Bond yields surge, Saudi Aramco on oil and New York City’s AI safety push | The 8:30

Morning. Welcome to the 8:30. Um, >> happy Monday here. Do you guys hear anything? >> I I hear something. >> Okay, I got it. I can't hear anything. The >> music. Uh, oh, [music] okay. Pros can't hear anything, but you know, we're here. You don't need to hear anything else. >> You got us. >> Um, we got caught off guard. >> We caught a Monday morning here where um futures are very little change. So, we're not getting a lot of direction. There is not a there's not like one big headline driving trading this morning. Um, so let's get that out of the way and say that off the bat. Um, but there are a lot of ongoing things that we continue to watch that there are sort of incremental movement on and discussion of. Um, and one of them is what's been going on with bond yields, not just here in the US but around the world where we continue to see bond yield surge. Um, and you know that doesn't seem to be changing significantly. >> No. um one and two, it also continues to not derail the equity rally, at least not substantially. And that's something that a lot of strategists um and folks around the street and Europe for that matter are sort of still trying to to grapple with and figure out. >> But that said, and I' I've seen a few people make this point now. Yes, at the index level, the equity market has largely not been impacted by the bond sell-off. However, be that's because tech has been so strong. If you strip tech out of that, small caps haven't had a winning week in a month now. The financials have been struggling. Under the hood, there is some struggle. Tech is just managing to obscure that. Where we saw the best gains last week was the NASDAQ. >> Tech is still obscuring some weakness underneath. >> Yeah, I guess so. But is it also But is that other stuff not performing because of bond yields moving higher? >> That's hard to say. >> Yeah, I don't know. Yeah, I'm sort of noting some of the some some some Wall Street chatter here talking about how we're talking about bond yields not derailing some of these some of these stock uh sort of moves here. JP Morgan talking about how you know uh bonds not cause lasting damage. Uh expect yields to retreat from current highs. Okay, fine. Um you know, Citadel also talking about we're more constructive on US equities in Q4. Uh the reset came right. We see companies sort of cutting down leverage in that space and that's helping what what they're saying. Uh >> yeah. >> Uh so see this opportunity not to step away, right? I'm paraphrasing a lot here. >> But uh I think maybe there's just sort of the we're sort of shifting from extreme bearishness to some some some bullishness heading into earnings. Maybe there's some good things they see constructively, you know, with regards to like, you know, don't freak out so much about the bond yield stuff just quite yet. >> Well, it depends on who you talk to, right? Yeah, I agree. I mean basically you have this view that okay stocks are telling one story bonds are telling another which one is correct >> at some point somebody has to win >> right I mean there is a view out there that the bond yields are just reflective of of strong economic growth and therefore no you know they don't have no >> we're going back to a preinterest kind of regime >> maybe but it doesn't feel that way does it um Henry Allen who's a macro strategist over at Deutsche Bank writing this morning talking about clear signs of financial market stress he talks about sovereign bond spreads having widened um that we're seeing front-end yields go higher around the world and also that longerdated oil futures uh keep rising and he seems to think that this means that there will be trouble coming for stocks eventually. Then you've got Ed Yardi on the other side of this. He asks in his note, how long can stocks ignore bonds if yields keep rising despite low lower oil prices? And he's like everything's okay. Earnings are fine. He's sticking with the uh the year- end target of 84 or or I should say 8,400 by midyear 2027. So, he's not getting more bearish. >> We also saw some of this reflected in Scott Besson's comments recently, the Treasury Secretary. If we flash back on what was it two or three weeks ago, we all remember when he says, you know, uh I am the house now. I have asymmetric information. I have an asymmetric advantage. I run the market. I'm the bond trader chief. >> To me, it was like vi like Captain Phillips vibes. >> Oh, very much so. >> Look at me. [laughter] Look at me. I am the crafty now. >> Um, and now we see him say uh in an interview public comments over the weekend basically, well, I don't control the market. I don't control what bonds do. There is something to be said about the staying power of the selloff. Yes, some of this could just be the fact that the US economy is growing. That is true. However, go back to Friday when we got that jobs report that far underperformed expectations. We got 29,000 jobs against what was it 90,000 surveyed >> and the short end of the curve. the yields finished higher on the session. If you had asked anybody what they expected, they if they saw the short end finishing higher on the yields after a small jobs report, nobody would have taken that bet. >> But that's what we're looking at. >> Well, and part of what's so interesting here is that even bond market veterans are looking at the market and they're like this, like I remember Rick Reer when he was on recently with Brian Sausy, he was like some of this doesn't make sense. Um and we were initially seeing oil prices track to bond yields which you could argue made some kind of sense. Um and by the way that same Henry Allen note from Deutsche Bank he sort of set talks about not just the first order effects of higher oil prices but like the sort of secondary inflationary effects. The problem is oil prices been coming down and yields are still moving high. >> Yields been going up. I mean there's this people are talking about how you know you see that you mentioned oil prices and you talk about the Iran war and it's the step up in yields and gas or oil prices and looking at mortgage rates >> right and this is a double whammy of mortgage rates and oil and the thing is you don't think mortgage rates in the war how does that how does it >> correlate it's like well it certainly is and we're and that's a major major pain point for for Main Street right and I think that's sort of >> not hidden in in this whole discussion we're talking about markets and and investors and how they're doing quite well. But, you know, there's a nice tie in there between oil and mortgages, believe it or not. >> And you know what else? Maybe that little like misspeak where you just said at first you said gasoline instead of oil. Maybe that's actually the reason that yields have continued to move higher because even though oil prices have come down, diesel has not really come down and fuel has not come down because as we've talked about time and time again, it's the refined products that are now having the squeeze issues than than crude. So that kind of helps explain why there is still this inflation being expressed in bond yields >> and I and I like this this connection not like but I think I think it's accurate yields oil there's a definite connection there it's linked and not in a good way >> right you know no that's right it's also worth saying just very very quickly on the bond front to Scott not to give Scott Bessant credit here necessarily >> you can give him credit it's allowed >> I I I don't know I well I don't know if it is credit but a lot of this is global we see the growing fiscal crisis crisis in France. We see um people are starting to talk about contagion again in Europe, that idea of all of this yield stress spreading. So the US is not alone. His comments were saying, "Look, I'd be worried if we saw an idiosyncratic move." However, with the entire global bond complex with yields rising, it's not necessarily credit, but it is a bit of cover, >> right? I mean, and he said that in his Axios interview, right? It's not as though people are selling US treasuries and buying other global >> um sovereignities. Everything's getting sold off. That's right. >> Selling everything. >> So, let's take >> Don't blame me. It's everyone else is in trouble. >> Exactly. Pros, let's stick on your point on the gas prices, the diesel, the oil here. >> Some really interesting comments from Aminaser, who's the CEO of Saudi Aramco. Um, he's speaking in London today. And he makes a point I think is very smart. It's where I want to start this. He says until Hormuse fully reopens, the straight of Hormuse fully reopens in confidence returns, the crude reality, nice pun, is that pressure at both ends of the barrel will intensify. And I want to match that. Um, Juho over at Guai Junan in China says this morning, the core issue is that a recovery in supply volume does not equal a full normalization. And that's the exact problem here. Because look, crude oil is moving through the system. We've seen the those numbers. I wrote those up last week for Yahoo Finance. We are back at pre-war levels on crude getting out of the system. Why is Brent still at $100? Because you still have to price escalation risk. You have to price the fact that there were seven attacks over the weekend on vessels after a period of relatively quiet um few weeks. On that front, you have to price the fact that when all this dies down, all these countries are going to have to refill their stocks and start buying again, which is going to push pressures higher. And then you take the refined side where we see the real stress. Again, how many times have we said this on this show? Refineries are running at 100% globally. If you can't create more refined product, you're not going to be able to relieve the American consumer or the American corporate side or really anywhere in the world where the prices are even higher. >> So, you're in this weird situation where yes, the picture in the Middle East does look to be getting better on some front, but that doesn't mean there's relief coming. At least not yet. And also kind of to your point, not just will the stocks have to be refilled, but it doesn't feel like the demand side of the equation is weak at all. And so even if more supply comes to the market, will it be spped up and then some by the demand that's out there? >> Well, this is something in your world pros, we go back a few years ago and look at what the IEA was projecting on oil demand and they were expecting it to fall pretty heavily because of why EVs, the electrification movement around the world, all of that transition. now come back to here and when this war started the IIA came out and said look demand's going to have to drop >> to compensate this somehow but you look at their most recent projections they're kicking demand back up saying it's not slowing as much as we thought that transition a is not happening as quickly as we thought >> but b there's just such a need that's not getting filled >> a couple of things you mentioned uh with Nasser uh talking about he somehow supply shocks have left the cushion >> quote scarely thin right so the the supply is back but there still the cushion is not necessarily there. Something about six billion barrels of commercial inventories remain, but they're not practically vi available, right? I guess that it's it's somewhere offsite. It needs to be moved to a certain place. >> There's also complications if you get like a tank down below a certain level, you really can't draw the rest of the tank because of how the physics work. There's but there's you run into real problems when you start getting this low globally. >> And secondly, you mentioned, you know, Trump is talking about more strikes after the election, right? >> That's right. >> You have to price them. >> You got to price that, right? This is not going away. Yeah. Escalation is literally saying we're going to wait a few weeks then we're going to come back and do this. Like >> first of all, it's kind of crazy. But second of all, that's weighing on us, right? That's you can have all the supply in the world coming out, but I'm scared more attacks Middle East of all places, then yes, oil goes up. >> I mean, if you want the proof point of what's going on on I think it was Friday, we got the announcement from the G7 that they're going to be releasing 100 million barrels combined of crude and diesel. What did prices do? They stayed exactly where they were. And and speaking of pricing on also on the Saudi Aramco point, Bloomberg is reporting this morning that Saudi Aramco is cutting prices to sell That's right. >> into Asia specifically. So again, that says to me like that's although that would, you know, we've been talking about all the upward price pressures on oil, but that's interesting that they >> are making that kind of >> I mean, they're the ones most screwed by, you know, straight her moves and things like that, right? So maybe it's them giving them a deal in some sense. Maybe there's some kind of there's some sort of uh back and forth there with the other >> specifically to Asia. >> Well, there's also an interesting dynamic going on for Saudi Arabia who if you go back to before the war, they spent the last 5 to 10 years really trying to capture market share to capture more and more and more of how much of the market they are supplying, how much they are controlling prices because after the US shale boom in 2014, the US supply has been ticking up and up and up and the market share has been ticking up. Saudia Ramco is now sitting in a situation where their oil cannot get out. So the buyers in Asia are looking elsewhere. And the fear is that even if this all ends, >> those buyers are going to say, "Well, you're unreliable now." So Saudi Aramco is saying, "Look, pay a $5 discount to the benchmark, which is the lowest they've offered since 2020. That's six years. And stick with us. >> Stick with us. Keep buying this oil because Saudi Arabia does not want and Aramco does not want to risk losing that market share. And they also need the cash flow >> and they need the cash flow very desperately. All those Gulf economies are getting really squeezed. >> I mean that's the other big trend that we have seen you know at the same time that they've been trying to increase market share Saudi Arabia has been trying desperately to also diversify its economy. That's right. And to go heavily into tech and so um that's something that is really this war has been very problematic in that sense. That's right. As well >> AJ real quick you know noticing in our notes also that that LG net gas is also struggling. What's what's kind of the story there like I thought there was some sort of you know relief in that space too but I guess not >> there is and you would think that some of the demand is going to shift toward natural gas that can US natural gas has been doing pretty well that industry has been doing pretty well but at the same time look what's happening in Qatar where the largest LG export terminal in the world is still damaged is still under pressure there that's going to create pressure on that system the LG uh terminals in the US that are being built some of that funding's been a little slowed down because of the war because of other political concerns that's going to put pressure there. The idea here is that the it's not just oil. The entire global energy complex is really getting put under pressure. >> Right. And the difference in naps gas of course is that it is a more regional >> That's right. >> uh market even with LG increasing the ability of >> oil is very global but LG is also very very hard to transport. You have to keep it >> really really cool to keep it in its liquid form or else it gets very explosive. oil you can throw into a tanker >> which is also flammable obviously but LG if you don't keep it at the exact right temperature will blow up >> and then you have winter coming up in Europe in North America Ukraine and Russia war it's all going to be problematic for that >> let's do a hard pivot I want to do a hard pivot [laughter] way to do it another topic getting a lot of attention that in in a lot of our worlds of sports gambling you know both from like among friends and family and peers and even young kids >> I mean how many ads do you hear per day I mean for DraftKings or FanDuel or whatever it is >> I mean so So in an interview with Bloomberg, Fanatic CEO Michael Ruben know Fanatics is like big in sports merchandise, but obviously they have a they obviously they have a betting uh sort of unit here. Uh they plan to more than double advertising for that gambling unit nearly $1 billion. Uh Ruben said success in Fanatex sports and collectibles unit will help boost total revenue to 14 billion but two billion that come from sports gambling uh which fanatics enter in 2023. So, this comes along the backdrop with some scary cautionary tales of sports gambling uh addiction and with young people and and things like that, but it seems like it's full full steam ahead from not just the gambling sites like the DraftKings, like the Fandals, and then now Fanatics, but also all the prediction markets are getting involved. So, it's like a tsunami here of just betting, betting, betting, and it seems like there's no it's not going away anytime soon. And Wall Street wants it. I I thought it it's so interesting that I thought the interview with Michael Rubin was quite interesting because he's he's privately held, right? He said he's under zero pressure, less than zero pressure to [laughter] go public. >> Y >> and they kept the interviewer sort of kept pressing him on like why go into sports betting, right? >> Why even like or prediction markets like why double why increase? >> I'm a contrarian. >> And he basically says like because we can we think we can do a better job. >> Right. >> He also said I like going somewhere. Someone's like that's a bad spot to go in trying. It's like I like to go in those spots. >> Right. right? You know, >> so we'll see if he's right. It does feel like a very and and all it feels like a crowded space that is also um is facing regulatory challenges because huge amount of regulation. >> We're seeing all of this um excitement, spending on ads, people talking about it, all of it is increasing, but there is push back. >> Well, in some major states sort of now allow gambling now with Florida and and California, which they thought never he mentioned would never thought they would do it. They did it and now they're trying to walk that back, I guess. >> That's right. And there's but there's there is an interesting caveat he gave in that interview. Um on the betting and gaming side which is separate from prediction markets. Keep those two separate. On the betting and gaming side he says that business is the most competitive business we play in today. To your point it's very competitive. And then on the prediction markets and it's I it's interesting to hear him recognize this. He says we think the regulatory environment is unlikely to be as it is today. Pointing to some of that change coming. So the question for Michael to your point is like why why risk pushing into these businesses when the fanatics business is anyone who's a sports fan on the merch side knows that's a phenomenal business. They really have a lot of market share on selling jerseys, t-shirts, hats, all of that kind of stuff. Michael has to his credit done a great job with that business. So at that point why push into one of the riskiest fields possible? >> I want to add a couple things. Maybe this might actually shed some light on this. Right. So two different two different sort of surveys here. So, Bank of America Institute survey found that Gen Z is twice as likely to see sports betting as a type of investment >> versus 20% of respondents overall. Right. >> Um, also in a Betterment Retail Investor survey, 52% of Gen Z respondents said they moved more money originally meant for investment to sports betting. Right? So, it's almost like capitalizing not just on the hype of people betting. And I don't want to say they want they want to capitalize on addiction, but also seeing it as, oh, Gen Z people see this not just as gambling. They see it as some form of >> investment is really the wrong word to use, but it's some form of >> well, it's part of their fiscal plan now is gambling. >> Well, here it's insane. >> This is something that I've talked about before and this is something that um a new piece in in the New York Times get to gets to as well. Max Reed um wrote that up. This is something I've talked about before. It used to be in the stock market, >> you would invest to build wealth over the long term. We are now living in a lottery ticket culture or a gambling culture, whatever you call it, get rich and as and and and as Max Reed points out, like this has permeated so many different aspects of the culture from prediction markets to sports betting >> to investing in the market now. I mean, it's no mistake that Tom Lee's ETF is called Granny Shots, right? [laughter] Like it's because you're trying to it's about 100xing, right? But is your chance of doing that by sports betting in the market how much better than actually just buying a lottery ticket is is it that much better odds wise in ter if you're trying to create that kind of oneshot wealth return. >> I mean you could argue [clears throat] an 18 leg parlay is probably a worse bet than some sort of lotto ticket, right? >> Yeah. Easily. You know it's probably less likely you're going to hit that parlay. The other thing that that's sort of not mentioned here is I I always bring it back. This crypto started a lot of this, right? This is all part of this. You didn't even mention crypto. >> I know, but isn't this part of the whole equation? Yeah. >> And it's some gambling. Uh it's betting on the future. Uh it's the next the way web 3.0 all sort of nonsense. At least it has some sort of like maybe a little fundamental kind of oh I would have bet on that. This is just >> and here the here's binary bets, right? >> The impulse behind it makes sense. Of course, >> we are in, as we've talked, like the one of the least equal um scenarios in terms of wealth in history. Or if it's not the most ine unequal, it is the most visibly unequal because of social media, because of the way our culture works. You see that wealth all like every day, all day if you want to. >> And the New York Times story really brought something really interesting the the the combination of sort of the content creators gambling. They mentioned kick and um the site that's related to stake >> uh using that as a way to to fuel more betting is is on the content side with Drake and I I had really had no idea about that and I started to watch that one man documentary and they talked about how a lot of these men in the manosphere sort of thing. They're all like pushing people to gambling sites or buy my investment bucket, right? >> Uh of stocks, >> right? There's a there's a phenomenal story out in Bloomberg. Um I think it was on Friday. This is this is a global fund. This is not just here in the US, though of course the wealth inequality in the US is far greater than a lot of Europe. Uh in Sweden, convicted fraud convicted fraudster Alexander Ernsburgger, who Bloomberg calls Sweden's answer to Jordan Belelffort, [laughter] has gotten out of prison. He is a free man, and his new career is >> He didn't escape. He served his time. >> He served his time. >> No pardon. >> No pardon. >> No pardon. I don't know if Trump's reach extends that far just yet. um his new career is as this like to your point this like hustleb bro influencer of follow me I will teach you how to be rich I will teach you how to turn your life around and make money and for you know kids who are looking at social media all day and seeing the first class flight the really expensive bags the crazy apartments and you don't have that >> that's a really strong psychological drive there's also one more stat I want to bring up on on Ruben and fanatics >> uh that I think is worth pointing out he he said He mentions that only 3% of Fanatic's 20-ish 23 million customers use multiple business lines. But those that do spend five times more. >> So if you can get people who are already in one sector of your business into the betting or into the prediction markets, it's a good bet you're going to make a lot of money off of that. >> Yeah. >> Yeah. >> You know, one thing that you can still hopefully afford >> and spend your money on. >> Jeez. >> Yeah. Yeah. I mean, well, I like I say the nostalgia trade, right? talking about, you mentioned Levis's, right? Uh Gen Z loves dredging up trends in the past and Levis is seeing sort of a rate sort of a right a rebound here uh in older cuts like the 517 that was seen in Love Story, the JFK Jr. >> What is that, by the way? I don't even know. >> Just a baggie cut, you know? It's like it's not like you're 501, right? Um and other classic styles, right? And Levi is forecasting seven and a half% growth for the fiscal year. We're going to have earnings coming up this week. Uh so good news for Levis's there. I I don't know how sustainable it is and is has this a fluky trend or is it Julie every like 10 years right Levis's come back in style right at least the older older >> so it's worth noting right now >> I am wearing Levis's 505 >> you are Gen Z >> I am wearing the straight leg 505 >> I mean I like Levis's also one thing I like about Levis's by the way pro tip um is that Levis's runs its own resale site it's one of these brands that does that really so you can get you can get um Levis's directly from the brand that are resell and of course as everyone knows like older jeans are the best jeans are better but um but but I mean it is going to be under a little pressure to translate this into sales growth. The stock has not really performed. It's down about 5% this year. The company um you know that 7 and a half% sales growth this year would be the best um basically since the post-pandemic period. The sales were up 29% in 2021 and then they kind of fell off cliff. They were up like 7% the next year and then they've kind of muddled along. So, even though it feels like Levis's are part of the conversation, that hasn't translated into really strong sales growth maybe until now. We'll see how they report this week and and how that full year goes. >> I was at a boutique recently uh streetear, you know, whatever. And they had the Levis's uh that were remanufactured by the by by by Levis's on sale at this multiiform, multibrand boutique. not just buy it online, but that they're actually putting out the re uh assembled and redone stuff tagged, right? It's vintage and it's like, oh, this is pretty cool >> because that's also a Gen Z. >> Exactly. Exactly. But also they I want to note that they also went big into DTC or their own Levi sort of stores. >> Question is, is that a good idea? Is that a bad idea? You know, a lot of Jenzi, a lot of younger people want retail like they want experiences. They want a story to be told. They want smaller retail. They don't want big. They don't want big e-commerce. So maybe this is their bet into it. But I got to say, legal license is a gigantic company. Like make them making a store is not like, "Oh, this is so quaint and nice in here." It's still >> It depends. I guess it depends, I guess, on how you do it, right? And how what the vibe is when you walk in, right? Just to put a a finer point on the stock. I mean, it is up 5% over the last 6 months, but year to date, we're down 4%. One year ago, over the last uh 12 months, we're down 19%. >> So that's a long way to go for >> actually makes me where I'm looking up. Where is a Levi? There's a Levi store. There's one in Soho, >> very close by on Broadway. Maybe >> that's that's the one. Maybe we should uh do the show for >> I got these jeans at that store. >> I took your advice, by the way, and I went to Kiss the other day. We'll talk about it offline. I didn't find any. >> You're just looking. You're just looking. You're just looking. Just Just browsing browsing the >> Margelas. I wasn't that I wasn't looking. I'm definitely only [laughter] browsing Margelas. All right. On that note, let's take a break. Coming up, we're going to be talking about the AI race. That's next. >> Birthday Margelas, I think. >> No. [laughter] Not worth it. >> [music] [music] [music] [music] [music] [music] [music] >> Heat. [music] [music] [music] Heat. >> [music] >> Down. [music] Oh. Down. [music] [music] Down. >> [music] >> Down. [music] Tick. >> [music] >> Down. Down. [music] Heat. Heat. [music] [music] >> [music] [music] [music] [music] [music] [music] >> Welcome back to the 8:30 once again. What are we talking? We're talking AI. What's new? It's another day in the neighborhood. >> I said recently I wasn't getting tired of it. Maybe you're [laughter] getting tired. >> Today I'm getting slightly >> I'm glad we pushed to the back half. >> Right. Right. Get get the good stuff out of the way. No, you know, there's plenty to talk about. We're going to start in Washington and then get a little more local for us here in New York. In Washington, the big news over the weekend, Trump's super intelligence force, remember, it's not AI anymore, it's SI. >> That force is now going to be led by the director of national intelligence, Jay Clayton, Pentagon under secretary Andrew Ferguson, uh, Chief Technology Officer Emil Michael, and the director of OPM Scott Cooper. They've got a report due in 120 days, which is what was that four months um from now? Six months. Is that right? >> Four months. >> Four months. >> What date? What is it? >> 120 divided by 30. Four months, right? >> Four months. >> Yeah. Okay. Four months from now. [laughter] They have a report to to President Trump and um Chief of Staff Susie Wilds to and the goal is US leadership pushing this forward, not overregulating this. Now, here's where we get local on the regulation. We have some really interesting news in New York City today. The New York City Council will be doing hearing today where Jacob Coxin, the exanthropic researcher who came out and made that really bold prediction on Twitter that kind of set off this whole fear cycle of look 10% shot that it wipes us all out in 10 years. He will be testifying in front of the city council today >> along with a few other um you know we're really we're calling them whistleblowers. Um, Alex Turner from DeepMind. Uh, Daniel Kokat Talo from uh, OpenAI will be testifying. The companies themselves also are sending representatives to put their side forward. Enthropic, OpenAI, Meta, and Google will all be sending representatives. Notably, SpaceX is not and they've now been subpoenaed. >> But like, what is the what is New York City going to do? >> So, this is this is what they're debating today. And it's a a kind of a sweep of proposals. There are three I've picked out that I think are worth noting. The first of those is to require third party validation of new models and a human operated shutdown mechanism for any AI marketed, offered, sold, or deployed in New York City. Basically, not only can we verify you, but you've got to prove to us that if we want you to, you can hit the off switch. >> But this is effectively making policy making federal policy. >> It's it's trying to address, and this is the city council argument, trying to address gaps that the federal government is not yet But this would effectively make federal policy >> because it's not like you're selling stuff into New York City >> that you're not selling elsewhere. >> Well, you can >> it's software. It's not a it's not >> but can you deploy it more cheaply in Texas or somewhere else? >> They can actually do this because you can say you're you're you are you can target us by IP, right? We can we can access product here. It's kind of like how they ban certain gambling in certain, you know, porn sites in different areas, states. You could you can do that. you can block it >> or the disclosure the question you're bringing up is this is this is this is curtailing or impacting uh interstate commerce >> you can make that argument and that's that's how federalism >> and then you would have to fally deal with that I'm saying is I don't understand if they passed this law in New York City wouldn't that effectively make it the law nationwide >> no it's just whoever access the site in New York City >> in New York would be under those >> Yeah those the off switch no if you require third party monitors for any version of the software that comes out in New York City, would they release a different version in New York? No. It's the same stuff that they release everywhere. So, you're saying by defacto they are legislating nationally. Correct. >> This is not new for New York though. New York does this all the time. California does it for any state. >> That's what I'm trying to say. I'm trying to say this would effectively make it a nation, you know, nationwide regulation. Maybe not with the kill switch, but with the third party monitor. And there's another part of this that will probably also be taken federally or at least used to challenge law federally. It's a proposal. Again, all these are proposals. They've not passed yet. It's a proposal that would allow private right of action. So basically litigation for foreseeable harm from third party misuse when a developer fails to adopt reasonable safeguards. So the argument is that if you open AAI do not develop correct safeguards and I a user use your your o your your product through a third party service I can sue >> for for harm that happens >> the city can sue or whoever >> the city or well it's it' be personal litigation right yeah personal litigation and so then the question is okay do you see open AI do you see Google do you see anthropic tightening down on their safety guidelines because they don't going to face a wave of litigation and this is the piece we haven't seen yet. Where's all the litigation on harm done? >> As long as there's no there is some >> as long as there's no federal law that in place that supersedes everything. This is like the wild west of regulation too. All the the bigger states can say hey you know what we want this tailored to our like we don't want the harms sort of affecting our our citizens. We want to have a saying that we're lz fair states we don't care what's the big deal. So I think this is going to be a problem until we have some national legislation. Well, and the thing is the American public is overwhelmingly in favor of legislation >> of some kind of safety guidelines. Yes. >> The problem is the administration doesn't want this. [laughter] >> They're going to be like pass don't do anything to impeach. >> Well, that's why you get city that's why you get >> and eventually state because if if this passes in the city, odds are that Hok would look to take at least some of it to the state and now you've got federal pressure eventually. The third one I just want to point out very quickly because I think it's worth it. um setting up uh whistleblower processes for people coming out of the labs or other areas. Um complaintants would be able to receive 25% of the proceeds if the city acts, 50% if it's designated to serve and sue. This is a similar model you see in the financial services industry. >> Whistleblowers. Yeah. If you report whistleblowing at a financial services firm to the SEC and you are found to be right and they act and there is a um finding of wrongdoing by the firm you're whistleblowing on, you are entitled to X percentage of the money the SEC gets from that. >> This is opening that same thing up to whistleblowers. And so now >> the guys like Jacob Coxin have said they are motivated by their morals, by their um conviction that they need to care about the human. Now there's going to be monetary um incentive and so do we see more people starting to come out of the labs to try to blow the whistle not because not only because they care which I'm sure they do >> but also because there is considerable money waiting on the other side if you're follow if you're approved right >> um the other question then about all of this as it has been really over the past several months is how does this affect the businesses right is this a re does this create a curb does this create an overhang for the labs and the whole ecosystem around them. Um, and I think a lot of big investors are still grappling with those questions. Does, you know, just like it did when the whole pacing discussion happened, >> that was a big sort of bombshell and area of concern. And I think that the market has sort of answered it by saying it's not a problem. >> That's right. >> But at some point, you know, every time we get these, I think we have to ask the question a new >> President Trump would like it to not be a problem. >> Yes. Most certainly. Let me let me grab the great segue from you, Julie. Yes, do it. On on pacing and what is President Trump's number one concern with AI or at least his stated concern, the race with China, right? >> And the fact that we cannot allow the US cannot allow China to catch up and to become the dominant force globally. There's some new data out from Bloomberg Intelligence. um they you know ran several of these models through a benchmarking program and they report that the gap between the top US models and the top Chinese models is now only 3% for the US edge. That was 9% in May. It was 15% earlier this year. So that gap is closing very very quickly. And the problem here is that a lot of those Chinese models are open weights. They are not the closed gap uh closedweight models we see in the US from the likes of Enthropic and OpenAI. Instead, they are open weight. They are cheaper to produce. They are getting better really quickly. The technologies getting better. The hope in the administration is that if we stop them from getting Nvidia's best chips, if we cut off the silicon, we can keep our gap. But clearly the data shows >> already cut off. >> The silicon's cut off and they are still making really rapid progress. >> Well, the allegation of course is that they're making rapid progress. models which is basically ripping off the the work that the closed models have done but uh it's kind of just kind of reminds us of it's been mentioned about the Russians and how they had such little computing capacity back in the old days which made them more efficient. >> That's correct. >> Engineers knew that they only had certain amount of time with the main framework with the computer and they made their code super super tight and not wasting a lot of lines of code. >> Uh maybe this is what's happening in China. They know they have to work they have to work with less hardware superpower to get the same results. wanted to mention that we highlighted last night also uh Axio said the scoop speaking of open weights uh on a on a startup called reflection which is a US-based company doing openweight models >> backed by Nvidia right backed by >> backed by Nvidia >> this is the US answer >> yep and this is this the pitch is that basically US companies can use reflections open weight model to build their own AI and their behind their their company stuff to do custom work um and and that way you're not you're not subject to the the whims of the governments or whoever talking about Chinesebased models. This is a US-based model. Open weight. It's not a big deal. So, that's also a threat to the to the big the big a AI startups here. Uh with this sort of thing that of course backed by Nvidia. >> I mean, and again to bring it back to the implications for investors when you're talking about threats to the frontier labs, right? So, market share is going to matter. >> That's right. >> In the future, right? how it's not that necessarily the frontier labs would go away and be eliminated by openw weight because it looks like the frontier labs will be ultimately be more advanced right so but it's a question of how much market share will they have how much will migrate to lowerc cost openweight platforms and even though the whole data center um infrastructure ecosystem might hold up well because you know open weights need infrastructure too they need chips and they need power and they need buildings and all the rest but like the Frontier Labs themselves, their business would be affected. So, it's kind of an interesting thing for investors. >> If you're if you're Amazon or even Google with with cloud, you're like, great, we'll we'll take that business on. It's fine. You don't necessarily need to win at AI. We have the the backbone for that. >> So, it's really anthropic and open AI that are the most affected by this. >> And to your point, this is the problem with the open weight companies who are producing this. Open weight models are cheaper to produce, yes, but they're also much more cheaply available. Some of them are freely accessible. So where are you going to make the money required to fund that buildout? A lot of that is coming from all the revenue that an openi or an anthropic or that a Google or a meta or an Amazon is spending. So for the open weights to really be competitive like a company by like reflection which is trying to push the US open weight model fix some of the cons security concerns the partnership with Nvidia makes a lot of sense because they desperately need financial backing. That's going to be the question for the openweight community of okay fine you can do it the same thing you can do it cheaper you can do it better >> but you still got to make money at some point in that chain >> yeah yeah >> kind of makes sense why Nvidia would take that openweight side of the business here because it's they're agnostic towards it but at the same time >> Jensen Wong's argument he's supportive of but they're so invested in >> in the other the frontier startups through via circle of financing they can't have them fail either right >> it's all of the above it's one big hedge I guess >> it's one big hedge >> let's let's talk about the the data centers themselves and how much the push back has or has not affected how many data centers get built out. Both uh Bernstein and Goldman Sachs are out with new notes looking at how much uh how many gigawatts are going to be built. That's how they measure it. They don't measure it by like square feet of the data centers. And we got a nice big >> I was going to say take a look at that thing. Do you want that thing in your yard in your backyard? >> I mean not. >> At least >> that's a pretty monstrous structure. >> I like I like that it's black. I like that it's black. >> You like >> I don't like that it's black. I want It's a nice like Japanese burnt birch, you know? >> Oh, covered in like covered in pictures of trees at least or something. >> Well, that's a good idea. Kind of like the cell towers that supposedly was like trees like trees that don't actually look like real [laughter] trees. >> A pretty good idea. >> Yeah. Yeah. To put trees on the side. >> I like that idea. >> Hey, this is my billion dollar business. >> Play burbling brooks. >> Yeah. Yeah. There you go. >> Play the sound over the speakers. And >> I kind of think we're on to something here, you guys. Okay, guys. Or even guys, we all quit. We're gonna go start [laughter] up um a a thing that that that camouflages. >> It's like it's like car wrapping, but we're wrapping data centers. >> I like this. I like this. Okay, getting back to these notes. [laughter] So, um the notes basically are tracking um kind of different estimates. What what's interesting about the Bernstein note is they talk about the big dispersion of estimates of of how much buildout is going to be done and it all reflects people's perspective. So, like the REIT analysts who have covered data centers for a long time have one view. the chip analysts have one view, but when they put it all together, the Goldman note and the Bernstein note actually end up in similar places, right? Um they look at about 18 gigawatts added this year. Um Goldman's at 26 for next year, Bernstein's at 25. So they're they're pretty close here. Um and basically looking at it increasing even with this big push back that's happening. Um that's because it's regional, right? So even if some of the plants are not getting built in Texas, they're getting built elsewhere. The other thing is that PJM, which is the big um the biggest grid in the US, which is here in the Northeast, they've enacted new rules for some of these um these projects to bring their own power. So that's a bit of a constraint as well. But overall, >> the stuff is still going to happen. That's right. That's what it feels [laughter] like. It's worth putting a finer point on the dispersion that Bernstein notes. Surveying 63 forecasts from 40 sources, the range for uh gigawatts by 2030 >> ranges from 59 to 186. >> So basically tripling or more the the bottom of that range. That's a huge dispersion. And where are you going to see that stress? You're going to see it on the grids. The Urkott um estimates in Texas, as you noted, ticked down a little bit because of Greg Abbott's um push there because of some of the worries around the strain that grids been under for storms. In PJM, PGM is interesting because they've faced a ton of scrutiny from FK, the Federal Energy Regulatory Commission, for overpricing power, for not having capacity available because how much of this cost is getting pushed onto the consumer to the rateayer who's watching their bills spike. This is now part of that build your own power solution. PJM saying, "Look guys, we can't handle all of this. If you want to build here," which they do because the infrastructure is here, the power is here, the demand is here, you've got to pay for it. Which is another point of the how are we going to finance all of this. >> Yeah. >> Go ahead. Go ahead. >> I I was going to say, and even with these forecasts for pretty substantial increases in gigawatts, I think it was Bernstein said, only 38% of the projects on the books now are actually going to get built, right? either because >> shadow pipeline >> I mean there's lots of different reasons why it's not just the political push back it's getting the power it's getting the supplies of the other stuff it's are these companies that have proposed these really legit in the f do they have the financing lineup in the first place >> let's not forget Oracle with the force majour because their power is not coming through >> so there are different a lot of different reasons but overall they're both still bullish on it happening yes >> but the magnitude is what's in question >> yeah and you talk about investment in in the companies like Nvidia is and and your your your microns of the world and and even the hyperscalers talking about capex growing from 466 billion in 2025 to 856 in 2026 1.7 trillion 2027 so big numbers here but then again they talk about only 35% of announced pipeline is deemed credible right many of these have assume a sixmonth delay plus political implications like it seems like they kind of swatted away the political stuff right it's going to happen it's going to happen it's it's going to bro, it's it's going to be there. >> But these little things in the back that they're not credible or, you know, um there's some states talking about really piss getting pissed off about this thing in my backyard. I feel like it's been it's not necessarily fully discussed in these two notes, right? I mean, we didn't really see that >> gestured at but not not addressed directly. >> I guess they think that it'll sort of even out and go away >> like that way. >> The pressures will ease. Um it doesn't seem like the pressures are going away. Uh politically speaking, >> it's because we're gonna have our company that makes the data more palatable. >> This guys, this is not a bad idea. >> There's also there's an argument from the Bulls that like look, even if we get all this political push back. Um Goldman Sachs does actually site an NBC poll showing 64% of voters are less likely to support a candidate backing a local data center. >> That was the Quinnipic one, I think, that came out recently. Even so, the argument you hear from bulls is that let's say 48 out of 50 states pass anti-data center regulation. There are 50 states, two of them, three of them are going to decide at the uh state congress level, state legislative level that the money is more important, the business is more important and so somebody is going to create a businessfriendly environment for this and that's where demand is going to go. Or it's when we talk about the Amazon last week where they're saying, "Okay, we're gonna work with the community to really make sure you guys are really on board with this. Here's what we're doing. No secrets. Here's how much power we need. Here's going to benefit you. We're going to make sure that doesn't sound loud and it meet all kinds of gas." >> No, but here's my bare case on that. Who said the exact same thing 10 years ago during the pipeline buildout throughout the Northeast in the Marcela shale? >> The frackers. the oil and gas companies and the frackers who came in and said, "We are going to give you money. We're going to give you jobs. We will make sure your wellwater is protected. These pipelines are not going to be invasive. They're not going to hurt the local species." >> And then in some of my older reporting, I've gone out to some of those sites and seen families whose wellwater is coming up black and brown and blue. >> Because of the uh impact of the fracking because those ponds where they put the fracking waste water, they leak. the companies aren't as careful as they said they were with the pipelines. Also, all these families have signed NDAs that say you can't sue us, you can't talk about it, you can't show anybody. >> Yeah, >> we've seen this story before, and I'm not saying it's going to play out the same way. There are differences. This technology is not as dirty. Notably, >> but I worry whenever I hear big industry saying, "We're going to come into your backyard and it's all going to be fine." Because we've seen that story before. Well, listen, even casinos, right, that offer casinos offer a lot of economic um, you know, benefits, they say for community a lot of the, you know, cuz the casino business isn't that great of a business in some cases. And so, it doesn't work out that. >> No, you know what spikes in communities around casinos? Addiction rates every single time. >> I got to mention something real quick. Our friend Dan Dicker one time. I was talking to him about about the politics of pipelines and things like that. I'm like, you know, how do you have this pipeline build? This, you know, what was a big one, the XL, whatever. Yeah. Uh, you know, it's like it's the fear of of risks of of of leaking and and spills. He's like >> of a blowout. >> And he's like he's like he's like he's like they're pipes. They leak. It happens. They're pipes. They leak. >> Do you know what those pipes do with with oil and gas? They blow up. >> I know. I know. But they blow up. >> This is you know Dan Dicker just wait. Pipes they leak. You know >> they leak. They leak. >> I want to stick with digging and oil. >> Oh, good one for us. You win today. >> I like that because >> in the world of Hollywood there's a story a movie called Digger. uh that's causing some waves here about Tom Cruz, >> but I got I got I gota I love this variety lead here for the movie. Right, they're talking about Digger, right? In Digger, Tom Cruz portrays a powerful oil tycoon who is bracing for an ecological disaster, >> but nothing could have prepared him for the catastrophe that's unfolding at the box office where Digger is collapsed an embarrassing 8 million from 3,300 theaters or screens there. And some might even say it might be 7.5 million. I mean, this is this is a a disaster for a hundred million plus movie. Tom Cruz vehicle here. >> It was supposed to be his Oscar. >> His his magnum opus. >> I mean, Inorito, the director is is a legend. He's he's total badass. But it just sounds like 51% Rotten Tomatoes. It's just not hitting. Not >> reviews were just bad. And a lot of people saw this. I read some of the reviews and they were just like, I I don't understand why this got made. >> I know. And this is also comes, you know, we're talking about a movie that's that's coming on the backdrop of this massive Hollywood merger, right, with Warner Brothers and Discovery. >> This isn't this the last movie from uh pre- merger. I mean, the thing is like >> on the one hand, you know, we complain about the sequel, the sequelization of Hollywood, right? And that there will only make safe movies, right? Like you got to give them props for taking a swing original taking a risk. Um even if it didn't turn out that great. Like I'm glad they did it. >> I mean it's interesting that you know it's it's mixed critically, right? It's 51% reviews here. I've been reading some stuff here and there online. People saying actually it's better than than I thought. It's it's a it's a it's a kind of an inaccessible odd movie, >> right? But they removed every every screen of Odyssey for this in IMAX 70 millimeter which very upsetting >> right >> which was still packed >> and they had obligation to put Digger in there. There's probably five people in each screening right >> Richard Gelfon of IMAX is not happy about that. >> Yeah. >> Yeah. I mean if you're not Christopher Nolan >> it's really hard to make original IP in Hollywood right now for a lot of reasons. >> You mean to get financing? financing and then also to make money on the movie because most of that money from an original where you were taking a bet, you were going to get the first push in the box office. Yes. Then you were going to get the back push on DVD sales. >> That's gone now. So what do you do? Old Faithful, the Marvel sequels. >> You know, you know what I rewatched this weekend? >> What' you rewatch? >> My Olds ass. 10 out of 10. >> 10 out of 10 movie. No, >> seriously. It's a really Have you seen it? I >> I've heard I have not seen it. I have not seen it. >> Excellent. I have seen it. Highly recommend that movie. Who's in that movie? Um, >> Aubrey >> Aubrey Plaza. Yep. There we go. >> But like, but the main star is a is a young woman who I'd never seen in anything who's fantastic. Yeah. >> And a guy from who was in Wednesday because it's kind of young adult. Anyway, um, should we run through a couple quick movers before we get to the >> Before we do that, I just want to read a great quote from film indust film industry analyst David Gross. Okay. >> On Digger. >> For a black comedy, which this is, numbers aren't bad, >> but black comedies are small films. >> And this isn't a small film. This is a Tom Cruz movie. Yeah, >> a Tom Cruz vehicle. >> It's not Mission Impossible, I'll tell you that. Um well, he can afford it. We'll [laughter] say that about Tom Cruz. >> Um all right, a couple of movers I just wanted to mention. Nvidia, um looks like it is going to open at a record again today. Um Hanhai Precision, also known as Foxcon, um came out with numbers and they were better than estimated. And so there's sort of like this um extrapolation through to Nvidia. And also it just feels like the vibes on Nvidia have improved to some extent. There's renewed talk of its valuation being low because its earnings are still expanding. Um and so that also seems to be helping matters here uh when it comes to Nvidia. So the the AI trade continues unabated >> unabated >> or somewhat unabated I guess. Speaking of AI trade and other things, also Morgan Stanley's Adam Jonas uh reiterated his overweight on SpaceX uh $3 price target talking about how the gist of it is basically the stock is cheap here. People are have a hard time uh valuing the company for what it's based both based on, you know, the price per token of their AI business and the mega and the compute that they're doing. Uh, plus how do you value a rocket company that's doing stuff like, and you mentioned this, the the extreme difficulty of building a heat shield for a rocket, uh, orbital re-entry, uh, the having a booster land itself and having a sort of hot hot staging in space. They're solving all these super difficult problems. He's saying that that they're not people are not properly pricing what they're doing. Uh, and at at at you know, a $300 price target, half of is only what 159 right now. So, it's basically saying there's, you know, 100% upside upside here. Uh, and he says, "Buy it now. My clients don't get fully get it, but I think they should. >> My clients don't fully get it." >> What he said, meeting with different clients. >> Yeah. One more name to watch. Sarah Bros getting a boost here, 6% up in the pre-market. That's comes after OpenAI CEO Sam Alman came out and said, "Sarah Bros is a close partner. We are working together very, very closely. Maybe there's some doubts around OpenAI, but the shine is strong." >> Yeah. All right. Got to leave it there. Brian Sazi is next. Um, I think it's Cerebrus. >> It should be >> [music] [music] [music] >> Heat. Heat. [music] [music] [music] Heat. [music] [music] Heat. >> [music] [music] >> Down. [music] >> [music] >> Down. [music] Down. [music] Down. [music] Heat. [music] >> [music] [music] [music] [music] [music] >> Heat. Heat. [music] >> [music]