Bond yields push higher on hawkish Fed bets and rising oil prices | The 8:30

Welcome to the 8:30. How's everybody doing this morning? Um, we are watching a lot this morning. We're watching futures go lower. We're watching rates go higher. And we are watching earnings season which never seems to end. But let's talk about Pepsi specifically here this morning. Pepsi coming out with earnings um and the company cutting its forecast for the full year. It is blaming higher expenses among other things. So it said now says uh earnings per share in core constant core earnings per share in constant currency will be up 1 to 2% this year. The forecast had been 5 to 6% so it's pretty substantial uh decrease in that forecast. Uh earnings did beat estimates in this most recent quarter. Um they were $2.34. Organic uh sales were up 3.1%. And the CEO Ramon Laguarda um did speak about the need to cut costs more because of the cost pressures they're under. He said additional structural cost reduction actions are being identified and will be implemented in the coming months. The company's also had trouble with pricing, right? It raised prices and it saw sort of push back from consumers that had to cut prices again. Um and so, you know, it's been sort of stuck in a tough spot. >> Yeah. It's also uh they're dealing with uh the international versus domestic issue that's been hitting a lot of these kinds of companies. You look at their numbers that they just put out. Worldwide beverage volume up 3%, food volume up 1% in North America where they've been trying to institute a turnaround. Beverage volume is falling by 2%, food volume is staying flat. So that the growth story on the US and Canadian and Mexico side for North America is much weaker than what they they're able to pull off internationally. >> Right. >> Yeah. and talking about you talking about margins and foods in particular, right? Core costs operating prop 12%. >> Margin dropped 280 basis points. Uh you're talking about there's the tariff effect too. There's tariffs on on materials for for food like you're free to lay chips and things like that. So they're probably struggling with that. So they had a currency till but that wasn't enough for them, >> right? >> I think this is a struggling business. I mean it's just a low margin business and it's like >> who wants to eat snacks that are salty and maybe artificial? Well, pro I I do organic growth. I don't want organic but >> um I thought it was interesting yesterday I was on market hang yesterday and Christoph Versace was on with us and he sort of he said he would be watching Pepsi really closely as a proxy for you know a nonAI business that's that's sits at the sort of intersection of all of these cost pressures that have been coming in right you know Pepsi is exposed to diesel because it's because they have to ship everything >> uh it gets exposed to those higher agricultural uh costs higher tariffs, you know, although obviously there's been give back of some of the tariffs, but they're still exposed to some of the tariffs. Um, you know, uh, they're exposed to in some cases lower income Americans who are not spending as much. Maybe they're not indulging as much in salty snacks. By the way, they're also exposed to the JLP1 effect if people are buying less of that. A lot going on here. Um Nick Modi was on our afternoon show yesterday, RBC analyst who covers the industry and he also talked about that they don't have like they haven't participated in some of the trends more recently like the protein trend for example. He said they don't really have like a keystone brand or product in that protein area. >> I believe they have Quaker Oats, right? If I'm not mistaken >> I think is General Mills. Is it >> maybe General Mills? I'm going to quickly look that up >> while you I I think you're exactly >> No, you're you're right. It's owned by Pepsi. I have seen by Pepsi. I have seen >> Does that count as a trend as a trend? >> Well, they they've added a protein version of that. >> There you go. But you're right. It's so slow. The roll out is so slow, right? Uh low calorie Gatorade. That's I mean that's stuff like that. >> I'm just laughing at the protein version. Like I think the protein versions of things are ridiculous. You want protein in your oats, put some freaking peanut butter in it. I I mean like put some nuts in it. >> Drop a steak in there. Seriously. >> Oh, that's a low quality protein. Okay, let's be clear. Prote >> Why is that a low? >> It's high cal, high fat. >> So what? >> That's not what you want. >> That's what I want. >> You don't you don't you don't see prospect as protein shakes. >> So what do you want? Te you want some texturized pe protein. >> You put whey protein whey protein. Yeah. Or or if you want if you want to go vegan, you would do the the pea protein, which is I mean that's has its own issues, right? So >> all of that like none of that is good for human beings digesting. I do want to mention one. I do want to mention one thing. One one real one real thing is that Fredo has a a pilot with Tesla to use the semis in California >> for some of their for some of their Modest they have a Modesto uh operation and using that for that some of those that would alleviate some of the diesel pressure. >> But I mean what how margin like this right? >> Well and the semis are expensive to be clear. That's right. >> It's an upfront car. You write it off. It's a write-off. >> Well I don't know. Would they own or would they just contract with them to >> I'm not sure. I think I think Tesla is is making you buy them. >> Oh, that you so you can't just like lease a fleet. You have to actually purchase it. >> Buyer finance. >> Well, whatever it is, it's an upfront cost. It's as though it's they're right. >> I haven't seen anything about leases, but >> yeah. And if if we if we want to step back to the macro, you know, to your point on your conversation on Market Hang yesterday, this is one of those stocks where all we really talk about here is the AI trade and how powerful that is. You have to remember there are a lot of other stocks that are not AI companies and probably not going to become them quickly. Mhm. >> And that's where you're seeing a little bit of the convulsion, a little bit of the pullback, a little bit of the weakness because not everything >> can benchmark to we are an AI company now and our stock is going to soar. >> All of that said, Pepsi shares are up this morning >> that they are uh they're hotter by 1.6%. >> Yeah. So, there might be this feeling that okay, the last quarter looked okay. Um they're focusing on the right things. Maybe the shares were already down 14% year to date. I'm just also looking um the call has just started a little while ago um and LaGuardo is talking on the call. I'm seeing some headlines from that. He says we don't feel good about the beverage business and he says we're putting all the urgency to improve sodas. So I believe they own Poppy like >> Poppy's huge. Yeah. Yeah. Right. >> It's not huge enough. >> Yeah. Apparently so. Right. >> Beverage volume is down. So apparently so. >> Yes. Exactly. So that this is something that um you know obviously we're going to keep an eye on. Steve Schmidt, the CFO, also uh spoke on the call and he said margin performance drove that lowered guidance. So again, that's that idea of like where is the right place for pricing right now >> for some of these products and they you know they seem to have gone low enough that it's affecting market. >> Interesting. Stuff like Poppy you can charge more for the premium products and maybe that that would help. Right. I mean >> right people see it as a higher tier than getting >> Who's drinking Pepsi? People have ballparks like who's buying Pepsi, right? I mean that's just the the question that they have they have to deal with right now. Yeah. I don't know. Are you guys Pepsi drinkers? >> Uh, I'm I'm not a soda person. >> Yeah, I'm not a soda. >> When I was a soda person, I actually preferred Pepsi over Coke. People thought it was crazy. >> That is That is like the hot take. >> It wasn't as sweet to me. >> Yeah, fair. Well, cuz Coke has all the sugars in it that makes it like all the sweeteners that make it really sweet. >> Pepsi for me, >> right? Um, you know, you know who might be drinking Pepsi and Coke? The FOMC uh voting members. I I apologize for that one. That was >> That was terrible. Um, >> all right. Cut his mic. Cut his mic. Um, in all, >> you know, I'm going to do it one time. >> In all seriousness, we got the uh minutes from the September FOMC meeting where the Fed issued its first quarter point hike in 3 years. And some of the headlines coming out of those notes, all 19 participants supported this move. We saw the unanimous vote, but just because there's a unanimous vote doesn't mean everyone was necessarily super on board with it. This does seem to say that at least most if not all of the participants in that meeting were explicitly looking for that for that um that interest rate hike and thought it were appropriate. Several of them saying that they see another hike in 2026 also as appropriate. Looking at CE data this morning, uh the market's pricing in roughly 80% odds we get that second hike in October. >> Yeah, listen, >> the minutes are old news. I know we like but they're important. They're important, Julie. They're important. >> Isn't it more important that Chris Waller spoke yesterday? >> So Chris Waller spoke in Istanbul. >> Yes. >> And laid out >> not Constantinople. Sorry. >> Not Constantinople. >> Is that what you were thinking? That's >> No, which is more like why is he in Istanbul? >> He was speaking to >> Yeah, they do they do the they do the the the speaking. >> I know. I know. But it's just funny. >> But he was in Istanbul laying out the case that yes, we could see some more hikes. The question is timing, how fast we need to deliver those, what's appropriate. And this comes after we've seen some Fed speak of governors saying, "Look, >> we don't need to rush into this. We don't feel the need to push ahead." However, now to the point um on the CME data, the market is now seeing it as much more likely than we were a month ago or even two weeks ago that we are going to get that hike. >> Yeah. I mean, you know, we'll see. It's It's so interesting to me. The Worsh won't give forward guidance, >> but everyone else will. >> Everyone else is doing it. >> Everyone else will. They're filling the void there. You know, you mentioned new speakers, new Fed speakers talking about like John Williams and uh Vice Chair Philip Jefferson talking about >> they have time to assess the economy now as opposed to just saying let's do another rate increase. You know, we're they're going to look at it more sort of discreetly and see what they want to do. >> CPI next week, right? That's right. 14th, right? That'll that'll be a big swing for that. But um I think I mean yeah, the minutes are important, >> but also things change pretty quickly around here. That's right. I mean to me the most important thing is this discussion is rates keep going up. >> Rates keep going up. >> Rates keep going up. Futures are down this morning. You know we we have this narrative year day after day. Oh, yields are up and somehow stocks keep going up, right? >> Well, guess what? Over the past two days, we had the we we had the NASDAQ get to a record. We had the S&P get to a record and then they fall in the past two days and yields have kept going up. So like it it doesn't matter until it matters, right? Until >> right until we see the shift. And you see now a lot of strategists on Wall Street trying to kind of call the top, right? >> But at the same time, you have just as many people on the street saying, "Look, there is plenty of room for this to keep going higher because what do we have? We have the AI capex cycle. We have the war in Iran. And now we have a headline out of the Atlantic last night that President Trump might be considering strikes against Iran before the midterms accelerating that timeline. So oil's up 5% this morning. All of that's going to put pressure on yields." Interestingly, we got the 10-year auction yesterday. actually a little bit better than people were expecting. A lot of buyers came in for a uh you know at at what they thought is a good price buying at 530 >> because here's the thing with the high yields. Yes, it is a problem for a lot of things. But if you are a fixed income investor, that's your income and maybe you want to lock in that higher yield and get that income when everything else is a little less steady, >> right? But also it's for us us the government bad, right? High yield 5.3% not great. Uh I want to know Julie talk about stocks keep kind of going higher in the in the era of these high rates but I saw a thing on uh someone posted about how yes it might be true for tech up 5.6% in the last month right what's down communications healthcare energy industrials consumer discretionary financial down 7.2% 2%. That's right. >> This goes back to that idea everything else getting destroyed, >> right? That there is bad breath in this market. You're not seeing a broad gain. Um that's that's going on. That yes, other things are being hurt even as tech continues to go up. >> I mean all the other sectors are getting hurt. >> Yes, that's right. >> Basically, and what the funny thing is communication services does include tech. >> Right. Right. >> There's definitely meta. I think meta is in that um group among other things. That's right. Um the so in terms of where rates are going to go from here, there's also you said the auction yesterday was which it was. There's auction today $22 billion worth >> 30s at the long end of the curve. And we're also going to get a buyback today uh through through the 20s and 30s um through the longer end of that curve. >> And the the auction happens at 1. So that's when if there's going to be a move in the market, that's when typically it would be. >> That's right. And if we get that I mean we're going to get that buyback, but the question is really how effective is that going to be? We've seen the really the the ineffectiveness of Scott Bess's buyback strategy, >> right? I I don't know what >> Yeah. Do you buy back more aggressively? Do you just throw your hands up? Do you try to slow down the capex cycle? >> 6 billion like it is a drop in the bucket. Does that help anyone? Like does that does that does that boost? >> I think that I think the Treasury's argument would be that it's incremental. >> Incremental. Fine. Okay. >> Right. Fine. But at the same time, if you're the Federal Reserve, we have not seen any governors come out yet and say, "Look, we want to slow down the AI capex cycle because look what it's doing for the country. It is boosting nominal growth. The economy is growing to Scott Bess's point." >> Well, and how would they >> and how would they but the >> like how you know >> you'd have to raise rates aggressively enough to >> How much would you have to tighten? This is exactly slow down the capex cycle. I don't even know what that would look. >> But the pain the problem for them is let's say you wanted to do that. the pain point for the consumer is so much lower than it is for a massive multi-t trillion dollar company. >> Yes. When you have mortgage rates that are, you know, almost 7 and a half% and rising, >> what are you going to do? Push the 30-year mortgage to 10, right? >> You can't do that, right? And so then the question is, okay, you've got the war that's not going anywhere and probably going to get worse. You have the the capex cycle. You have all the other inflationary impulses going in. If you're the Fed, what do you do? I mean this is the problem with monetary policy is it is a very blunt instrument right as has been I'm not I'm not the one saying no no this is they call it the blunt >> instrument that is that is the thing it is so >> we also have the the privilege extravagant >> yes well that's true that's true >> I mean we are seeing yields around the world that's true this is a global story >> that are going I mean if you look at what's happening in France in particular where we're really seeing spreads widen we are seeing protests continue >> um In France, there's a a comparison of some of the different yields around the world. Um, in France, there are high school students who have been protesting because um their schools are in disrepair because there is not the money to fix them. And um you know there's there's an upcoming election wherection a faright um party Marine Le Pen at the head of that the national rally >> um has talked about you know cutting in some places but she's also talking about cutting taxes, >> right? So there's a lot of debate over what that fiscal picture is going to look like in France. You've got yields in Japan that are coming higher as well, which has kind of blown up the carry. >> Yeah. And because the Bank of Japan is finally starting a rerating cycle after what, two or three decades of basically free money. And now we're saying we've got to raise rates. So obviously those yields are going to pop right away. >> Yeah. I mean, and when it comes to global sovereigns, it's all relative. So, >> you know, >> and I I want to >> So yeah. Do is is it still the the priv the the exorbitant privilege of the US? Is it still the cleanest dirty shirt? Right. >> I mean for now it still seems to be but you know that's something that people like Ray Dolly have warned about. Is that the risk >> is that it's it's global. And I want to go back to France for just a second because to your point one of Marine Le Pen's uh key proposals is to cut something like 125 billion euro off the deficit. But the how do you do that when you're already facing a fiscal crisis when yields are already super high? The US is going to have to answer that same question after the midterms when we get to the the budget planning and the deficit planning >> for Europe because they can't they can't just print. They're part of the euro. >> They can't just print. >> They can't just print and that you know for a lot of reasons Europe is a much tougher spot economically than the US. But it's the same question the US is going to have to answer and that Congress is going to have to wrestle over when they start budget discussions. Let's take one more part of this. Uh, one of the things really driving all of this inflation is the competition for capital. We are seeing it is getting, you know, we joke here every morning. H, what's another $50 billion? We wake up and it's another 50. What's another hundred billion? And then we woke up this morning and what did we get? Broadcom is planning, the Wall Street Journal reporting $50 billion in financing for OpenAI to buy chips. Uh this comes after we got headlines that Broadcom is also helping finance $60 billion for Enthropic. We got the news yesterday or maybe the day before that SpaceX is raising 40 billion in debt to buy Nvidia chips. >> That was just yesterday. >> That was just yesterday. How fascin purchases. >> If you are trying to issue into this market, where do you put your money? You could look at how crazy this is getting. >> You know what I wondered about when I was looking at these headlines this morning? When we talk about the crowding out effect, >> ridiculous. >> Where else is it showing up? Is, you know, there's been a lot of talk about it happening in the Treasury market, but when you see also IPOs >> not happening into this market, is that the crowding out effect? Is that investors saying like enough? I'd rather go um buy this chip debt, this compute debt, >> you know, at whatever yield than buy this what I consider to be an overvalued IPO and participate in that. Maybe that's part of I mean, I don't know if it's the same investors, right? But institutionally it's the same end buyers and are they in some cases making some of these um decisions? At the same time in the private market there doesn't seem to be much evidence of difficulty no in raising money. >> OpenAI is not doing another round. >> Yeah. >> Fine. Exactly. Exactly. >> It's kind of like when the spigot cuts off then they'll stop trying to issue debt. Right. So right now the spigot's open. So there's still clearly we're seeing that today in now. >> Um but then on the flip side we we talked about this >> what's happening the debt that's already out there right? So SpaceX CDS spreads are widening right? That's a measure of of the insurance for the for the debt. Um Oracle bond yields are rising. Their CDS are record high. Um Meta's H bonds behind Meta's Hyperion data data center hit a record low, right? So the issuance is already out there is not doing so well right once they get out the door and it's you know not really a problem I guess for for SpaceX and these guys once they got the money already but it doesn't not a good look. raise again which SpaceX is trying to do and again you know I think you know yesterday they raised right out after the IPO right they just had a big IPO like okay let's go to debt markets now um so that's a little bit of a concern there are people concerned about that the buildout's not going to happen as fast or that these companies won't pay when it when the bill comes due right is is that is what's the concern for behind this debt sort of not doing so well in the secondary market >> well that's part of the question right that nobody's doubting the demand side story yes clearly the demand is for this debt because they're keep being buyers. We can talk about crowding out all we want. Where's the crowd crowded out money going? It's going into the AI trade. That's why everything else is getting crowded out. But the question is duration. How long can this go on without any kind of crack or >> Well, that's the thing. Cash flow. >> Yeah, >> it's all right. Like that's the concern like who's pushing to get that cash flow >> most quickly to pay back >> right >> the debt >> which is what we keep saying who's going to be left holding I want to read something that box CEO Aaron Levy wrote about about this whole cycle right he said the compute needed for the a stage of AI we're at right now is going to be quote insane personal agents agent swarms defending enterprise agents that review all our code for security issues agents that process nearly all enterprise data workflows background agents etc etc we're going to need that mix of inference volume, right? That's what he's talking about. So, that's the bullish side. We need we need more. We're going to have so much demand. Uh my concern is that you guys haven't actually explained why we need this. Like, why do we need the bots? Well, they need we need cyber security protection from other bots that like it's like it's building both sides of the equation. >> Well, that's been something that I've talked I talked about when we first got the AI push is that it was a push, not a pull, >> right? In other words, it felt like it was something that that the sellers were saying, "You need this and everything is going to that there was this air of inevitability to it all." And there still is that. Absolutely. Now, if you talk to companies both large and small that have used these AI tools to great effect, they're super impressed by them frequently. It's helping them. Um, that said, I do think it's like it's just going to be lumpier >> and slower to adop be adopted. the push versus pull. I'm sorry to interrupt. >> Yeah. Then that then the bullish uh >> it really reminded me of the EV situation in this country. Three, four years ago, >> manufacturers were pushing EVs on this is the future. >> And for one reason or another, consumers weren't necessarily buying so strongly. And that led to a big sort of come to Jesus moment with the industry being like we're writing down 18 to 20 billion each in costs or loss whatever charges. This is not working out. is I'm not saying it's gonna happen here, but it was because of that whole like it's not like there was organic demand. I want EV. I want EV. I want EV. That wasn't necessarily happening at a high mainstream level, >> right? I think and I think people in the AI industry will say the demand is happening >> and on the financing side it is there admittedly like we see it on the financing side, >> right? But that's not the demand that we're talking about. >> And well to this is this is where I want to come back around to to quote you Julie. Nobody likes foisting. >> Nobody likes being foisted upon. >> You know who doesn't like foisting? me, especially when it's freaking >> Oh, here >> video calls on a flight. This is what AI is providing us, right? The ability to have stuff like FaceTime calls on a flight. Well, I'm not exactly happy about that, right? And this is sort of the the biggest latest nuisance that might be happening on flights, >> uh, like United, like American and places that have Starlink is the ability to do voice calls and pretty high speed in the air. Um, now technically it's not the the FAA has not outlaw outlaw that, right? It's still, you still able to do that, but a lot of airlines saying, "We don't want you calling your kid in the middle of flight." And >> you know why? Because it's rude. Because it is rude. >> Yep. Even if you have headphones, it's still super annoying on business calls. I think the journal wrote a story about it saying people are treating it like they're home. Like it's >> Nobody wants to hear you yap on the flight. Like, do you want to be stuck ne stuck next to somebody trying to like get their, you know, their kid on the phone? No, you don't. >> No. We're doing a business call or a business Zoom, right? >> Yeah. Yeah. >> I mean, this is just I mean, listen, we've sort of had the death of courtesy already. That's true. >> So, this is just the latest. You know, you guys know I'm on public transit every day and all three of us are >> and most of the time, this is the thing. It's just like the the few people who ruin it for everyone. Like, most people are fine. This is the loud minority and then you have somebody like scrolling on their phone and they hit every video is is the volume's up and it's like for some unknown reason they don't have headphones or earbuds or whatever. >> So it happens everywhere but it's a new nuisance obviously on planes because of the quality of >> Wi-Fi. I will give United credit. They there was a incident where where where a passenger was refusing to wear headphones for something like scrolling and I can't remember the flight either turned around or they didn't take off. They said, "You're going to stop or we're not we're not moving. We're not going anywhere." That's good. But there's still a lot of people saying, "What's wrong with that? Why can't I do that? Why why can't I be allowed to do this?" Well, this is like you don't get it. You're a barbarian. You don't get it. >> I would love to see the ven diagram of people who think it's cool to listen to stuff on a plane without headphones. And then the people who also think it's cool to like take your shoes off and be like putting your feet up on people's chairs. That That's got to be a circle of a ven diagram. >> Oh god, the bare feet. Don't get me started. >> It's just the It's the It's my space. I do with it what I want. No, it's not. It's our space. >> Um, let me say also that Delta is reporting tomorrow. >> Correct. True. Correct. >> And, um, so this is a timely discussion we're having because the CEO of Delta has been in pitched battle with Elon Musk over Starlink, right? Um, and so he's going to be asked about it on the call. One, I think, right? >> You're going to ask seeing any kind of >> customers saying we want this or we're leaving. Has there been a decrease in people flying, business travelers? Has there been anything anything that you can kind of put a little number on? It's going to be asked about. Plus, there's no upside for Ed Bastion to be getting in an online war with Elon Musk. This guy like loves first. I don't want to use a word. He's a crap poster on on on x.com, right? So, you know, you don't want to get in that war with him. No. >> A troll. We can call him a troll. >> Yeah. You're not you're not going to you're not going to win that in the eyes of the internet. And it's not going to do anything for your business or for your role as CEO. No. >> Yeah, but you'll get a peaceful flight. >> There we go. >> All right, we're gonna take a break. We come back, we are going to talk about the AI trade from the chip perspective. Samsung and TSM both out with some numbers. We'll talk about that. Heat. Heat. Heat. Heat. Down. Down. Down. Heat. Hey, hey, hey. Shalom and welcome back to the A30. >> I like it. >> Now guys, tell me if you've heard this one before. >> Samsung and Taiwan Semi raising some money here. >> Well, actually, no, no, they're not raising money. Big numbers here. Big numbers. >> Big confused. I got my my shalom here. Samsung with a nine-fold increase in operating profit, right? Driven by the chips and the memory business uh to 80 billion for the quarter, revenue doubling, right? Uh Taiwan semi-reported sales up 50% in the quarter using their latest September data. So another big quarter for them. Uh so clearly that AI infrastructure trade going strong, but >> investors are kind of like meh, right? These stocks are up a lot, but in this market, uh they're wanting more. Uh is this more of a concern about again is this more concerned about the debtfueled buildout or or is is not is not going away or is it hitting limits here? I think that's what we're seeing is that's maybe that's a twosided coin there of concern as to why we're not seeing great numbers, great moving stock. Not really, right? Yeah, it's interesting for Samsung in particular that it's doing better because the outlook I mean a um as we heard what from Micron which >> gave some reignited some hopes about the the length of the memory chip cycle. >> You know, Samsung didn't say anything to refute that and there still is this outlook that memory chip prices are going to continue to rise. >> So, it's interesting that it is not benefiting. >> Yeah. >> From that. >> Yeah. There's a to your point um e Toro's Josh Gilbert analyst over there who covers these stocks uh said this morning in a know he says Samsung's delivered a record profit and still fallen short of expectations which tells you just how demanding that trade is. Look, it's not enough to just put up good numbers anymore. This is like this is the Nvidia problem. Nvidia comes out every quarter, has what by any account would be an absolute blowout quarter every single quarter and half the time the stock trades down. Yeah. >> Well, so how much of it is just that yes, great news, but it's already priced them. We already knew more than doubled this year. We've seen with the microns of the world, you know, they've done so well. Expect more good stuff out of them and it I don't know what it will take to actually surprise the market to the upside. Right. That's right. >> If anything, it's just sell them >> sell the news event or something like that, you know. >> Yeah. In some cases, I mean, and as I've said before, like it doesn't matter what the stock does the day after earnings. It matters what it does over the long term. And this year the stocks are up quite a lot. Now Taiwan semi Taiwan semi is always a little confusing to me because it reports its revenue and its earnings separately. Mhm. >> So, but you know with that increase that they had revenue was what $46.7 billion. Um if you look at the conversion between um uh between the Taiwanese currency and and dollars um and there too they've had a big increase and the over the longer term and now you see this uh little bit of a pullback but also you have to you know look at the context that the market is down today >> right that and s uh excuse me Taiwan semi sits in a really interesting position because they are the primary chip supplier for a lot of the biggest names here. So you'd think if demand for chips is good, that company's going to keep doing well. The question is then, okay, well, what do we need to see out of you to think you're doing well enough for us to reward you? And at the same time, you look at uh some of the strategists who cover this stuff on Wall Street. And increasingly, you see the the shift to, you know, maybe we're going to start seeing a little bit of a lower capex slowdown. Maybe we're going to see just a little bit of a tail off here, >> right? But well, and these but >> we haven't seen it yet. And these companies are still spending more. >> And these companies are still spending a lot of money >> on building out capacity, not just in their the countries where they're based, but in the US as well. >> And that is a huge bet that in 10 years when that factory has now become a sunk cost, that demand is still going to be there. And if you take uh you know, Mary Dailyaly, the federal governor of San Francisco, at her word, she says at least for the next several years, memory is not going anywhere. Those prices are only going up. But the question is longer term, okay, you've just spent how much money building a factory in Arizona, building a factory in Texas that's breaking ground >> in 10 years. Does that still look like a really good investment? >> Yeah, because that's the the trouble that the chip industry, particularly memory, has run into historically. They overbuer. >> We have seen this story before with memory. Counterpoint Research talking about they raised their DRAM price forecast 10 to 20% sequential increase from a 5 to 10% previously. Customers are bringing forward orders good for Samsung. Is it enough there? I'm curious what that's what that might be for the next year. This is for the next quarter. >> Yes. >> 10 to 20% sequentially. I mean that's insane. That's insane >> that it keeps going up at that kind of rate. Yeah. Just continues. >> And the question how long can that go? >> Yeah. I mean, in theory, it could keep going, but at some point, like, there's got to be some kind of limit to whether it's the yields are hurting or whether demand on the consumer side isn't as strong as we think it's going to be or whatever it is. At some point, you'd think there's got to be some kind of uh little crack. And then the question is, okay, how does that little crack then become a fault line and where does it go and spread out from? >> Yeah. And I'm just looking at futures again this morning, which it looks like they just keep kind of grinding lower. Yeah. >> As we speak. Right. And then and again, is this a question of yields starting to gain a little bit more, you know, along with oil prices starting to gain a little bit more attention and cause a little bit more alarm and there's not enough on the AI side to counterbalance it? I don't know if that's what it is, but >> I mean, we should also note Asia as a whole is down this morning. Uh there's their session's been in the red. So this is this is not like an idiosyncratic move from these companies. They're trading with the rest of their >> um you know n like regional bucket in Asia. So there is some of that playing into this but there are bigger questions of you're spending all this money when will you like what's the show for it down the line. >> Yeah exactly. Um all right let's talk about a company that came out after the close yesterday that is a tech firm. Um and it's a NeoCloud. We're talking about Applied Digital. Um so this is a company it's like sort of a Neocloud. I guess it's in the Neocloud um universe, if you will, because they build data centers. Um in some cases, they then lease that capacity. So, I guess, but they're leasing it in some cases to other cloud computing companies and hyperscalers. So, they're in this universe. Anyway, the company came out with a revenue that was up 322%. They still have a loss of a penny a share here. And you know, this is another one of these situations. So, so the shares are surging this morning. This isn't a big enough company to move the needle in terms of the futures overall, but um it is moving the needle for that little NeoCloud universe. What strikes me here when you look at these numbers and again when we talk about the timeline and when this stuff is going to pay off. So the company said base rent from its high performance computing business was $65.8 million from 44 million last quarter. $65.8 million. That's a drop in the bucket. >> Like what are we talking about? Are we talking about numbers for Goldfish? >> Right. Well, and again, and that's base rent from that business. So, it's around 66 million. The total uh numbers were about $342 million. That's total revenue. That's right. So, we were just showing um on our Alphaspace platform some of the other NEOClouds here. Um and we have seen strength from some of these names, not all of them, right? Some of them have underperformed this year. actually applied digital has not done great this year but there's been a lot of retail interest and trading around these names which has been interesting the likes of iron has been really sort of a battleground name if you will >> right and that you look at applied digital to your point they've not done super well this year but contrast that with the fact that their fiscal Q1 revenue is up 322% year-over-year so then the question is okay what's not working for investors >> I think it's I think people are noting you know buildout costs are rising, right? Um it's it's a good business, right? A lot of the hyperscalers is looking for compute, but it's problem is that >> they're having problems building data centers. Costs are either going up or people don't want them, right? This is sort of the business they're in is building out these >> these physical properties, I believe. So, yeah. >> Uh I I think that's maybe why we're seeing a little bit of uh >> you know, I think we're up 1% uh premarket for the stock. I mean, it's it's okay. Um >> is it only up 1%? >> I just checked on uh yahoo finance.com. >> Oh, okay. I did and I can't read what the when we have it. My eyes weren't good enough. >> I'm seeing >> see it on the screen% it was up. It was up >> a lot more. Right. >> Yeah. Much more significantly. >> We'll see how when it opens and things like that. But but yeah, I mean it's it's >> great growth, interesting business, lot of interest, but some sort of maybe some concern here. Uh even the fact that it lost how much money did it make or what? 60 billion 60 something like that. >> Be hilarious. >> Yeah. >> Yeah. >> Right. uh base rent HPC base rent was 65.8 98 million versus 44.1 in the previous. >> And the company last year, it's fiscal 2026 spent $2.9 billion. >> Right. Right. >> So, >> and this is this is the quirk uh you know, I don't want to call it a problem because it's their business model, but this is the quirk of the business model. When you're doing this kind of thing, you've got to spend money to build the facility first. >> I can read. >> Then you collect your payments over the life of the lease. >> Yep. And so that's a lot of upfront spending that you've got to kind of put all your hopes and dreams on that you're going to get the return you need to make that profitable. I mean in recent years recent recent months weeks days we've seen oh Nvidia will give you money to build that data center you know >> right right that's sort of how you >> but this is part of the problem here all the circular financing of okay where's the money actually going and the question is who's actually making any this is what we keep coming back to who's actually making any money here and who's going to keep making money >> right >> who could be making money according to Michael Dell >> yes >> the children of America >> that's a good one that's a good one um >> I like that one >> yesterday Michael Dell CEO and founder of of Dell coming out and defending uh the uh the Trump account move to basically allow individual stocks, individual shares to be put into these accounts. And we tal as we talked about, you can't sell them for 5 years, can't say no to the stock, can't choose the stock, >> but it has its bowls. Yahoo Finance's Washington correspondent Jennifer Shamberger spoke with Michael Dell at the White House yesterday. Let's take a listen to what he had to say. In the case of Gwen Shotwell, she's giving two million shares of SpaceX to uh you know, two to to two million children. It's kind of hard for me to believe that's a bad thing, right? That that these children are going to somehow be negatively influenced because they now have one share of of SpaceX that they didn't have before, right? I mean, the alternative is they they didn't have it. >> Kind of hard for me to believe that that's not a good thing. He says, "Kind of hard for me to believe that a child won't benefit from holding SpaceX shares from several years. As we've discussed, there are a lot of potential problems with this model. There are a lot of potential conflict of interest problems. Also, it's worth noting uh Michael Dell and his wife Susan have pledged uh six basically six and a4 billion dollars to the Trump accounts. That's cash. That is not stock. Gwen Shotwell at SpaceX has donated actual shares that are going to these accounts. Dell did not has not done that yet, but the administration is expecting that more business leaders will be following in child's footsteps. >> And the administration has been through Michael Dell and other proxies has been pushing back against the criticism of this share donation plan. Um David Zervos, who just uh joined the just joined the Treasury Department from um Jeff, he was one of those pushing back uh on it after Greg of the Wall Street Journal posted the story and and said this is not a good thing. And you know, I posted about it as well and had people coming to me and saying, "This is free money. What could possibly be bad about it?" Well, there's a couple of ways to look at it. Gwyn Shotwell, yes, is giving those shares, which is great. But is she giving those shares instead of the alternative, which would have been giving money that would have gone into an index fund, right? As as we've talked about before, and this is a drum that Rob Arnot beats all the time, >> the 10 largest companies of 20 years ago, 30 years ago or 40 years ago, are most of the time not the 10 biggest companies of today, >> right? >> In other words, like Walt, SpaceX might look like a rocket ship today, and maybe it will. You're putting risk into a portfolio that is not by choice of the person who holds the portfolio. you're foisting it >> and at that point in their life should be designed for long-term safe appreciation >> well >> until there is some calculation of I want to take argue that at birth someone should be taking on a lot of risk if they're not planning on tapping that account until retirement but it should be risk that they they are choosing >> right >> I have to ask why is there so much defense of this of the single stock donation plan why are we seeing so much what's wrong with it what's wrong with it why it's free money we should be doing it how you're not doing it. Don't you want free money? Like why are they why is it such a concern? I mean, take tax reasons aside, why can't you just sell the stock? Gluen Shotwell sell the stock and give it to like you said like Michael Dell is doing. >> I'm sure Gwen Shotwell is also pretty liquid and has so behind that I'm not saying I know the answer, but a couple roadblocks, right? Congressional intent clearly says does not say single stock ownership. You got to give either cash and it's got to be either the broad ETFs, right? Or in broader index. this is meant for protection of this is what Congress said. So, right. So, that is also a big roadblock. We say we talk about potential suits here, here and there. Um, but the Zervos thing is funny to me too because he's saying, "Oh, you don't want the money?" Uh, so basically what you can do is just when you're 59 and a half years old, you can sell the stock and pay the after tax proceeds back to the government. It's really simple right here. Like, you're telling me that's the solution to this? >> That's what you want to do. Just hold on to the stock for 59 and a half years. >> 59 and a half years. And I don't think the the Michael Dell is, you know, battling a straw man there by saying the children will be influenced. That is not the concern that the children will become SpaceX fans by owning space. >> Well, they've been saying this. They're saying this in science and math and space. >> But it is a straw man argument. >> Then they should be able to choose. >> Yeah. Right. Yeah, >> you know what if and we're talking about SpaceX, but as we talked about the other day when we discussed this, what if it is >> a stock that the that the family or the child does not want to hold, right? That is more the concern here. Um, and the concern is also that the leaders of the company could in the future use it as leverage. >> So, let me add an interesting nugget that conservatives might be interested in. Let's say I have religious viewpoints that I don't want to own certain companies. That's a concern. you're I can't cancel the stock. >> Well, then they would say, well, you hold the S&P 500, which is >> so therefore you hold your diversified. You're not directly buying the stocks. And you think about the potential kind of downstream impacts. You know, imagine in 5 years a data center operator needs to get a permit in a certain state and the people donating these shares can choose the region, the demographic of who this goes to. So, let's say I need a permit in, you know, Oklahoma taking a random stock. If I then go donate a bunch of shares to the children of Oklahoma, does that help the state legislature unlock and help me get my permitting? Which you could do, which is an immediate conflict of interest on literally every definition of that phrase. >> But that said, >> the maybe the other side of this is look at the economy we're in. Look at the K-shaped economy. Who has come out on the top of that K? It is asset owners. It's equity owners. By and large, the wealth effect in this country has been driven by owning stocks, by owning equities. And so, I think the argument you could make on the other side. >> Oh, no. Making that argument. >> You are getting the jump on owning and you're young, so take the risk. So, maybe higher risk like SpaceX, but you're owning equities. That's could set you up for the future. The problem is everything else that comes with it. >> And the median stock does not outperform. No, it does not. Yes, holding index over the longer term >> is a much more a safer bet, a more consistent bet than holding any individual stock. And yes, it is absolutely possible that SpaceX will dramatically outperform, right? But again, it should be the choice, >> right? >> And do we buy that in 59 and a half years, the MAG 7 will still be the biggest companies in the world? >> Doubtful. >> Doubtful. >> I think also one little wrinkle is that, you know, this is I think it's a good policy move. I think is was a good intent behind wanting to >> accountide kids with with education money and and retire money down the line. >> Sure. They can also argue why are we relying on corporate America and private citizens to do this stuff when it's a government initi or government sort of uh purview here like this is what they should be doing right >> so again lot lot going on there were a lot lot of mix there but I mean Trump likes to mix private and and public worlds right so >> it's been one of the defining ethos of this white house get the private sector as involved in public duties and public governance as possible this is this is where we see the US government taking stakes in private companies we see the involvement of private corporate leaders in the White House much more closely than we'd seen before. This is part of the operating mantra for this White House. >> Yeah. Um should we talk about some individual stocks ahead? >> Let's do it. >> Let's do it. >> About an non-controversial stock, Julie. >> Okay. Or am I doing this one? >> You're doing this one, right? >> Oh, okay. Are we still talking about it? I thought we were skipping it in the end. >> Oh, >> so go to talk about Levis's. >> Okay. A lot of controversy behind jeans, especially for one John Highland, our producer, right? So, basically, we take a look at Levi stock here. A little week here ahead of the bell. They posted earnings that topped estimates, but lowered uh net revenue growth projection to the bottom end. We talked about this last week, right? Levi said DTC net revenues increased 2% in the quarter, comprised 45% of net revenue, but they missed their internal estimates for that DTC business. Meanwhile, wholesale revenues increased 6% for the quarter. So, they're not going where they want to go in terms of their own sort of own and operated selling here, whether it's website or whether it's their own stores, right? Um, you know, they were getting some some nice boosts here from stuff like the love story effect that that John Highland loves. The old school evil Kennedy. Yeah. There's this '9s sort of uh, you know, we have nostalgia for it. Even if it's you weren't even around the '90s, you have nostalgia for it. They want the bagu jeans, the different cuts. uh they were getting that nice lift there, but I guess it wasn't big enough here from a sort of margins and selling where they sell point of view. >> Well, and here's the problem trying to chase culture. They went all in on the baggier cuts. And this is some commentary I've heard, not that I'm the gene affectionado of the of the group. Um >> you wear jeans every day. >> I do wear jeans every day, but uh they went all in on the baggies and now if you you know, if you ask the kids of today, >> everything's going back skinnier. This is the problem with trying to follow. And the lowrise. >> And the lowrise. >> They went baggy when they should have gone lowrise, >> right? >> At least that's what Michelle You're cutting cross incorrectly. >> She's the CEO. >> That is correct. You see the young see young kids with young girls in particular low-rise jeans are back, right? >> Yeah. >> Yes. >> Um >> I'm a hard pass on the lowrise. >> Hard pass. No, thank you. >> Should we take another stock that's moving this morning? >> Well, do we have any We have more to say on Levis. >> We have more to say on Levi. Are we good? >> Do you have anything to say? No, I guess so. I guess not. >> Okay. >> Another stock that's moving is Palunteer. That's up. What are we up in the pre-market world? >> This is what I want. >> I tried to set it up. >> It's up 2.4%. Um, and the catalyst there this morning, Goldman upgrading its its rating on Palunteer to buy from neutral neutral, excuse me, setting a price target of $230 per share, representing a roughly 18% upside. >> Yeah. Which and they just sent me the notes, >> right? I want I want I want to quote from this note. um they see a step function change in depth for that company powered by AI, powered by bespoke software development. And the other thing they call out and this is something Alex Karp the CEO of Palunteer has been you know beating the drum over is what he calls sovereign AI the need to control your data to control your own proprietary information. His argument of course is that you are if you're an enterprise and you're using Anthropic or one of OpenAI's models and you're feeding your data into it, your proprietary data that's all going into the training corpus of the models and then other businesses are by proxy basically taking your alpha. The argument he makes is look we need sovereign AI. We need customized models that are made for you that you run yourself so that you keep your stuff locked down. Palunteer has been making a huge push into that market. I find the term sovereign AI to be terrible and I'll tell you why. Because some people use it to mean that and some people use it to mean country. So >> it's true. Yeah. >> And so like I find it quite imprecise. I want executive order that we change it to something else. >> What would you rename it to, Julie, if you had the pen? >> Proprietary AI. >> Proprietary AI. >> Sovereign AI for countries. Proprietary AI for for >> Is that kind of a mouthful? Proprietary AI. It's a lot of vowel sounds. >> PI. PI um is is also sort of an issue if we could keep talking about Palunteer talking about like whether the market sort of pricing in you know that I think I read this in an article about how um the AI AI opportunity plus their forward deploy engineered model right so they basically put these people at your company to help set up their the Palunteer systems right foundry and whatnot right um can you scale on that and here's Goldman saying yes they can still the setup still favors growth it's not the end of the world you can still actually put human beings there to to do the forward deploy model uh at these companies. I mean it's like old school SAP price coopers back in the day you know McKenzie now right putting people out there >> and this is also how Palanteer got their start with their initial government contracts with the military by being willing to forward deploy people out on the battlefield to say look this is how you use our technology they've built that really successfully >> on the battlefield or on the battlefield >> or it's like Pentagon no on the battlefield I mean they they do a lot of hands-on they they get very hands on their engineers will go out into the field >> employees in there there are people who work at Palant who do that. Wow. >> And to to your point, Goldman says there's room to grow. The other thing to consider though is that the forward deployed model is very expensive. That's a lot of human capital. And so, yes, you can scale it if you keep hiring, but then at what point do those hiring costs start becoming really painful, >> right? >> And the the stock, by the way, is not down this year. It has just underperformed, right, >> the NASDAQ 100. That's right. So, it's not as though >> it's done poorly like a lot of software. it kind of dipped and then came back to some extent. >> Yeah. >> Um so yeah, >> I mean think it's it's still a f fascinating company and you know it's sort of also is shrouded in mystery still to this day. >> Well, Alex Karp's the philosopher in the valley. >> A lot of people don't really understand how the technology works, right? It's it's what's what's behind it. What's what's foundational model for a lot of their AI stuff, right? And it's also got the controversy problem of being uh involved with DHS operations, FBI, CIA operations. Um, which to a, you know, a certain class investor is always going to to give off red flags. >> What if he what if Alex Karp wants to donate shares through the Trump accounts? >> See, this is one where I could see people getting upset because there are people who don't want to support what they see as a wargaming stock, as someone involved on the battlefield. They don't want to support the defense industrial complex. If Loheed Martin >> it's free money >> or RTX or Palunteer starts donating do you want someone making you know ballistic missiles in your portfolio. >> Yeah. On the other side of things like if you donate to these Trump accounts again bring this up again. Does that mean the government's like not going to kind of come after you? Right. Oh well DraftKings donated to the Trump accounts. We shouldn't regulate them. They're doing >> well. This is part of the conflict of interest thing that's so obvious to see. Um, and so what would be interesting to see for me is post 2028 if a Democrat takes office, what happens to these accounts? What happens to all of these rules? How much of this gets over redone by a more blue Congress? >> It would be hard to It might be redone. It would be hard to envision it getting changed for the existing account. >> Yeah, you wouldn't take the money away or change the accounts, but how do the rules going forward change? >> Will they still be called Trump accounts? Definitely not. They're going to get renamed like America. I mean like will everything go back? Will we call it the Gulf of Mexico again? >> Of course we will. >> We could do the EO as the order, but I think in the law the OBB whatever it says >> big bill it does. So you the problem is you have to legislate the change. >> It's not EO. >> I have to imagine that wouldn't be too hard to get done, but we shall see before we get to 28. We're going to get the midterms. We're watching that. That is all we have for you today for the 8:30. It's more than >> I'm not done. Darn it. >> Brian Sazi's got you next. >> I Heat. Heat. Down. Down. Take a minute. Heat. Heat. Heat. Heat. Heat. Heat.