantage in terms of ad serving and engagement diminished at all? I mean, has reels kind of caught up? Is YouTube sort of there or is it still seem like it's just got this special sauce?
- [22:54]
Mark Douglas
Well, you know, again what TikTok shop is, which I've referred to a few times, it's having influencers on their own create essentially reels that pitch your product or mention your product in interesting ways and if you like it, you click it and you can buy it right on the spot. And so that's pretty unique to TikTok. The meta tribe and with Instagram tries to do some version of that. So I think they're pretty differentiated and there's not really this issue. I don't think Instagram has caught up to that level of influencer engagement and the ability to monetize it. I think almost every influencer I talk to, they make the vast majority of money on TikTok. Instagram's just still not fully there yet in terms of the ability to produce that kind of revenue.
- [23:43]
Mike Santoli
Got it. Mark Douglas, thanks very much from Mountain.
- [23:49]
Melissa Lee
Coming up, open air dealmaking parade rolls on. First, Coral Weave expanding its current agreement with the startup by striking a six and a half billion dollar deal with them. Shares were up as much as 4% today, but have since turned lower. Then there's databricks committing at least $100 million over multiple years in open air spending. We'll speak exclusively with the Databricks CEO Ali Goatse about the deal later on in the show. The exchange is back right after this. Foreign From T Mobile we'll pay off.
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- [25:20]
Mike Santoli
Welcome back to the Exchange. We're tracking the recent weakness in some of the private equity names. KKR and Carlyle coming off their worst days in four months and on track for their worst week since April. Apollo Global, Blackstone and TPG also firmly in the red this week. Rising default risk concerns just one reason why investors are selling the alternative asset managers. Leslie Picker is here with more on, you know, this group that seems like it has a lot going for it right now, really? Active capital markets and loose financial conditions and all that, but yet not working for the stock.
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Leslie Picker
Yeah, I mean you would think with rates going down that would be a good thing for private equity in particular. And by and large it is because it means that financing costs are cheaper and with market valuations at higher levels, usually their portfolio companies are marked in some capacity to their publicly traded peers. So that would also bode well for private equity. But if you really dig down, the companies that have suffered the most in this recent weakness have been those that are more exposed to private credit now. Also, rates going down bode well for the borrower health in private credit because it's floating rate. Therefore their interest servicing costs would presumably go down.
- [26:27]
Melissa Lee
But.
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Leslie Picker
But if you see rates lowered in an environment where there isn't a recession and spreads aren't widening, that can impact the yields that these alternative asset managers Earn, which of course impacts their own profitability. So I think a lot of that is kind of feeding into the concerns. They've also run up just a lot since April and so they're seeing a little bit of weakness off of that.
- [26:48]
Mike Santoli
You mentioned the idea of default risk and maybe it's going to actually hit private credit harder or sooner than the rest of the market. I mean there, there was a Chapter 7 bankruptcy filing of this auto related company recently and some noise in auto finance. We were talking yesterday about Blue Owl buying Buy now Pay loans from PayPal. So just this sense of like this glut of private credit supply and then what do they have to do in order to put it to work?
- [27:14]
Leslie Picker
Yeah, there's about $2 trillion in dry powder right now. And what's interesting about this time around is there's been this, you know, newer trend towards some of these wealth products which are semi liquid. But what's different about those is, you know, traditional alternative assets, you can kind of put the capital to work when you see interesting opportunities or you feel like valuations are right or you can kind of be patient. But with the evergreen funds, it's a much quicker need to put that capital to work. So you don't necessarily have that same discretion or that same luxury of discretion that you might have had in a traditional structure. You have to buy as soon as you can kind of find an asset to buy in order to fulfill the fundraising. And those have become so popular that you have this whole big industry putting money to work all at the same time. It risks bidding up valuations, at least for private equity.
- [28:03]
Melissa Lee
So is this basically the, the vehicles that the retail investor would have more access to? So, so they're going to go, they have to spend money, they're going to buy crappier stuff and they're going to shove that out to the retail investor. Sure.
- [28:14]
Leslie Picker
And the potential rate of return for them is going to shrink if they're bidding up the assets upon purchasing them. And so that's a big concern that's out there just among not just the, the people in the industry, but also the people who are advising retail investors and high net worth individuals.
- [28:29]
Melissa Lee
Always, whenever it gets to the retail investor, by that time the cycle is at the end.
- [28:34]
Mike Santoli
I remember the liquid alts Trend, the early 2000s, that was a kind of a similar story. It's not a disaster. It's just kind of like the party's over largely.
- [28:42]
Melissa Lee
Yeah.
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Leslie Picker
And you're putting your money to work. There it is, it's semi liquid. So it's more illiquid than you would get in a, you know, stock or bond. But, you know, it's, it's still. You want a decent return for that?
- [28:54]
Mike Santoli
Sure.
- [28:55]
Leslie Picker
You may not get it.
- [28:56]
Mike Santoli
Leslie, thank you. All right, now to Bertha Coombs for a CNBC news update. Hi, Bertha.
- [29:01]
Melissa Lee
I'm Mike.
- [29:01]
David Faber
Defense Secretary Pete Hegseth is ordering hundreds of generals and admiral staff stationed across the globe to gather at Quantico Marine Corps Base in Virginia next week. The Pentagon confirmed the gathering today but did not provide details. The Washington Post first reported the meeting could include as many as 800 officers. While there are regularly scheduled meetings with senior military leaders, a meeting of this size and scope is extremely rare. Microsoft said today that it cut off its cloud services to a division of the Israeli Ministry of Defense Fence. The tech giant did not specify which services were stopped. But it comes after a report from the Guardian last month which said an IDF unit built a system to track Palestinians phone calls. Company president Brad Smith told employees they did find evidence supporting elements of the Guardian's reporting. And Sean Diddy Combs back at a New York courtroom today for the first time since his trial in July. His lawyers want the judge to overturn his convictions on two prostitution counts. Combs was acquitted on racketeering and sex trafficking charges. Back over to you, Melissa.
- [30:10]
Melissa Lee
Bertha. Thanks. Bertha Coombs. Coming up, Robinhood's chief brokerage officer. With the stock that's apparently falling out of favor with retail investors, it's this name no longer their customers top holding for the very first time in five years. We will reveal it next.
- [30:32]
Mike Santoli
Robin Hood out with new data on retail trading activity in August, reporting that for the first time in five years, Tesla is no longer the top holding on the platform. The EV maker being usurped by none other than Nvidia even as traders scale back on their MAG7 positions. Nvidia, however, underperforming Tesla by more than 35% since the start of August. Joining us now with where else customers are buying is Robinhood's chief Brokerage Officer, Steve Quirk. And Steve, good to have you here. Just characterize what the activity level is. Whether it seems as if your customer base is is taking on more risk, looking for different places that have not yet moved as much or how are they behaving?
- [31:13]
Steve Quirk
Sure, thanks for having me, Mike. So I would characterize their behavior as still very engaged. If you look at our volumes across all asset classes, equities, options, even crypto and, and even the deposit behavior, we're seeing a lot of Customers bring in a lot of money and put it to work. But to your point there, you know, and you brought it up at the top of the segment, there's been a rotation. You're starting to see our customers rotate out of names which have appreciated and rotate into names, as you said, you know, ones that have been depressed a bit. And they tend to do that. They tend to act as almost personal portfolio managers for their accounts. And so that behavior is something that we like to see because, you know, they are taking gains in and moving into names that haven't quite seen the appreciation that they're looking for.
- [32:08]
Mike Santoli
And what about options flows? Obviously, it's been a big story in terms of retail traders and their influence. It's like 20% of all options volume on a given, you know, given day. How is that kept up?
- [32:21]
Steve Quirk
It's kept up, yeah. I think what, you know, some of the instruments that have been rolled out and that are getting a lot of traction are instruments that trade around the clock, like index options from the CBOE and also options of a shorter duration. So people can be a little more surgical. You know, for example, if I know Apple's earnings are coming out and I'm sitting On, you know, 40% gain in an Apple position, protecting myself for a shorter duration is much less expensive than having to buy a, you know, a monthly insurance policy, if you will. So I think you're seeing people find many more uses for option, not just, you know, protection income generation, but other ways to be a little more tactical.
- [33:07]
Melissa Lee
Steve, I wanted to talk to you about Tesla being dethroned because that does seem to be a very interesting stat. I mean, this has always been the most trusted traded stock and also the most traded option out there. So when you saw in August that investors are starting to pull out of Tesla, I'm wondering if, you know, is the activity in the retail investor, when it comes to a name like a Tesla Nvidia, is it predictive or is it coincidental in terms of Tesla, you know, maybe investors locking in the gains, the nice gains in the month of August and Tesla and rotating to something else or, you know, in your experience with these sorts of things, is it predictive of a stock move?
- [33:45]
Steve Quirk
I don't know if I would say it's predictive. I would just say, I think to your point, you know, their customers, retail customers, become very, very savvy and astute in taking gains, you know, and not hanging in positions or at least taking partial gains when they see nice appreciation in names. And when, you know, that's happened there. But to your point, you know, it's been at the leaderboard in terms of holdings for five years. So it was, you know, it was, it was surprising, you know, to see it get bumped off and in video pop in. But, you know, of course, the, the enthusiasm around Nvidia and the whole sector, you know, is, is something that I think we're seeing across retail in general for sure.
- [34:27]
Mike Santoli
And Steve wanted to sort of get a bit of an update on the prediction markets business. Obviously the ability of customers to kind of play various events, sports, things like that, and how it's growing. There's a lot of estimates on the street out there about how big it might have gotten at this point. So talk to us about the uptake there.
- [34:47]
Steve Quirk
Sure, yeah. So we started in the event contract prediction markets at the election, and since then we've done about three and a half billion contracts. But now what's really caught fire is sports. So between Thursday and Sunday this week we did 300 million contracts, and the Sunday night game was the biggest one ever for us. We cover about six categories across economics, financials, current events, and sports. And we see a nice mix of volumes across them. But sports is by far and away the largest. So I think there's an interesting intersection happening here with traditional tradable assets, with cryptocurrencies, the technology behind both of those, and then the prediction markets. Because in addition to having them be tradable, there are one. They're an amazing source of information for people just to, you know, we will see millions of people on our platform on a Saturday night, you know, just trying to see what is happening in, in, in the world of sports. And, you know, that, that, that drives them to look at everything else we're doing.
- [36:01]
Mike Santoli
Yeah, I mean, half of them lose. You know what I mean? It's not exactly like investing where it's a, you know, over time, it's a positive sum game. Right. So you don't think that's. That fouls up the brand at all.
- [36:12]
Steve Quirk
You know, listen, the way that we do it, we're very much aligned with our customers. What I mean by that is we're facilitating our customers to, to interact with each other right across these prediction markets. So we're not, look, you know, we aren't the house. All we're doing is a facilitator for those transactions. And, and, you know, we're doing it in a more economical manner than what traditionally they would be doing it.
- [36:38]
Mike Santoli
Gotcha. Steve, appreciate the time today. Thank you, Robin Hood.
- [36:42]
Melissa Lee
We've Got breaking news on Tick Tock. David Faber's got the latest. David.
- [36:48]
David Faber
Melissa, thanks. Yeah, of course we're awaiting the President's signing of that executive order. Filling in some blanks here in terms of what we can expect when we get that and some things related to of course, what will be the creation of TikTok USA. Essentially take a look at shares of Oracle right now as well. First of all, as for the declaration or the EU eo, excuse me, that we're going to get from the President, it is essentially going to say that as currently Congress contemplated and as we've been reporting, the divestiture will meet the requirements under the statute of the law that was passed by Congress to be considered a qualified divestiture of TikTok such that it no longer poses any sort of national security threat to the United States. So that is largely what we're expecting to see in the executive order the President will sign roughly two hours from now. A couple of other things though that we're learning about the ownership group and again I've been reporting on this previously but can add one more key investor and that is the Abu Dhabi based investment fund of MG X which I am told by people familiar with the situation will join with Oracle and Silver Lake in what is going to essentially be the largest single ownership group of the new TikTok USA. They together those three will control roughly 45% of the ownership of Tik Tok USA. As we have previously reported, 19.9% will be owned by ByteDance, the company's current owner. And then the remaining roughly 35% will be a large group of investors made up of virtually, I'm told, all of the existing banks. ByteDance owners, remember that's an enormous private Chinese company that conceivably will do as much as 50 billion in net income this year. And so investors there include the likes of General Atlantic and Susquehanna Sequoia CO2, many if not all of them expected to roll it, not roll in to actually also be contributing to equity in the new TikTok USA and then a group of other smaller investors as well. Smaller in terms of dollar size unknown at this point. I know the President has mentioned Michael Dell or Rupert Murdoch. Unclear whether they will have any real ownership stake here at all. But what we can tell you is in a new name, at least as far as I can remember, Melissa is mgx, his name now at the forefront of that group that will control 45% of tick tock. It will have a seven person and board. Some of that may have been previously reported. One seat I know will go to ByteDance unclear in terms of the other governance that goes along with it, but clearly Oracle, Silver Lake and MGX will have an important seat at that board, of course, when this becomes an independent entity apart from China other than licensing the algorithm.
- [39:43]
Melissa Lee
Interestingly though, David, it does appear then that China will still remain the largest shareholder. Largest single shareholder.
- [39:50]
David Faber
No, no, no, because all of the existing ByteDance holders, I should say, that are not. That are US based. So ByteDance itself alone, 19.9. You have the existing ByteDance shareholders that are US based, not China. They will, they will own some of that 35% I was talking about. Obviously the other three names that I mentioned are not Chinese. So that is why under the executive executive order you could consider this a qualified divestiture because it will represent less than 20% ownership by the Chinese entity, namely ByteDance.
- [40:25]
Mike Santoli
And so, and David, so you have a lot of detail here on the transfer of value of ownership. We don't know do we know as much about exactly how the technology is going to change or be reconfigured and all the rest.
- [40:38]
David Faber
You know, I thought you're going to ask about the over overall value, which is still the key question that I'm not getting answered about, which is what the heck is this thing going to be ultimately valued at? Apparently that number has been arrived at, but it is not being shared, certainly not with me at this point and not with, from the people that I was speaking to to get some of these other details. Otherwise you know, you're going to, I mean not really seen as interruption of service. They're going to be licensing what is obviously the algorithm now, billions of lines of, of code as we've talked about, and then they will take it from there in terms of copying that and allowing it to exist on its own. Essentially as has been the case for quite some time now. Oracle will continue to be the cloud provider for all of the data that is produced and held here in the United States. Project Texas, you remain, remember so that remains the same. But, and again we expect this to close pretty much quickly. My understanding is there had been an expectation, actually this would have been announced sometime back prior to sort of Liberation Day, but as so many other things sort of, it got delayed as a result of what happened around tariffs and the heated rhetoric between the US and China. But ultimately they did agree a couple of weeks back, as you know, in Madrid. And here we are waiting for the EO and for what should be a cap structure that as I just described it.
- [41:58]
Melissa Lee
David. Thank you. David Faber. Coming up, another day, another deal for Open Air, the startup committing to $850 billion in spending this week alone and announcing another partnership today, this time teaming up with databricks. We've got the CEO of Databricks to join us for an exclusive interview on that partnership. Next.
- [42:20]
Mike Santoli
OpenAI and the data analytics firm Databricks announcing a major partnership, a $100 million deal using OpenAI models to help Databricks customers build AI agents. For today's tech check, Mackenzie Sagalos joins us now with Databricks CEO Ali Gotze in a CNBC exclusive. Mac.
- [42:39]
Mackenzie Sagalos
Hey there, Mike. So, Ali, thanks so much for joining US. This is OpenAI's first major integration with a company like Databricks. But what does databricks get out of this partnership? Are you seeing signals that enterprise adoption hasn't been scaling as fast as hoped?
- [42:53]
Ali Gotze
Yes. What we're seeing is that enterprises really, really are excited to get agents actually working inside the enterprise. Nobody's at scale succeeding with them. It's very, very early days, but everybody's very excited that if they can actually automate the tasks that are happening inside a large organization, it'll be game changer for gdp, for productivity, for revenue, for cost reduction, for risk reduction. So that's really what we're focused on with agent bricks. And a core component of that will be now OpenAI's models that will now be available to any of our customers on all of their data that they have in database. So we're very, very excited about this.
- [43:30]
Mackenzie Sagalos
Accenture CEO Julie Sweet spoke to our Sarah Eisen earlier today, and she says that she is starting to see an inflection point in adoption. But when are we actually going to start to be able to measure a return on invested capital for these companies?
- [43:43]
Ali Gotze
Yeah, it's happening slowly. I think that, you know, people got too excited maybe in the last two years, and it got kind of, you know, people were following the investments that were happening in the infrastructure and so on. They were a little bit ahead of themselves. But actually, we're now seeing the use cases land. We're seeing them being automated. You know, MasterCard actually has been using us and OpenAI for all of their product onboarding, for all of their cards. Adidas has been using us and using agents that actually can now measure the sentiment around the world for all of their shoes. And they can then improve those shoes and the designs in a way they couldn't do before with humans. They couldn't read everything that's on the web around this block square. The payment company can now completely automate how stores and restaurants install and interact and configure and get it up and running by just speaking English to it instead of having to fiddle around, you know, you know, configuring things in the old way. So the impact is happening that projects are landing, but it takes, it takes a while and I think it's going to take a few years before we see, you know, that kind of transformation that completely changes every company on the planet.
- [44:47]
Mackenzie Sagalos
Now we've seen this surge in investing news this week with public companies hitting record highs off the back of these open air related infrastructure deals. Do you think that this is a healthy build out or more of a concerning spending spree?
- [45:00]
Ali Gotze
Well, it's hard to know. It's clear that very small portion of the people on the planet are using alarms right now. Right. Even if you use opening eyes number which are very impressive, you know, 7,800 million, whatever those numbers are, you know, they still have 10x more to go. So once all the people on the planet are using LMS and once we are using them inside the enterprise for all the tasks, you can see that at least the inference is going to go up. So we will need more inference capacity going forward than we have now. The exact investments and where they are, you know, I can't predict how they're all going to do, but there's going to be much more usage in the future than we have today, there's no doubt about that. And a build up will be needed and it will be needed in all kinds of regions around the world to be close latency wise to where the consumers are. So I think it's early days, it is very exciting, you know, but you know, we still have to get the customers and the enterprise is actually successful with the use cases. So that's, we are laser focused on that with Agent Briggs.
- [45:57]
Mackenzie Sagalos
Last question for you. There's been a lot of talk this week about the circular model of AI that Nvidia is handing $100 billion to OpenAI that OpenAI is then planning to hand right back to them for chips. There's concern about OpenAI being this epicenter of the entire AI trade, also making it a single point of failure. Now that you are part of that ecosystem, how do you protect against it?
- [46:18]
Ali Gotze
Yes, Databricks actually hosts and I think we are the only platform that actually hosts all three major models. So we now have OpenAI which we're very excited about. We announced earlier that we also have anthropic on the platform. In a similar vein, we also have Gemini models from Google natively so any customer of databricks they don't need to worry. It just works inside of agentbricks so there is redundancy already across those three for us. And I wouldn't worry too much about you know like there is the press and what people write about and the headline numbers and then there's the fact that we actually will need inference capacity going forward. There is going to be more inferencing done people using lms, right? We're like in the early phases. Not every person on the planet is using at the fullest capacity these AI models so more capacity will be needed. I can't comment on the exact investment here and there and how the sort of how we're counting to get to those big numbers, but I think we need the hardware to be deployed around the world.
- [47:14]
Mackenzie Sagalos
Ali, thanks so much for joining us. I'll send it back to Mike and Melissa now.
- [47:18]
Mike Santoli
Mac, thank you very much. Mackenzie Scalos and Ali Godsey.
- [47:21]
Melissa Lee
Coming up, quantum computing hits the street. More pain in the auto suppliers and Birkenstock says clogs are hot. You heard me right. All that and much more coming up in Rapid Fire. That's next.
- [47:35]
Mike Santoli
This December, join the celebration in Times Square. CNBC opens its doors for an exclusive in person experience at the iconic NASDAQ market site in New York City. Fast Money Live trading the holidays. Join Melissa Lee and the team of traders live and on air for an all access celebration unwrapping trades, trends and tips to ring in the new year. Fast Money Live trading the holidays December 11th. Get your tickets now at CNBC events.com/fast money.
- [48:09]
Melissa Lee
Welcome back to the Exchange. Let's get you caught up on a few more stock stories on our radar. Time for Rapid Fire. First up, Accenture, the consulting firm reporting better than expected results but issuing full year earnings guidance below estimates. Bookings however, showing signs of a recovery with the CEO telling squawk on the street that I was a big driver in that turnaround. It's been a brutal year. We should know for Accenture shares down about 30% forward PE now sits at 17. On the other hand, IBM has held up relatively well, getting a boost today after HSBC said IT successfully applied IBM's Person Quantum Processor to real bond trading data. They're linked because it's all AI.
- [48:46]
Mike Santoli
Yes. And also within IBM is basically an Accenture that it services and consulting business. It's sort of. They used to run in parallel and Accenture has never really been this cheap relative to the market or relative to IBM before. People have basically said, but the government budget cuts and maybe they're being displaced by AI. It's a question. The HSBC thing is kind of interesting.
- [49:06]
Melissa Lee
I think it's really. You sound skeptical.
- [49:09]
Mike Santoli
I think it's very interesting. The question is what's the cost of the quantum approach to doing that? In other words?
- [49:14]
Melissa Lee
Well, can you scale costs will come down?
- [49:17]
Mike Santoli
Should be, yes.
- [49:18]
Melissa Lee
Yeah.
- [49:18]
Mike Santoli
And so they basically said it's a smarter way to put price and make a market bonds.
- [49:22]
Melissa Lee
HSBC called it its Sputnik moment. So that's major.
- [49:26]
Mike Santoli
Well, Sputnik eventually got outpaced, but okay.
- [49:30]
Melissa Lee
Next up, CarMax shares cratering today hitting its lowest level since March 2020 after earnings missed estimates hit by weaker retail sales, higher loan loss provisions. The company saying a big challenge was a deterioration in credit quality and loans originated in 2022 and 2023. Adding that consumer consumers in those years had artificially inflated purchasing power. I mean, at the root of this is artificially inflated credit scores because interest rates were so good for so long and they were flush with cash from the pandemic. And they are also seeing a bifurcation in terms of where the sales are going. People with higher FICO scores are not buying as much. People with lower like sub 550 are buying more. And they're saying that's a trend across the industry.
- [50:10]
Mike Santoli
It's a bit of a trap because people buy as much car as they can afford to forward with shortly payment and then if it gets away from them and their credit score deteriorates. Yeah, they're stuck.
- [50:17]
Melissa Lee
All right, topic three, an interesting note out of TD Cowan this morning on Home Depot as the firm raises estimates for second quarter results. TD saying it's positive on the company's pro market share opportunity. A greater benefit from a pickup in HELOC extraction versus its peers and it'll benefit from any housing turnaround. Home Depot and Lowe's trading pretty much in tandem this year. HELOC extraction, I mean HELOC rates, Home equity line of credit rates should be going down. With rates coming down, they're saying Home Depot could benefit.
- [50:44]
Mike Santoli
Yes, tied to the Fed, not to the market. Exactly. All right, well, that's going to do it for us. Dow is at session lows. Thanks for watching the Exchange. Power Lunch picks it up right now.
- [50:53]
Melissa Lee
You've been listening to the Exchange.
- [50:55]
Leslie Picker
Make sure you're subscribed to get each.
- [50:57]
Melissa Lee
Episode every day, same time, same place.
- [51:01]
Mark Douglas
Hataday presents in the red corner, the undisputed, undefeated weed Whacker guy. Champion of hurling grass and pollen everywhere. And in the blue corner, the challenger, Extra Strength Hannity. Eyedrops that work all day to prevent the release of histamines that cause itchy allergy eyes. And the winner by knockout is Patternay Pataday. Bring it on.