Chips, Memory Stocks Lead 8/17/26

The bells bring you an end to the training day at the NWSC. Snowflake, 20 honors, nothing asack, RTP, digital ending the training day. Welcome to Closin Bell, overtime, last year's studio, BFN asack, MarketSight, I'm Melissa Lee, along with Mike Santoli. Socks modestly hire today as rates in oil rose, the downed hasn't be off about a half a percent. Each the Nasack down a quarter of a percent, software and big tech, mostly lower, meta the notable Mag 7 declineer, the company getting ready for another big trial tomorrow over social media practices will have much more and that's straight ahead. Semis, including memory names, seeing notable strength on the day, Sandisk, Micron, Western Digital, leading the way, retail a week spot today, sneaker stocks were lower, Nike, now at the lowest level since 2014, breaking $40 to share, high end names also under pressure, PVH, and Capri, the biggest losers. And refinerers, a non-AI winner, once again, Marathon, Petroleum, Valero, and Phillips, the winners, oil up more than 2% on the day as Iran rules out an interim deal extension, and clearly, unless that had impact in the bond market as well, helping to push yields higher among some other factors. Pattern has been, that means consumer week, the broader list of stocks this week, we did have negative breath. More of a kind of slouching into the new week than it was a real heavy sell off, down half a percent of the S&P, still has room to like even last week's low, but it just feels as if it was one of those times where we had this run, 6% up in 12 days, and now it's a matter of kind of clicking the winners from the losers again. - We had this run and volatility sits basically a 2026 lose, I mean, just off of it. I mean, I don't know if you told me all the headlines that would start the day off today, I don't know if I would say the markets would end the day lower by about a half a percent. It does seem like the markets are very endurored to, you know, we're gonna bomb the whatever out of a country, with oil higher, with the 10 year yield at 4.72%. It's just, there's all these concerns out there that are lurking, that nothing can drag those memory stocks, for instance, lower. It's quite amazing. - Well, I do think that, you know, look, we're pushing six months, I guess, since the war started, and it hasn't paid to be alarmist in a broad way about it, but maybe the memory strength does tell us something, which is, you know, find me the one theme where it seems like there's a wall of money running at it, having nothing to do with what the price of oil is or anything else, and it seems like that's where we arrive. - Let's get to the bond market here, where yields didn't move higher again. The 30 year yield, hitting the highest levels since 2007, Rick Santelli has more from Chicago. Hi, Rick. - Hi, Melissa. Indeed, let's look at 12 hour chart of 10s. Now, I understand that 30 year made a high going back to '07, but the 10s, they couldn't even take out their high from the last day in July. Now, if you look at it, intraday chart, and hold that intraday chart for a minute, at 8.30 Eastern, we had a very strong empire, rates moved up a bit, and the rest of the move added in oil, and you could see the second catalyst as we sit on the high yields of the day. Now, let's look at the July number. If you look at the end of July, you could see, 474 is currently the high yield close, and that's at high yield close going back to Jan of 25, but I want to point out, if you look at the difference between 30s and 10s, known as the knob spread, right now it's hovering just below 60. That's the widest it's been since early May, and the reason I point that out is, is because the 30 years interesting, but it isn't the benchmark, and it's tending to widen out like the premiums in between many majorities. We wanna keep a closer eye though on that four and three quarters level, and attend especially on a closing basis. And we all know that Goldman kind of changed what they're thinking about with regard to the Fed, but there's been many that were there already, especially after, for the last three months, our average job creation is only 20,000 on non-Farm. Mike Melissa, back to you. - Yeah, we're keeping our eye on the 10 year yield, because of Rick, a milestone that we crossed last nine, you sent out an email to all of us here at CNBC, regarding the debt clock. I mean, we're approaching these levels here with 10 year yields where they are, and it's gonna cost us more. And at the same time, you have this dynamic work, even if the Fed, if we're pricing out Fed hikes, the rest of the world is hiking. - Oh, absolutely, there's no doubt about it. I don't wanna dismiss the notion of 40 trillion with a T in terms of the debt clock, that is huge. But let's keep in mind, whether a couple years ago, it's a 37 billion or 40 billion today, nobody seems very concerned, and yet global yields, whether you look at boom deals, they're up, whether you look at Japanese 10 year yields, they're up. Yes, there's an entire world whose yields are up for almost the same reasons that had his debt and deficits. Now the 10 years awfully well behaved, but those facts alone, above and beyond anything the Fed may do, is enough potential horsepower to shoot yields up more dramatically. - Rick, thank you, Rick Santelli. We do have a news alert on in Thropec. We wanna get to Kate Rooney's, got the details there, Kate. - Hey, Melissa, so from what I'm hearing, and Thropec is now on track to generate, this is annualized revenue of more than $65 billion. This is according to two people familiar with the matter, it would be a sevenfold increase, just from a year ago, these numbers from what I'm hearing are as of the end of July, again, it's a projected run rate, so it's based on the current performance, a lot could change here, but this is what I'm told was shared with investors over the weekend, it does come ahead of Thropec's highly anticipated IPO, and the revenue run rate, when the company last reported this, this was during a fundraiser earlier this year in May, $47 billion, so it speaks to just how quickly the revenue has been ramping as this company looks to do its road show. Some of the other numbers we have been reporting today, preliminary Q2 revenue, which was also shared with investors over the weekend, we have heard from a source topped $11.5 billion, that was up 14X, but that is the latest, should also mention here Bloomberg was first to report some of these details, no comment from Anthropic guys, but the latest revenue ramp for you, back over to you. - Kate, we asked this all the time, but we think this is last month's revenue annualized? - Annualized, so that is, they are extrapolating based on current. - So it's like 5.5 billion last month is what their revenue was, they say that's a $65 billion runway, something like that. - Exactly, and then quarterly, so 11.5 billion was what they're sort of preliminary projecting for Q2, so they are, there's some math involved here, they're forecasting out, it also suggests that, or would, baked into this number is the expectation that the revenue continues to have the company, continues to do well, there's a lot of headwinds out there, there's a lot of things that could change the story here, we talk about open source competition, pricing pressure, so it's a bullish number, but as you say, annualized and sort of forecasted out. - Well, I mean, if it's annualized, it means they're saying, it'll stay at this rate times 12, so if it keeps ramping, who knows what the number will be in the year? - We'll see, and we also heard from Reuters at 2028, the more bullish number, $190 billion in terms of what they're forecasting way in the future, that's maybe the number that could change a bit more, but this is what they're telling, I should also say this is current investor, so this is people on the cap table, but it does not necessarily mean this is what they're communicating to bankers. - Understood, okay, thank you. Well, let's stay on tack, the sector continues to make a comeback following July's slump, the NASDAQ 100, up 7% since July 29th, while the semiconductor ETF is up 12%, mostly of course driven by strong earnings results from the hyperscarillars alongside a boost in AI cap expending, which is forecasted to exceed a trillion dollars in 2026. So, should investors stick to this theme or look elsewhere? Do you wanna guess now is Niles Investment Management's, Dan Niles, Dan, it's good to see you. Let's just start with the anthropic number, you get these fresh estimates of annualized revenue. Clearly, at the end user level, there's been no reason to think that there's led up. Everybody is taking a signal from that, you have to try to massively expand capacity to accommodate the future expected revenue. So, does the top keep spending for a while? >> Well, I think it definitely does, and you saw it with numbers recently, where if you look at the biggest three public cloud vendors, you saw Amazon, Google, Microsoft, their cloud businesses go from growing 35% year over year in the March quarter to 43% in the June quarter, and that's expected to accelerate in the September quarter. The more important part is that that operating margins for those three guys combined moved up 2% from the March quarter to the June quarter. And to the news just reported on anthropic, obviously the revenues ramping from $9 billion at the end of that last year to $47 billion annualized run rate in May to $65 billion now, that's great. The more interesting part is that supposedly on an operating income basis adjusted, we'll have to see what adjusted exactly means, they got the profitability in the June quarter. And so if you're getting the profitability, that's the big thing because obviously there's a lot of concerns around things like cash flows at the big hyperscalers where those have obviously gotten compressed, and you're having companies having to hit the debt and equity markets to raise capital. But profitability, if you're able to generate that, that helps reduce a lot of those concerns. - Dan, I'm wondering what your thoughts are on this capital spending and how security is. I mean, you mentioned basically the cost of financing and everything, and as we see the 10-year yield at 4.7 plus percent comfortably, we have the dynamic of global yields higher, we have the dynamic of the government having to issue bonds, et cetera, et cetera, it's basically the sort of, you know, putting the onus on the issuers to actually, you know, giving you the money, to investors that will compensate them for the risk. Are you concerned that perhaps part of this cap expen could be at risk? - Oh, yeah, I'm hugely concerned. But I think in the near term, as we just talked about, if you're having these companies generate profitable revenue growth, which is what seems to be happening, then the funding concerns for the short term, they're gonna be put aside. I mean, you can go back to the internet build. You had vendor financing as early as 1997, 1998. And we all remember NASDAQ going up 86% in 1999 and another 24% to start 2000. So I think in the near term, it sounds really strong for the AI related stuff. To your point, Melissa, though, I look at the period between now and November midterms. And if you go back and you look at data since 1990, in midterm election years, you typically end up with about a 10% peak to trough, draw down from July 31st to early November. In non-election years, that number's closer to 5%. So from a broader market perspective, I think things like oil being where it is, 30 years, treasure, sitting up where they were back in 2007. All of those things are like extra straws on the camels back. And I think it's going to probably break at some point between now and midterms. And so I'm trying to balance how I'm thinking about investing in terms of, all right, this is where the money's flowing. That seems to be infrastructure names like semis, like hyperscalers, rest of the market, things like consumer discretionary, et cetera, much more negative on. And so trying to short, broad things in those sectors to protect against a potential bigger than normal drawdown between now and midterms. >> Sure, and then, I guess there's this shadow, Dan, out there of a World's Regional today, we're making a bit of a splash talking about a lot of the commitments that aren't reflected on the big company's books. These are basically future capacity that they'll need to add or leases that they're ready to enter to accommodate orders for more cloud capacity for the most part, like totaling $3 trillion. Now, who knows exactly how the market is going to price something like that, or whether it's considered to be just, that's more growth in the pipeline for the A hardware trade, or that's risk that's going to potentially be soldered by the hyperscalers and others. >> Well, right now it's both, right? So let's go back to the internet example, as I said earlier, you had vendor financing three years, two years before that bubble ever broke. And so it depends on what hat you have on, right? In the near term, if profitability continues to improve, and don't forget, we had something new happen very recently, which is you had this thing called a Genetic AI with open clogging formalized on January 30th, come in. Since then, the number of tokens being produced is up seven and a half times from that level to where we are now. That's more than offset the 50% decline we've seen because of all these open-weight open source models, which is driven down the cost, partoken you can charge about 50% since the end of May. So you've got all these competing things going on right now. My fundamental belief is, if January 30th is when a Genetic AI started, you at least got a year of room to run. All of this stuff we're talking about of off-balance, sheet financing, circular financing, that's going to make the eventual breaking of this really horrific, but in the near term, I think the path of least resistance is a lot higher because you've got very strong revenue growth for AI and more importantly, expanding profit growth in AI. - You like Intel, Dan, as the former Intel analyst. What do you see here at this point? I mean, you're dating both of us. - The valuation is enough to scare people away. - Well, your number one, you're dating both of us, which I don't love that. - Yeah, absolutely. But if you look at Intel, here's the cardinal rule with how you conduct your stocks. You never know how high the estimates are going to go and you never know how low they're going to go. With Intel, you've got three different ways to win. And you're right, it does look like it's expensive if you look at it on a PE basis, but you have to remember, when they reported the June quarter, they guided the September quarter 40% above where the street was for EPS. And right now, you've got massive headwind with all these foundry costs, et cetera, for the company that that's going to get alleviated, I think, sometime next year, because I think you're going to see companies like Apple start to ramp. You're never going to see a press release, right? Because these big guys, they just don't do that. But I think you're going to see things like Apple and their microprocessor side start to ramp. They've already got announced agreement with Tesla and Bidia invested money in the company. Obviously, they haven't announced deal with Google. And so I think from the foundry side, you're going to see them go from a massive lag or to TSMC, just starting to catch up, packaging, advanced packaging is another way to win, because that's something where they're already really good at. And then finally, obviously, agentic means you go from eight GPUs to one CPU to something closer to one to one, and that really benefits them. And the valuation, if you look at it on an enterprise value to sales basis, it's actually a massive discount to both AMD and TSMC, which are the two closest comparables to them. So I'm usually bullish on Intel, because you got three different ways to win. The valuations low when you think about them under earning. And, you know, agentic is brand new, and I love it when you have a ratio to go from eight to one to one to one in your favor. - Right, Dan, always ready to speak with you. Thanks, Dan. - Thank you. - Let's stay on tech. The cybersecurity sector has been gaining a lot of momentum this year, names like Palo Alto, CrowdStrike, Fordnet, up more than 80%. According to Jeffries, the moves are driven by investor positivity around the need to secure AI and preference for large-cap platforms. The rise of hacking incidents by AI agents has sparked a cybersecurity spending boom to address threats posed by frontier AI-powered cyber attacks. Open AI co-founder and president Greg Brockman addressed the need to change cybersecurity on Squawk Box this morning. - We are in a window right now, where we can see a little bit into the future. I talk to a number of organizations going to conferences, talking about cybersecurity, and everyone feels that we are in a moment where cybersecurity fundamentally needs to change. Every organization needs to up-level at cybersecurity practices. But many people don't know where to start. And I think that no one is really talking about this message publicly. Everyone kind of feels it talks about it in closed rooms, but it is important that we as a country and as a world really take the moment seriously. So the Open AI Hugging Face Incident, it was one moment we got to see into the future. You could see how automated attacks are going to become possible, that these will be capabilities that will be in the hands of threat actors in upcoming months, because this technology is being created across the world by many organizations. - It's amazing how far the pendulum has swung on these particular stocks. I mean, considering where they were at their lows. The analysts at Jeffries, Joe Gallo, is pointing out that from the IGV low in April, these stocks on average are up 100% roughly. So they've come all the way back. These are the answers supposedly to all these hacking incidents. - Yeah, Brockman says, a lot of people don't know where to start. The assumption is they're going to start with these vendors. Every IT department, at least, going to see if they have the antidote or to try to shore things up. If there's one thing that does give pause, it is the consensancy nature of this now. All of a sudden, cyber is like, it feels like the safest place to own software and Jeffries also points out the valuations on a growth-adjusted basis now above the 2021 peak for the group. - Exactly. - So you wonder what is already being priced in there. - And the inflection, the AI inflection is nascent. So they haven't really seen that sort of additional revenue because of AI threats yet. So it's sort of a mismatch here. - They do where in between. - Yeah. All right, well, turning overseas, the memorandum of understanding that the US and Iran side in mid-June expires today without any agreement, according to reports, Iran's foreign ministry has ruled out talks to extend the memorandum. Aiman Javars here with the latest statement. - Hey, Mike, that's right. President Trump told reporters again this afternoon that he wants to make the Strait of Hormuz a permanent US territory. And he insisted that the US has the military capacity to do just that. - We have a blockade. We control it with a blockade. And I like the ideas that Larry got a territory. We have total control over the Strait. Now they can be a nuisance. They can put a mine in the water. People don't like having mines hit their billion dollar ships, you know, et cetera. But the blockade has been very effective. And you know, we're taking out, and now maybe that will stop or maybe it'll open up even further. - And although the President insisted in that same appearance that the Strait is open during those comments, the pace of traffic there is actually slowing dramatically. Reuters reported that just five commodity vessels transited the Strait on Saturday with none registered for Sunday. They're citing ship tracking data from Kepler there. Now that's compared to 31 ships in the prior weekends. You can see the trend line is down significantly week over week. The President's son, meanwhile, the President's son-in-law and Chief Negotiator Jared Kushner told Fox this afternoon that there are conversations between the United States and Iran. And he characterized those conversations as robust and positive that comment coming on a day which President Trump also has. in a comment to Fox this morning, threatened to bomb the S out of Oman after reports that the Omanis are in talks with a random control of the straight-up or moves, including potentially charging tolls on that vital waterway, guys. Back of view. -Amen, thanks. Amen, javours. -Yeah. -Coming up, media insiders give us their predictions for the industry, including the names they think will surprise Wall Street by taking streaming market share. Plus, can China get its economy back on track? And what role will AI play in its future growth? And meta heads to court again. You're watching Closing Bell over time, live from the NASA market site. -Welcome back. CNBC asked media executives across the industry to give their predictions about the future of TV, including who could challenge the streaming giants, government regulation and why personalization will win. Alex Sherman's got all the details. Alex. -Now, my colleague, Louis and Rizzo and I, over the past few months, asked 10 media executives the same five questions to get a look at the variety of different answers among the people that are actually making the decisions at the biggest media company. So we asked them to talk about the rate of decline of the cable bundle. We asked them about a TV industry standard that will be different three years from now than it is today. We asked them about regulatorys, particularly about big tech and and traditional media coming together. And if there will be some sort of massive move against that or a breakup, we asked them about sports rights, the improvement of sports rights that we're seeing year after year now in terms of ratings. And we also, for the fifth question, asked them about if there was one streaming service that doesn't either exist today or is small today, that will become a dominant streaming service in the next three years. Take a listen to what some executives told us about that final question. Look at Instagram's recent announcement about TV formats. So I think to your point, likely a service that we're not thinking of today, but it could be more broadly services that are here today and are expanding the capability of how they engage and connect with audiences, as well as expanding those experiences. The real opportunity is for somebody who can pull it all together to be an aggregator of all these different services, much the way that cable TV was originally created to provide value and utility, to be able to provide a bundle of services that it discounted rate. I think that's the opportunity for a new entrance into this space. We see TikTok videos getting longer and longer, and I think that's a trend that will continue. And I also think that niche casting is also going to continue, and you will see lots of very small communities play very big roles across all of these services. So that's just the sampling of the answers. You can watch the entire video on CNBC.com with all of the answers from those 10 media executives. I mean, if I'm going to read between the lines Alex, it sounds like, you know, Netflix has gotten a lot more competition. They're already talking about, you know, competing with people's sleep for viewing time. Imagine if all these streaming services, even if some of them, only a couple of them, actually, you know, come to fruition. This was Netflix's argument for why they felt like buying Warner Brothers Discovery would not be a problem with regulators that if you take a look at the overall streaming landscape, it's not just the traditional streamers. It's YouTube. It's TikTok. It's Instagram. It's the unknown service out there that may become the most popular thing three or five years from now. So I absolutely think it's a strong argument that there is quite a bit of competition when it comes to what we all kind of see today as television watching. What is television watching? It's so much more than just traditional TV. I am surprised that none of them, or at least the ones that you shared, actually, you know, mentioned AI as a driving force behind a new streaming platform that will exist in the future. Yeah. You know, I was expecting more of that. Absolutely Melissa. In fact, the one regret I have maybe is not asking a direct question about AI in this because I assumed that it would come up naturally and it didn't really. And I don't really know what to make of that. It may just be that it's not top of mind yet for TV executives. It may be just in the questions that we ask them, or maybe that they just kind of still don't really know exactly how AI is going to take over the TV industry. I think it's a little bit behind in that way as opposed to other industries in terms of just its sort of obvious utilization in the years to come. Yeah, though one observation out is that the answers you got, which is citing Instagram and TikTok, it's kind of AI by proxy in terms of how those things operate. And one of the takeaways I had hearing all that is they're kind of saying the next thing might be YouTube. I mean, it sort of sounds a lot like YouTube. Nishcasting, long form as well as short, and all the rest. Obviously, it's a more of a chaotic environment, but I do wonder if that's the big one that's already here. Yeah, I think so. And so that was sort of the thinking behind the question that I asked about, are we going to see a regulatory crackdown in this sort of convergence between Silicon Valley and traditional media? And also, by the way, it sort of informs the answers of some other questions. One answer I didn't play for you, Jeff Zucker talked about how he sees more and more podcasts coming on to air and that he thinks that's going to be a trend in the next three years. We're seeing it on the margins certainly, but this idea of the convergence between new media or the stuff that you're seeing on YouTube and old media I think is definitely a theme that resonates throughout all the answers. For sure. Alex, thanks. And maybe that range of answers also explains that somewhat depressed valuations of a lot of these companies. I mean, Disney is as cheap as it's been in 15 years. Netflix has lost its frame because people just don't know how this is all going to go. Right. I was actually surprised that nobody said there's going to be a platform where users can actually plug in what they want. And AI will feed them back a cartoon or a video or whatever it is short form, whatever it had, you know, and that is the platform. The meat channel. Yeah, just like customizing for my, yeah, whether whether I can articulate it or not that probably is going to happen. All right. Well, recently the charge of Amazon and Nvidia have been nearly identical despite hyper scalars and semis in general, tending to trade and opposite directions. We'll discuss why that might be. Welcome back. I always think it's worth investigating when two stocks who you don't think should move together actually do behave in lockstep. That's been the case for the last year of Nvidia and Amazon. Now, Nvidia, semiconductor is they've mostly been working well to the at the expense of hyper scalars to spenders and the receivers. Amazon and video not so much now. Nvidia is really underperform most of the other semiconductor makers. That's part of the explanation. I also wonder if it's sort of seen as just more of a general platform at this point. It's an ecosystem. It's not just sort of leveraged to the absolute high demand accelerating parts of semis. Here you see this divergence just developing over the last week. They were right at the same spot on one year basis or week ago. Then you got the Nvidia announcement about the financing last week and Amazon pulled back with the other max seven. Whether it's worth anything or not, the last couple of times you've actually seen them pull apart. They have reconverged in a couple of times to the benefit in the short term of Amazon. What is the backdrop of the markets been overall when they do? That's a good question. This was basically the market was doing very well up until that point right there. Then you have this pull back and it hits Amazon a little bit harder. Then the bottom of the market was here obviously and then they ramped together. I think it's hard to generalize in terms of exactly what's happening on the macro level. Investor preferences find them both in the same spot. Time out for a CNBC News Update. What Julie Borson. Hey, Julia. Melissa Paramount is asking the state's challenging its merger with Warner Brothers Discovery to pay for costs associated with the delay in closing the deal. The new court filing the company is requesting a $1.88 billion bond to be paid by the states against the merger. Paramount agreed to delay its proposed acquisition of WBD while the trial plays out, but it could end up paying $650 million per quarter in so-called ticking fees until the deal closes. A New York judge postponed the state's trial of Luigi Mangioni after he pleaded guilty to the 2024 murder of United Healthcare CEO Brian Thompson in federal court last week. Mangioni has pleaded not guilty to the state charges. On Friday, his lawyers asked New York to dismiss its charges citing the state's double jeopardy laws. And Major League Baseball owners unanimously approved billionaire investors as the new owners of the San Diego Padres. Jose Feliciano and Quanza Jones agreed to purchase the team from the sidler family earlier this year at a record valuation of $3.9 billion. Back over to you. Thank you, Julia. Up next, what China's slowing economy could mean for Wall Street and China's AI race with the U.S. China's economy is under scrutiny after a slate of disappointing economic data for July, industrial production, retail sales and urban investment all coming in lower than what was anticipated. Meanwhile, unemployment ticked higher to 5.2 percent. That's up from 5 percent in June. The weak economy comes at a time when the country's AI industry continues to push forward with cheaper and faster Chinese models making strides globally. The latest example is Alibaba's AI model, Quinn, which hit 3 billion global downloads in the past six months and surpassed meta in alphabet. in the alphabet. Joining us now to discuss what is next for China is Dennis Ungovik, partner at Meyer Ungovik in Scott. He's assisted companies with investing in China. He's also the author of the book, The Fragility of China. Dennis, great to have you with us. Well, that's a thanks for inviting me back again. How are you? It does it does seem like China, you know, it has a two-speed economy. It's got AI, exports are actually doing fine, but then on the domestic side, things are very weak. And it also seems like Beijing is kind of okay with that at this point. There's no huge stimulus plans or anything like that to rescue the domestic consumer. What should we make of this? Great questions. The most important thing is, Xi Jinping has decided that if he's to stay in power and if China is to grow, that he has to do it through technology. And he basically has been ignoring parts of the economy. For example, a third the economy, the GDP, is made up of real estate. It's been in the tank for the last five years. And the debt the GDP ratio, I don't mean to be too wonky here, but the debt that China has to its GDP is 300 to 100 or 3 to 1. As bad as we say the United States is really, we're like 140 to 100. So the bottom line is, I think that Xi Jinping is making a big bet. And it's probably not a bad bet that he has to pull the economy through increased manufacturing, better technology. And that's the way to do it. Dennis, I mean, it's worked before and I guess the predictions that things will break in terms of the stability of China have gone on recognized or unrealized before. I'm wondering in this particular moment when we've seen China's massive stockpile of oil, for example, act as whether intentional or not a stabilizer for global supply at a time when we had issues with the straight of form moves. We had a report last week that there aren't enough ships for all of the EVs that China is exporting. It seems to me all this together means China will long term remain a source of disinflation in the global economy. I think you're absolutely right. Xi Jinping in trying to put all of this together has felt that in the long run, their ability to manufacture wasn't good enough 10 years ago. They had something called the Made in China policy that was put into 2015. What they wanted to do was stop manufacturing from this moderate level to the higher technology level. And that's why when he put the pressure on saving oil, I really think that the Chinese have a really good shot at moving forward much more quickly than I think some of the skeptics think they do. And I've written a book called The Frigility of China, but you have to be honest. They really have done a good job in marketing what they have. Look at deep seek. Deep seek is now much less expensive than many of the things out there. You can go online and use it and it's open source and it's much less expensive than the others. And I think technology is not going to be the full answer to the Chinese economy because they've got the real estate problems and they've got the debt problem. But they're moving ahead. And they are getting sort of the rest of the world hooked on these cheap components and the models, the cheaper models that they are producing for the AI race. I mean, the U.S. may say now, no Apple, we don't want you to buy CXMT chips and we should be concerned about Chinese open source models. But the rest of the world are using this. I mean, to the point where semiconductor exports from China are adding 10 percentage points to total export growth out of China. I mean, it's amazing, Dennis. And so, you know, in terms of where China is positioned and how it's positioned here in terms of globally in the AI race, as we go into the meeting with President Trump in September, how much leverage is China have here? I heard today, Melissa, that the meeting's only one day. So obviously not a lot is going to be done. I think that Xi Jinping is going to put enormous pressure on the President to say, lower the tariffs or at least make these products. You mentioned Apple a minute ago. They want to buy the Chinese chips. I think there's going to be tremendous pressure on the President to do this. And I don't really see how in a global economy where the least expensive product, if it's relatively equal to the most expensive product, doesn't do well. And that's where I think Chinese, the Chinese that put their finger on it. And at this point, it looks pretty good. Yeah, I mean, everything that we do to measure the AI model says maybe there are a few months behind, right? So this is something that's probably going to be certainly good enough as a competitive pressure point for the rest of the world for a while. Dennis, I'm going to appreciate you time today. Thank you. Thank you very much. All right, up next, Newburgers, President and Chief Investment Officer of Equities, weighs in on the recent market rally. And whether you should be buying on any pullbacks, closing bell over time, we'll be right back. [MUSIC] [BLANK_AUDIO] Earnings have helped power stocks to record highs with earnings rising more than 51% this quarter year over year. But can investors take the results at face value and project similar growth into the future? With us now to share his thoughts is Joe Amato, Newburger President and CIO of Equities. Joe, good to see you. Am I? I'm good, I guess 51% is a little much to ask for a run rate of earnings from here on out. Pretty remarkable. But how are you viewing things? I mean, earnings have done a ton of the lifting for this market, obviously driven by very particular areas. What does it mean for right now for an investor looking to make changes to a portfolio? Well, I think you said it. Earnings really have been the story. And even when you adjust for some one-time gains, you're up 30%. But at the same time, we have definitely seen a broadening out in earnings. Because if you look at the median stock in the S&P, earnings up 14%. So you've had a couple of good quarters now and that momentum in earnings and that broadening out has really been, I think, the driving force in the market. And because earnings have been so strong, it's actually taken a little bit of the valuation anxiety out of the market, right? When you think about multiples now versus where we might have been two years ago, worrying about multiples in the low 20s going to the mid-20s, well, now you're barely at 20. What's a good hedge to a portfolio now that is so exposed in so many different ways to AI? I mean, if you're invested in industrials, the top performers are leveraged to AI. If you are invested in energy, top performers are leveraged to AI. So what's a good hedge? I think it's a critical discussion that we have with clients because so much of the asset allocation mixes levered to the AI. And we're going to call it a trade per se, but levered to AI and really US tech leveraged growth, if you will. But I think the broadening out themes continues to play, right? As you migrate from those AI enablers, which have really been driving this market into the AI adopters. Now right now the market's not really clear on which companies are truly adopting and getting the margin enhancement from AI. But we're seeing it on a bottom-up basis. I think that's really the way to hedge yourself against a little bit of that narrowness of the market over the course of the last few years. Now, if you want to talk about asset allocation hedge, then you get into bonds and absolute return strategies. But in terms of equities, I think that broadening out and looking outside the US because earning stories has been actually. Yeah, I was going to ask about that. So you're tilting in that direction and in what ways do you implement that non-US trade? So we've been most bullish about Japan. And yes, lots of discussion about the Yen currency intervention that's gone on here over the course of the last week or so. But the underlying strength and really the shift from a deflationary economy to a more inflationary economy is an important shift. And then you have the corporate governance reforms in Japan over the course of the last really decade plus as driving a higher level of return on investment. So the earnings tell when you're getting from that better corporate governance, I think continues to be an attractive way to diversify your US holdings. Now, Japan has a lot of exposure AI for sure, which has helped fuel that market. But again, you have that same broadening out thing going on there as well. If the BOJ gets really aggressive though in terms of hiking in order to strengthen the Yen, then does that threaten the gains in the stock market? I think if they get very aggressive, it's not their style, even when they're hiking. You're not picking on that basically. Like a dovish hike. But we think they're going to raise rates in September. We think they need to raise rates in September. I think that will help with the value of the Yen and not having that Yen deteriorate too quickly. But really, I think that underlying long-term trend of better earnings growth there, that's the attractive element. It's been a lot of focus within the US market on the negative beta stocks, right? So there's more stocks than ever that have been moving counter to the S&P 500, like one-eighth of all stocks. Sometimes it's energy, sometimes just pure defensives. Is the market telling us something with any of that, if it's in fact, you know, simply does not want, for example, the traditional low volatility names, except when the S&P 500 is actually for sale? It reflects the momentum and the excitement people have around. What we'll see you reference earlier, this sort of AI-levered trade that is going on, that is going to be extraordinary. I mean, the super cycle in AI is extraordinary, right? And that's going to continue for a number of years, given the amount of cat-backs that's going in. But there are, you do see these days where the momentum shifts from one to the other. And as a market observer, people can get frustrated by that because you see you feel like it's whipsawed a little bit. It's the mechanics of it. But you know, whether it's leverity TFs, whether it's short-dated single-stock options, a lot of retail flow is fueling that momentum in when the shifts happen, they happen pretty powerfully. Joe, we got to leave it there. Great to see you. Thank you, Joe Lotto of Newburger. All right, well, for more on this earnings season of why some companies may be over earning, or even the market as a whole, be sure to check out my new weekly market memo newsletter featuring analysis of key market themes and exclusive commentary from top traders and investors. You can subscribe at cbc.com/marketmemo. Astronomical consequences. That's what some people are saying, meta. I was busy signing up for your newsletter, right? I appreciate it. I saw you trying to get the QR code there with your phone. Could be facing when a social media addiction trial begins tomorrow in California, details straight out. Welcome back, meta, one of the worst performers in the S&B 500 today. I had a tomorrow's opening arguments in a court case alleging the company designed its social media platforms to become addictive to children and teens. Julie Borson's got all the details. Hi, Julia. Melissa, this trial with the opening arguments starting tomorrow is the highest state's test yet of youth safety allegations against meta because it's several states coming together for what's being called a bell-weather case. Harvard Law School Professor, a Harvard Law School Professor telling me to just today that this outcome has huge implications, not just for liability in this case, but also what else meta could see in related suits across the country. California Attorney General Rob Bonta was out with a statement ahead of tomorrow's opening arguments, saying, quote, "Excluding our most vulnerable residents to boost corporate profits is not only morally wrong, it's also illegal." Meta said in a filing, "The damages could be as high as $1.4 trillion, which is close to its market cap, but just as potentially damaging. The states are asking for big changes to meta's algorithm, including eliminating features such as infinite scroll and notifications, asking the court to make meta-prioritized content focused on well-being instead of engagement, asking meta to implement age restrictions and time limits for younger users." No Meta CEO Mark Zuckerberg and Instagram head Adam Moeseri are both expected to testify. They were not sure just when yet. You've won. They will be testifying yet, back over to you. That 1.4 trillion number seems really unlikely, Julie. But I'm wondering if any analysts have tried to put a figure on, for instance, what eliminating infinite scroll could mean to the business? Look, I think something like that is pretty hard to calculate. I do think it's worth noting that that was a number that meta put out there, whereas the states themselves had a different number. They said it would be about $200 billion that they were looking at. Either way, these are our meaningful amounts of money. It is worth noting that in its most recent earnings, Meta said that it had $2.4 billion in legal costs, legal fees and the like. And so this is clearly a costly battle for Meta. We'll see how distracting it ultimately is from Mark Zuckerberg's goal to make Meta a leader in AI. But really an existential moment for Meta to get through, not just this trial, but the other related trials that are going to be happening this year next year across the country. Yeah. Julia, thanks. Julia Borson. We're showing Meta shares down 27% on a one-year basis of down 3.5%. It's a little tough to separate out exactly how much of it is from these types of concerns. It certainly can't hurt, but you did have Microsoft also down 3% today. But I guess it must change the total equation in terms of what you think their platform can earn over the very long term. All right, that does it for overtime. That's when you start right after this quick break.