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Wall Street's Double Whammy 11/20/25
00:43:53
The Nvidia-fueled rally fizzles, and so do hopes that the Fed will cut rates next month. We look at where you can ride out the volatility and still find opportunity.
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Our state has changed a lot in the last 140 years. We know because Multicare has been here guided by a single making our communities healthier. That comes from making courageous decisions, partnering with local communities to grow programs and services, and expanding healthcare access to those who need it most. Together, we're building a healthier future. Learn more@mycare.org you're listening to the Exchange. Here's today's show. And Frank, thank you. Welcome to the Exchange, everybody. I'm Contessa Brewer in for Kelly Evans today. That rally has just relapsed. The Nvidia fuel has fizzled. Stocks backtracked from green to red. Yet the Nasdaq at one point up more than 2% at the high. And now look at it. The Nasdaq is off by more than a percent. The Dow swing 1100 points from session highs to session lows. It's off by half a percentage point right now. And we're seeing red across the board, including Nvidia giving up its 5% gain off of a remarkable earnings report. Nvidia's off a percent and a half now. The trade is once again in the hot seat. Investors are factoring in a Fed rate cut or the lack thereof next month. And the Fed's working with a quagmire of no data, old data, alt data. How crucial is that cut to catalyze this market? We are also watching Wal Mart. The retail Giant delivered its 45th straight quarter of comp growth. But it's starting to look more like a tech stock. Is that trade getting too risky? The Stock up almost 6% today and investors putting risk on a back burner where Bitcoin buying is concerned. It went down to 86,000, the lowest level since April 21st. Now it's down more than 20% and in one month, two and a half percent on the day. Let's dive deeper, though, in Nvidia and that share price reversal that we are watching unfold. The company boasted a bullish print. It calmed concerns around the trade briefly. And then things turned. Nvidia is now down a percent and a half. Bubble talk is back in the spotlight. Bridgewater's Ray Dalio says the bubble is about 80% inflated. Mohamed El Erian writes that AI is in a bubble. But he also says, hey, maybe that's okay. Alphabet CEO says he's seeing elements of irrationality. And in video, CEO Jensen Huang says he's seeing something entirely different. My next guest agrees. He says I may actually be underhyped. CJ Muse is a senior analyst covering tech and chips at Cantor Fitzgerald. First of all, because we've seen this reversal, I got to ask you, is $200 the ceiling for this stock price?
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Simple answer, no. But I do think that there are external factors and I think earlier you cited the crypto sell off down 20% in the last month. I think that's creating fears that go beyond crypto and de risking elsewhere. But if I were to isolate to Nvidia and what they projected last night on the earnings call, it was a great fundamental call. And I think that this is a short term blip. But you know, this is a broader market kind of focus, not Nvidia specific.
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In my view, the earnings for Nvidia there was a lot here for investors to embrace. Not just beating expectations, but the implied guide of up 67% in datacenter revenues coming for January. That's got to be something you love. If the factors that we heard Jensen Huang lay out on the call yesterday, the optimism that he had for the space and for his company in particular, in spite of not doing the business that he wants to do in China, what can possibly move this stock higher? What's the catalyst?
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Well, you know, I saw the chart earlier with Wal Mart at a, at a forward P of 38 times in video on this pullback is now trading 20 times what we think will earn next year, $9. So I think valuation will support it. I think from a positioning perspective, long only's are underweight in video today. And so I think the realization over time that AI is not done will get investors in and to your earlier question, will drive the stock well above $200. Now how do we get there? You know, Gemini 3 was just released and it's an excellent model. We've got Grok 5 coming first half 26. That's going to have two times or more the parameters. And moreover, you know, these public models that we're utilizing aren't using Blackwell Ultra and never mind Rubin, which will come next year from Nvidia. And so I think we are on a very strong glide path for improvements to these large language models that will drive consumer adoption. And so I still think we're early, but you know, it's going to take proof points on that front to drive that home. And, you know, we're firmly in the bullish camp, but you know, it will take some time until we see that.
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Very bullish. In fact, you keep Nvidia as your top pick. Put a price target on it of $300. Does the China factor matter?
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Matters 100%. You know, I think that you want AI to diffuse on a United States platform. And the embargo that we put in place is only going to create competition indigenous to China. And it's not like it's going to sit only in China. They're going to share that with their friends. And so we are hampering the platform for AI being United States to go global. And I really would Hope that Washington, D.C. would better understand what a negative implication that is to us as a country.
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Oracle and AMD were the first stocks today to start heading into the red. You've got micron down 9% or so on the day. Talk to me a little bit about the concern that has started to fizzle up about financing and whether the debt about these data centers is just too great, too risky.
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Yeah, you know, I think when you look at it from a Microsoft or a Google or a matter perspective, they have robust balance sheets and EBITDA and free cash flow to support the investments. On the other hand, you have emerging players like Core Weave and Oracle and others open AI that just don't have, you know, that balance sheet. And so they need to be creative with financing. And, you know, there is a desire on the part, particularly for an anthropic or OCI to become a hyperscaler. And so in that sense, they got to be creative. Does it create concern? Sure. But do I view that as a, as a real negative? No. I mean, I think this is, this is how we'll get it done. And I would imagine that in the private equity world, deals like Brookfield, deals from Apollo, these will proliferate and support these underlying investments.
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Give me a sense about clients. CJ and whether they're feeling, you know, we heard the traders on Halftime talking about animal spirits and whether they've just left the building. Are people feeling optimistic and like it's, it's still ready to, to chase the rally?
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No, I think it's the opposite. I think positioning wise, we came into the report underweight in video, and I think the price action today coupled with de risking and, you know, what we're seeing in other risk assets, you know, makes it difficult, I think very Very, very near term right to, to, to want to chase this. But I do think that we are going to get fundamental data points that will support the fact that, you know, I actually is a moneymaker and that these investments will persist and that it is existential for the hyperscalers and that we will see the investments that are underlying our estimates for Nvidia hold through. And you know, the moment you find that intact, then you know, it'll be game on again. But, you know, finding that precise data point is a bit challenging to nail today.
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CJ Muse, it's great to talk to you of Cantor Fitzgerald. Have a great day. We want to talk to about the other big markets moving story today, the September jobs report. Look, it's the piece of economic data the Fed has to work with ahead of a December rate cut decision. And while the headline number came in better than expected, the unemployment rate rose to 4.4%. That has one of my next guests now leaning more toward a cut next month. She puts the odds at 60% where the market right now is currently pricing in a 33% chance of a cut. Joining me now Julia Coronado, founder of Macro Policy Perspectives, and senior economics reporter Steve Liesman. It's good to talk to you both. So Julia, I guess explain to me why you feel more confident about the Fed cutting now. What's your thesis? Well, what I learned when I was at the Fed was as a staff economist was that the unemployment rate is the Desert island indicator. There is no private sector substitute for it. It is the best measure of where demand and supply come together. And what we're seeing is a labor market that while it's not falling off a cliff, it certainly is loosening. The unemployment rate has risen a tenth in each of the last four months. Demand does not, you know, we had a pop in September, but if we take the totality of ADP and payrolls, it looks like pretty sluggish demand for new workers. And, and so demand is less than supply. Unemployment is creeping up. It's now above the Fed's longer run estimate of 4.2% and shows no signs of stabilizing or turning around. So to me that says yes, if the plan is to move towards a neutral stance to balance risks, the rise in the unemployment rate tells you that that's still a prudent move. And yet, Steve, what we have here is 119,000 jobs added in September, way more than was expected. Explain to me the data and, and how the Fed is going to try to work with what they got in September. What? They'll get another jobs report from October, you would think, before the December meeting.
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Yeah, and I think the context for my answer and Julia's as well as what Fed Chair Powell said when he said, look, there's no risk free move here by the Fed and I don't think there's any of even the hawks that would disagree with Julia's take on the job market. I think the story is one of risk management and a decision of where the bigger danger is, where the downside risk is. And there's a bunch of folks at the Fed who say all of the things that Julia said are true. But my unemployment rate is a percentage above where it was or where it should be. I'm not confident it's going down and I'm afraid that the market and the public will think that my commitment to my 2% target is weak. So there's a whole bunch of folks on the Fed who believe that, and there's a bunch of other folks the are siding where Julia is right now, which is the idea that there's a lot of downside risk to the employment market. I think the trouble is that that payroll number, the pesky payroll number you could call it doesn't really speak to weakness, but agreed. The unemployment rate is the. I will ask Julia why you would want an economic indicator on a desert island. I think you have other problems, but it is the desert island indicator.
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Go ahead, Julia. Why would you want that? I wouldn't want one actually in a desert island. Sounds like a lovely idea right about now. So. But no, you're, you're right, Steve. I think there is concern about, it's not just the, the level of inflation, but also the duration. Right. We have been above target for four years and counting. I think there is a deep seated concern on the committee that that's going to sort of get built into behavior and expectations in a way that maybe isn't showing up in our measures of inflation expectations. I mean, in fact, if you look at measures of inflation expectations, the Michigan measure continues to be high, but break evens in the market have actually moved lower of late. So a loosening labor market is leading some people to think that there's less risk of near term inflation, maybe even more disinflationary risks coming in the pipeline, you know, despite the tariffs. And that's really the conundrum, Julia, is how long will that impulse last? Are you concerned about this idea that has been floated about giving people sort of a refund for the government shutdown or rebates or the fact that refunds on taxes in 2026 are going to be so much higher than they have been. And the way that that cash in hand could stimulate the economy and inflation, I don't really think that that's a big risk because that is pretty small. I mean, yes, there will be a bit of a pop in tax refunds, but remember that as of now, a bunch of people are also on track to pay much higher health insurance premiums starting in January as well. The $2,000 tariff rebate idea, I just don't know what to make of that right now. That money, you know, we have to wait and see if those are in fact legal still, which the Supreme Court will rule on hopefully sooner rather than later. But when I look at the fiscal backdrop, it's nothing like, you know, what we saw with the fiscal support during the pandemic. There's a lot of crosscurrents with some cutting and some stimulus. So I don't really think that the Fed fiscal backdrop is something that's going to be producing a lot of strength in demand that we haven't already seen. The tax cuts have already kind of been embedded in the results we're seeing and kind of are offsetting the tariffs. So when you take the totality of the picture in mind, I just don't think it's that stimulant. You know, Steve, if the Fed is between a rock and a hard place, it seems to me like whatever the decision is in December, it's damned if you do and damned if you don't.
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I think that's right. And I think we don't talk enough about the sort of not just the K shaped economy, which we talk about from an income and a spending point of view. But there's another aspect to it which is the Fed has one interest rate for two very different economies. There's the folks out there that are really propelling investment spending on the AI front and they could care less if the funds rate is a quarter higher or a quarter lower. And then there's all kinds of small businesses and say industrial and old economy businesses that care a lot where the Fed funds rate is. And the Fed has to service both of those sides of the economy with a single interest rate. And so what you hear is you have some folks out there saying, how can you keep rates this high, Housing is hurting and car loans are hurting, and those are all the old economy numbers. And then other people say, how could I be cutting rates with this market that is so besotted by the AI investment and doing quite so well. So that's another some of the parts of the rock and the hard place the Fed's in right now.
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Yeah. All right. Julia Coronado, Macro Policy Perspectives and my colleague Steve Liesman, thank you very much for the conversation. And Steve has an exclusive interview with Boston Fed President Susan Collins tomorrow morning. That's at 8am Eastern time on Squawk Box. You won't want to miss that. Coming up, you can't blame Wal Mart for the Dow turning negative. The retailer holding on to its gains, having its best day since April after raising its full year forecast for profit and sales for the second straight quarter. When we come back, we'll break down the retail trade and look at who's best and worst positioned ahead of the holiday season. Plus, with the trade fading after an early rally, where should you put your money now? We'll look at some of the under the radar names within tech. That's ahead. And as we head to break, one more check on the stocks. You've got the Dow still flat and in the red. The s and P down 2.10of a percent, NASDAQ Composite down 4.10of a percent. Russell often fractionately, and the 10 year Treasury. That yield is moving lower. It's now at 4.113. The exchange back right after this.
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This is the exchange on CNBC.
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After Harry and David started selling pears from their Oregon orchard, we still hand pick and pack every one of our Royal Riviera pears. What makes these pears so special? Is it the single golden pear in every box that's a joy to unwrap? Or maybe it's that very first bite, as buttery, juicy, smooth and rich as you remember. Get a taste of the best handpicked holiday gifts and get 20% off site wide at HarryAndDavid.com, promo code PEAR20 that's HarryAndDavid.com, code PEAR20. Welcome back to the Exchange. We have seen some volatile stock movement in today's session after Nvidia was unable to hang on to some pretty significant gains. At one point it was up more than 5%. The Vix volatility index rising to 28, now around 24. And the Dow had been up more than 700 points at the high, was down nearly 400 points at the low and now, you know, roughly flat. It's down about 100 points. Let's bring in Tim Seymour, CIO of Seymour Asset Management and a CNBC contributor. Help me make sense of these wild moves.
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Well, not for the faint of heart. I still think there's a question about tech valuations, although Nvidia's valuation doesn't really bother me. But. And you've moved with a couple of the other. Call the Mag 7 as we do that where value is kind of interesting. Again, if you're looking at matter and whatnot. I just think there's this confluence of we still don't know what we're paying for and what is going to deliver now as opposed to out there. I still think there is some sense of concern around circular investments. And even though for Nvidia as being a, call it an infrastructure story and infrastructure story on top of its core business, I think it's probably worked for Nvidia. I think for the rest of the market it's, you know, they kind of gave you what they told. We had a chance for the analyst community to, to, to dissect and think about that. Certainly the buy side probably expected what they told us yesterday. And I think you get a little bit of that, that, that sell off.
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When I'm looking at The S&P 500 here, the laggard is Robinhood. It's off by more than 7% but you've got Interactive Brokers down more than 2%. On the other hand, Wal Mart is leading the S and P as the gainer with 5.8%. That stock higher by 5.8%. Let's talk a little bit about Wal Mart and what it means to have this really blockbuster earnings report amid quarter after quarter of comp improvement and just.
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Before we get to Walmart, that's the whole point. I mean Robinhood and some of the digital economy, those aren't strong halves. And I talk about the in terms of the investor group and so bring it back over to Wal Mart and where we are with a story that's hardly cheap. Right. If the market's worried about valuations, then they should be a little skittish on wal Mart at 36 times forward. But there's a dynamic here that I think is best of both worlds. Wal Mart is giving you both that investment into technology and maybe AI. But more importantly, really where E commerce and efficiencies have paid off, they paid off in the gross margin, although the gross margin was a little weaker here. But I think category by category we're seeing Wal Mart is taking market share. But Wal Mart more importantly seems to be more focused on profit than revenue. And I know that's crazy for the world's biggest retailer, but that's, that's part of the story here. And, and I guess, you know what's fascinating, maybe the more interesting part about the Wal Mart story, even though it's, it's, you know, the move from the New York Stock Exchange to the NASDAQ 100 is something that embodies and signifies where Wal Mart probably sees themselves as a company. It's also probably helps in terms of where you get follow through from an investor base that are tracking the NASDAQ 100. So fascinating that Wal Mart is flying in the face of a market that's concerned about valuations when Wal Mart's never been more expensive relative to itself and even relative to its peer group other than Costco.
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Well, that makes it much more like a tech company route right now then is this, is Wal Mart, do you think, a risky bet at these points, prices?
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I think there's going to be the ability to sell off Wal Mart. If we see the two pillars of the story here, which I mean on the demographic story, the consumer, so the lower income consumer and the higher income consumer and the broader merchandise mix. If we start to get any kind of a growth scare, I realize markets overall might be sniffing some of that out and that's where you would see a lot of pain across markets. But I think until we start to see that Wal Mart is very well positioned again, we talk about massive investments into technology and where logistics and ERP and what has been brick and mortar for them for a long time is now really, really paying off and showing the difference between them and almost everyone other than Costco. But I still think Wal Mart is eating into Costco.
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Okay, well, we will get another view on retail today when Ross reports after the bell. Tim, thank you. Nice to see you.
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Thanks Contessa.
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As we head to break, take a look at some of the names hitting new all time highs today, including Welltower, Alphabetical, Hca Holdings, Johnson and Johnson and Eli Lilly. Now Eli Lilly has turned negative. It's off by half a percent now, but the others are still in the green and we'll have more of today's biggest movers when we come back.
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Welcome back to the exchange. Markets right now looking like they're right across the board. You've got the Dow Industrials off by a third of a percentage point, the S&P 500 down half a percent, and the NASDAQ Composite down by three quarters of a percent. That was a real swing here from up two and a half percent to down one and a half percent. Meanwhile, if the S and P finishes lower, this would be the fourth largest intraday gain to be wiped out over the last five years, according to Susquehanna's Chris Murphy. In terms of sectors, now you've got tech leading the declines. It's off by a full percent, industrials down by a percent, materials almost that much, and Discretionary off by more than half a percent. And if we look at those individual names, you've got Jacob Solutions, Robinhood, Robinhood's down by seven and a half percent, Datadog down almost the same and Micron off by seven percent. The worst performers in the S&P 500. Bitcoin is erasing its earlier gains. The cryptocurrency back below that. 90,000 markets at 86,824. That's the lowest level we've seen since April, off 2.7%. Palo Alto Networks on pace now for a four day losing streak despite beating earnings expectations. This is a cybersecurity firm reaffirming its full year revenue guidance really continuing on this spree of deal making. It announced a $3 billion deal to buy cloud management company Chronosphere. And still those shares are off almost 7% on the day. Let's check out Bath and body works. It's plunging 24% after it posted disappointing results. 25% now. The retailer slashed its outlook. It said it's under continued pressure because of the consumer. Shares are having their worst day since March of 2020 and now have erased more than five years worth of gains there. We'll keep our eye on it. Let's get over to Seema Modi now. She has a CNBC news update. Hi, Sima. Hi, Contessa. A White House official tells the Associated Press today that a representative from the US Embassy will attend a ceremony at the end of the G20 summit, but the US will not take part in any talks. South Africa's president said earlier that the US had change, had a change of heart and would attend. President Trump boycotted the summit, citing alleged persecution of South Africa's white minority. Transportation Secretary Sean Duffy unveiled the new female test dummy today for the first time ever. American car companies will soon be required to use them during vehicle safety tests. Recent studies suggest women are 73% more likely than men to be seriously injured.
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In a head on crash.
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And a mind boggling discovery today published in the journal Science. A moss plant lived on the International Space Station for nine months and when it returned to Earth was still capable of reproducing. But it wasn't aboard the space station. It was attached to the outside of it. The study's lead author said it provides striking evidence that life has evolved on Earth, has intrinsic mechanisms to endure the conditions of space. Interesting discovery, Contessa. That is fascinating. So now it's going to grow, right? Right. And I want to know where they stuck it. Like was it just on a little Velcro or how do you attach moss on the outside of the space station? Piece of yarn. So many questions. Seema. Thanks. Coming up, stocks volatile after Nvidia was unable to hang on to its post earnings gain. Three names one portfolio manager says are buys. In spite of all this Volatility or maybe because of it. We're back right after this. Welcome back to the Exchange. A big market reversal. Stocks giving up gains. Earlier they were soaring because of Nvidia earnings. The Dow, the S and p were up 1%. The NASDAQ was up as much as 2%. And now you can see all off, less than 1% but still off. My next guest says he likes tech but he's finding better opportunities elsewhere. Joining me now is Surat Sethi, Managing partner, portfolio manager at Douglas C. Lane and Associates. He's a CNBC contributor. It's great to have you.
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Great to be here.
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B
Okay, so to what do you attribute this sudden and pretty stark reversal?
- [28:56]
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So I think Nvidia delivered on everything people expected. But the market in the last few days has been kind of turning down to say hey, let it risk off, let's see what's going into year end. People have made a lot of money in the trade and it's natural that you get this pullback and you know where else are the opportunities going to be and you've got a little uncertainty period coming. Where are we going to be with tariffs, where are we going to be? The Fed cut, those are coming through for the next month and year end comes in now and people are looking at their portfolios. So you've got tax lots selling so a lot of movement going on and you can actually see that hey, if things are overvalued, why not take some, some profits.
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B
The multiples and some of the tech names, hyperscalers especially are pretty remarkable. Is that part of what people are seeing, they're looking at not what the potential opportunity is, but just the facts of the multiples and saying no, it's too much for me, this is too rich.
- [29:50]
A
Well it's not only the multiples, it's also we don't really know what the return on invested capital is going to be in all this capex. And you saw Facebook got pretty penalized or matter got pretty penalized on that. So the money is being spent. You were rewarded for it early in the year but right now it's kind of like hey, what is going to be your long term earnings? And sometimes you don't get the benefit of the doubt and you take some of the profits off that.
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B
We've just shown Alphabet, which is still in the green up half a percent but Amazon off by a percent and a half. Where in tech are you still seeing some pretty significant opportunity?
- [30:23]
A
So we still like Amazon. I think Amazon has is quite a few different ways for them to make money. It's just not on the cloud, but it's on the retail side etc. So and they've, they've proven that when they spend they actually make money. So I like that, I like software. The software has been really thrown out with the baby. So companies like Salesforce or Workday, so there are opportunities, but there are also other opportunities outside the tech and I think that's where investors can look at for cash flow. Look at healthcare three years but has done nothing. You get, you know, serial compounders like Thermo, Fisher and Danaher and then you get a company like JJ that's going to have double digit growth trading at 16 times earnings and a solid balance sheet, triple A. So these are opportunities. Companies that historically all three of them traded multiples in the 20s are trading at 15 to 16.
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B
Let me go back to Amazon and the retail part of that company that you're focused on. When you look at Wal Mart today and the way that they're coming in and really challenging Amazon in its delivery and the online commerce world, do you see Amazon losing share to Wal Mart in particular? How does Costco factor into this as well? What are you thinking about the winners in retail?
- [31:38]
A
I think the winner is going to be all of them. Because what's happening is they have the buying power and they have the ability to negotiate with their sellers and they also have the huge amount of demand from all their customers. So all three of them I think could win. We like Amazon better just because they've got other things in there as well. But when you talk about tariffs and talk about the consumer doing hey, where should I go? Unfortunately it's the mom and pop shops that we get hurt the most. Because as people go online and look, Amazon's got Prime. So they've got a customer that they've already got there who are now doing other things. It's easy shopping. So I think the market get bigger.
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B
For Wal Mart and Amazon and the focused retailers. Do you think that, you know, Dick's focusing on sporting goods and outdoor, Home Depot and Lowe's focusing on home improvement and construction and things like that. Do you think that they get pinched?
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Well, you saw Home Depot's numbers are not as great but Lowe's actually did pretty well. So it's really going to be the ones that execute and have the products and also the pricing. Because as we've seen in this case shaped economy, the lower end consumer is not spending as much, but the higher end is. So where is the consumption going to be? And who's going to be able to have the product for them?
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B
One more because of the changing expectations over a Fed cut in December with fewer expectation now that it will happen. Does it matter to you in the way that you're investing?
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No, we're looking for high quality companies. I mean the market could get a short term tailwind if the rates get cut, but at the end of the day it's one of the earnings. What are these companies going to do for the next three to five years? And if they have those then I think you're going to get opportunity, especially when the markets are downturning. Now we go into year end, one of the big things that we're also watching for is tax lot selling. So you're going to have companies that are negative for the year, they're going to have even more pressure and I think if you're a long term investor those could be some good opportunities there as well.
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B
Fantastic. Surat. Thank you for your advice and your perspective. Coming up, Alphabet had until recently been widely seen as just left in the AI dust, but over the past few months it has handily outperformed Nvidia. The latest version of Google's Gemini Assistant might just prove the AI spending skeptics right. We'll explain next. Shares of Alphabet hanging on to gains as Google rolls out a new image editing and generator tool today. Deirdre Bosa has more in today's tech check. Heidi hey, can I say Google really just continuing its run as the new golden child Nana Nano Banana Pro. That's a new image model. It builds on the success of Gemini 3 this week and it puts Google's full stack on display. The product I'm going to try and say it again. Nano Banana Pro gives users better control and accuracy to create studio grade images. Now it's built on Gemini 3, Google's own in house model that by the way has climbed all the rankings by third parties and that in turn is trained and being served on Google custom chips. TPU's all capable of being distributed to Google's billions of users. Now that has become an incredibly compelling proposition to investors. That full stack that Google has, ones that are especially starting to worry about isolated plays in the trade. You've got matters spending on foundation models without a cloud business. Amazon has cloud, but it doesn't have a competitive flagship first party model. Nvidia Gas continues to dominate hardware but relies heavily on big tech spending. Google with that full stack makes the others look more like maybe disconnected pieces. You might remember though that not long ago Contest that Google was seen as an AI laggard. And it's really been the product piece hits like Nano Banana and Notebook alum that have pulled the narrative together. I spoke exclusively to Josh Woodward, the company's VP of Gemini and Google Apps.
- [35:22]
A
It's such a fun time to be.
- [35:24]
B
Building right now at Google, and there's so many both model breakthroughs happening, as.
- [35:29]
A
Well as translating those into product features.
- [35:31]
B
So I know the last time we talked, it was around Notebook lm, which was one of our new products.
- [35:36]
A
I think we're seeing that in the Gemini app. We're seeing that in AI mode, in search, really across the company. I think I started at Google as an intern and it's been such a fun ride.
- [35:47]
B
I've never had more fun than right now.
- [35:50]
A
I think it's partly the pace, it's partly the abilities these models give to people who can imagine new use cases and products. It's unparalleled. I think maybe what you're seeing is.
- [36:00]
B
That excitement coming through in the products.
- [36:02]
A
But it's also this compounding that's happening.
- [36:06]
B
Week over week now contest. I'm thinking that Josh isn't the only one having fun at Google. I'm sure there's others because it is fun when you are back on top. And Google's really firing on a lot of different engines right now. You know, you're talking about Notebook lm, which I recently discovered and has been very helpful for my kids and school work. Yeah. And I'm hearing professionals talk about, well, if you have to get through dense documents using that and getting your podcast so that you can listen to it and absorb all that information makes a lot of sense when you have it with such obvious consumer applications. Is there. Is that. Are they expecting it to drive consumers to Google products as well? I mean, you could argue that this is a consumer product as well. And I think that's. I mean, it's interesting because Josh Woodward, the guy I talked to, was really, you know, instrumental in getting Notebook out there. And then I think he was put in charge of the larger Gemini app because of its success. But I mean, Google struggle has always been these, like, really, really cool products around the organization and a very poor job marketing them to users. And what they've done differently is getting them out there. I can download it on my iPhone, so why would I need to go to a Google phone if I can get it on my iPhone? You know, like there's. Don't need to. But the fact that you even have to download. Did you download a notebook LM app like you should just be available in the Gemini app. Yeah, well, so I just downloaded Gemini. There you go. So they're making it a little easier. But that's always been the knock is that it's really hard to play around and find these great new products so no one actually uses them. And they've done a much better job with that over the last few months. And I think that's what investors are appreciating again. You can see that full stack on display. Notebook runs on Google models, which runs on Google infrastructure. So not an early adopter clearly here, but now everybody knows it. You are Deirdre. Thank you. Coming up, home construction ETF ticker ITB just barely. Well, look at it. It's down in the red right now. Home sales climbed slightly last month. There were some red flags just before housing slow season. We have all of that next. The exchange will be right back. Welcome back. Home sales posted a small gain in October. Can the momentum last? Diana Oleg joins us with more on this. Hi, Diana. Hey, Contessa. Yeah, and that's the question as we head smack into the slowest few months of the year for home sales. October sales were up over 1% for the month and from a year ago, thanks to a drop in mortgage interest rates in August and much of September when these contracts were signed. Now, the realtors also noted that the government shutdown may have slowed some closings, especially if flood insurance was required. But supply came down a little bit month to month. It's still higher than a year ago. Unfortunately, that doesn't say much because a year ago it was really, really low and now it's just low. So the homebuilders initially jumped higher on the news and the biggest names, Dr. Horton, Lennar and Pulte, are still slightly in the green as the broader market swings lower. So as you said, what next? Well, affordability continues to weigh on what should be demographically strong. Strong housing demand prices are not expected to drop nationally. They were higher again in October. And while mortgage rates are off their recent highs, they would need to fall much further to really cut into the overall high cost to buy a home. I would also note that we have not seen any stats on housing starts or building permits. So that kind of puts us in a dead zone on gauging future new supply. Well, that puts you right there with the Fed too, when trying to decide how to move forward. You mentioned flood insurance, and as you know, that's an area where I'm particularly interested in now that the government has reopened. If access to flood insurance through the National Flood Insurance Program was an issue for buyers, would you expect to see sort of a pop as those people go in and get what they need? Yeah, I mean, it's really just in the closing because that's in getting the mortgage for it. So it's that process. It wouldn't have, in fact, it have affected anybody choosing to sign a contract on a home. It's just getting to that closing date. So if you had some closings that didn't happen in October because of the shutdown and getting the flood insurance, those would just be pushed into November. So we'll see those next month. Okay. Diana, great to see you. Thank you. Still ahead, today's the deadline for initial bids from Warner Brothers Discovery. WWBD up nearly 30% since it said it would consider a sale. That happened last month. Shares of potential buyers, Netflix, Comcast, Paramount, Skydance are under pressure. Since then, Comcast is is down almost 10%. You've got Paramount off by almost 8 and Netflix down more than 14%. But those three companies are after what they need. Where Apple might fit into this whole conversations. We're going to look at that next. A real rally reversal we've seen today. The S and P and the Nasdaq are now at session lows with the S and P off one and a third percent and the Nasdaq Composite off 1.6%. The Dow session low would be at 398 points and right now we're off by 388 points. So we're very close to being at session lows on the Dow as well. We're going to continue to keep our eye on this. The Russell 2000 off by more than a percent as well. The initial bids for Warner Brothers Discovery due today. Paramount, Skydance, Netflix and Comcast, the three main players expected to pursue all or part of Warner Brothers Discovery as they look to build out their own portfolios. The assets up for grabs include hbo, cnn, MLB tv, Warner Brothers Studios. And who could come out on top here? What would it mean for the media landscape? Joining me now is Jim Stewart, columnist at the New York Times and CNBC contributor. Jim, it's good to see you today.
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Yeah, nice to see you.
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B
Who is the frontrunner?
- [42:10]
A
Well, I have to say it's Paramount, Skydance, you know, by a fairly long length at this point. They clearly had the most compelling argument. And I think we have to keep in mind with streaming, it's all about scale. You want as many subscribers as you can get because the marginal Cost of a new subscriber is basically zero. So all the revenue from that is pure product. And they can combine the Warner Brothers subscribers with Paramount subscribers. They get a big boost in scale. So that's a huge advantage. Also I think we have to keep in mind probably a lot of the Warner streaming subscribers may not be Paramount subscribers, that each of them have a relatively small share of the streaming market. Netflix, whose arrival as most people I know subscribe to Netflix and then some other things as well. So presumably most of the Mac subscribers also already have Netflix. So it's not clear that Netflix gets any more scale than it already has. So that's a big advantage. Secondly, they have a studio already in Paramount. They're getting a studio, they can cut a lot of costs there and save even though they say they're going to run them separately. Okay, fine, put a creative head in there. But we get all the back office together. You can save a lot of money there. And then finally they've got the money. They, the Ellison's have enough money to do it themselves. And now they're talk, they're tapping into sovereign wealth funds and their Trump friendly. So that's a lot going for them.
- [43:35]
B
What about Comcast? Because Comcast is making a lot of moves. They've really invested in sports, spinning off CNBC and ms, it's now called Ms. Now, and some other properties into a separate company. What did, what would Comcast get into now acquiring another company?
- [43:54]
A
Well, I think Comcast is next in line to drive the most benefits from that. I think that's why you've probably seen that the Paramount and the Comcast stock is not down as much as Netflix because Comcast also already has a Universal studio. They can, they can derive a lot of cost savings from that. They've spun off their cable assets. They could take the Warner cable assets combined, maybe spin those off, do something with those. The problem that Comcast has is the debt. Can they get into a bidding war with Paramount, Skydance in their deep pockets And Comcast, you know, to their credit has been pretty disciplined about what they pay for assets. Are they really, are they willing to go way up on this? Because you know, I keep hearing that Zaslav and Warner's, they want to, they want a big price on this substantially more than where the stock is trading now. So that's why I'd have to put Comcast a little behind in this horse race.
- [44:51]
B
Warner Brothers Discovery right Now is at 23:54 per share. Ellison reportedly ran as high as 23:50 per share. And that was not enough that there was some talk that WBD would want 30 bucks a share. Is it worth it?
- [45:08]
A
Well, that's a, that is a really steep price for basically, you know, a company that's struggling to, to make a profit now. You know, you can look out into the future and say, well, you know, combining these, you've got much brighter prospects. But these, these are very rich prizes. I mean, on the other hand, you know, I've got to give Zaslav and Mourners credit. They have pumped some life into that, that movie studio. They've done, you know, some good stuff with HBO and streaming. So they've, they've got the numbers in a pretty good place. But that's why I don't see a lot of upside like a new owner. Can they do that much better with this? I don't know. This is a rich price. But then, and frankly, having covered Hollywood in media for so many years, the buying these studios is never a purely rational process. You know, it's emotional, it's glamor. People want in there now you've got people already there that can gain some more scale. Somebody will probably end up overpaying.
- [46:04]
B
We haven't mentioned Amazon and Apple though. They're both capable of overpaying.
- [46:09]
A
Oh yes, absolutely. But Apple and, and Netflix have been pretty disciplined as well. And they traditionally said they don't really want to get deeply into the studio business. I mean they, they buy content. Yes, there's, they compete on the streaming front. There would be some cost savings there, but that's not the biggest, you know, issue there. They would be gaining a movie producer. Now Amazon bought mgm, they seem to be experimenting with that, but they haven't made a big move with that. Apple and Netflix both buy from, you know, the studio producers and they could keep doing that. Do they need to own it to guarantee the supply of top quality content.
- [46:49]
B
Especially with AI coming into the picture and being able to produce content so much quicker and cheaper. Jim, it's good to talk to you. Thank you.
- [46:56]
A
Nice to talk to you too. It's a fascinating puzzle to watch.
- [46:58]
B
Fantastic. David Faber sat down with Liberty Media chairman John Malone to talk about the M and A landscape. And we'll have more of that full interview available now on CNBC Pro. So you can check out that out again. We're looking at market down near session lows now. The Dow off by three quarters of a percent. That does it for this power lunch. And Brian Sullivan start now. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place. Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning, and effective communication, and you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.