Closing Bell 9/18/26

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1:10We'll debate it with our panel of pros coming up. But first, here is your scorecard with 60 minutes left in the trading week. Yes, don't adjust your screen there. The S &P did go into positive territory, as did the NASDAQ. The Dow is still about one-tenth of one percent lower, as is the Russell down about 0.7 percent there. The tech sector holding in the green with the semis and key mega caps like Amazon and Alphabet posting gains, which leads us to the talk of the tape with the MAG7 back to all-time highs. Do you continue to ride that train? Joining me now to discuss iCapitals' Shonali Bassick, Requisite Capital's Bryn Talkington, and Neuberger's Shannon Sikosha, Britton Shannon, are both CNBC contributors.

1:50Shanali, it feels like a kind of revenge of the MAG-7. After so long, they've been left behind in the AI trade. When do you make this move? I think it makes sense. For us, you have a lot of people entering it in a protected fashion, whether it's structured investments, asking more and more about the fixed income trade, related to the same names. However, you know, we've been saying that the rest of the year could be somewhat choppy. I will say, particularly for names like this, as well as software, as well as semis, anything tied to AI. But I do think that pullbacks create interesting entry points.

2:22Shannon, you've been watching kind of the valuation derating of the MAG-7. Do you think it's a good time to get in based on what you're seeing from a PE standpoint? Well, it's really interesting, Leslie. We've seen the multiple on the MAG-7 derate from 33 times to 23 times. And obviously, we've seen that across the S &P 500 with the stronger earnings that we've experienced over the last couple of quarters. I think the other part of this is that in an environment where we continue to hear questions about AI, the demand, is it justified? Perhaps are we moving too far, too fast in terms of security?

2:58You go back to some of these hyperscalers, MAG7 names. They have meaningful revenue generation. they were delivering strong top and bottom line results prior to this enthusiasm around AI. And so I do think there's a little bit of a combination of both a more attractive valuation, still anticipated stronger earnings growth, coupled with the fact that you can buy these companies and maybe stay a bit insulated from some of the noise over the course of the next couple of weeks. How much, though, Shannon, of the derating is due to the fact that they are now spending so much on CapEx when historically they've been capital light, not as capital intensive?

3:37And how much relative to kind of the new profile of these companies do you think these valuations make sense and do still present upside, given just the fact that they are issuing a lot of debt, issuing a lot of equity and spending more on the AI build out? Well, I think we're going to start to see some meaningful dispersion, Leslie, as it relates to the funding of this capbacks? Absolutely. Have these companies become more asset heavy? Absolutely. However, if you think about the continued drivers of growth and the expectations were for a stronger and more resilient economic backdrop, we heard that from Fed Chair Kevin Warsh, this optimism, if you will.

4:19If you come to, should these re-rate back up to multiples of previous? Probably not, given some of that cash flow, that free cash flow cannibalization. However, at the end of the day, if you're looking at how do I potentially play this undercurrent of strong economic growth, the undercurrent of continued strong enterprise spend, and oh, by the way, the continued need for cloud, I think that's why you're seeing this continued movement over the last couple of weeks back into these hyperscaler names. And Bryn, this comes against a backdrop of a week where we have heard what you call AI-mageddon, which is, as you describe it, too many experts yelling too many different things.

4:59There has been a lot of noise. Do you see any implication on CapEx or even just the capital market appetite for the AI build-out right now? Right. Well, I say experts in quotes, right, because everyone's an expert on this. But I think we have this juxtaposition between we've never seen two private companies, open AI and Anthropic, that really is what the AI-mageddon is talking about versus the Mag7 will say Amazon, Meta, Google, Microsoft in particular, there's so much more trust with those publicly traded companies for just like a litany of reason. And so I think when it comes down to it, we have these two private companies which don't have to give it really any disclosures around their balance sheet.

5:43All we get are revenue numbers, which is kind of funny, by the way, versus these other companies. And so I think that the MAG-7 names, just like in aggregate, are in a very good position, as we all question. You know, if you can't control your AI, well, then you are responsible. And Mark Zuckerberg talked about that a lot. And he's a publicly traded CEO, founder, CEO. And so I think that people are pivoting back towards like the comfort of publicly traded hyperscalers where you know where you stand versus the still opaque world and more virtue signaling in a lot of ways of open AI and anthropic.

6:22Yeah, it does, Shanali, introduce an interesting question and one raised this week when you had Sam Maltman of open AI basically saying it would be imprudent to go public this year when we have all these safety concerns. I've heard some other sources on the other side of the coin who say, no, being a public company is actually better because it forces you to have this kind of structured dialogue with investors in the market and the world in a way that private companies aren't forced to do. What's your take on kind of the timing and IPOs and private versus public right now? I think another interesting proxy is just look how fast their run rates of revenue have gone for Snowflake versus Databricks.

6:55And Databricks has been able to grow very fast under private ownership. Now, with that said, you know, the Frontier Labs are another story. because, you know, we're talking about hyperscalers versus frontier labs. Every dollar that goes into token spend, about 30 cents on every dollar is really still maintained. Margin improvement is really meaningful at the hyperscalers in a way that is now in question at the frontier labs, heading into that IPO moment. So how much capital can they raise? I do think Anthropic, what's interesting is that there are a lot of shareholders that still have the opportunity to really add them now in an index-like fashion.

7:27So I think that they could do well. But I do think that revenue growth rate potential is a wild card for Anthropic, given the decline in token prices as well as OpenAI at a time where margins are under pressure. The cost of everything is higher. And so that is a major question coming into this IPO. And the cost of financing is higher with the Fed increasing rates this week. Shannon, the potential for more hikes down the road. What do you think that means for the CapEx build-out? Most people say, oh, it shouldn't be that big of an impact. But I'm curious your take, just given where you think we are in the cycle and whether the higher cost of financing will really move the needle at all.

8:10Well, I think, you know, when we talk about this in terms of our expectation, for instance, at Neuberger is for two hikes and then a pause and likely a pause through 2027. I would agree that 50 basis points higher in terms of rates is not likely to take that option or be a lever that we're going to no longer be able to have these companies access the capital they need. But you made a great point earlier about valuations. There is this rising capital intensity sort of across the board, particularly in the U.S. economy. And every single increase in the cost of financing that capital could potentially make the ROI more compressed.

8:52And frankly, right now, what is the ROI? What's the appropriate expectation continues to be the question. And so I think it's probably naive and too simplistic to say that if it's two hikes, it's fine. If it's four hikes, it's not. I think that you are going to continue to see disparate dispersion in terms of quality of those issuers. And so I wouldn't be surprised to see, even if they're all investment grade issuance, that there might be just an incremental cost of the higher cost of capital as those balance sheets become a bit more bloated on the debt side. Right. And kind of the downstream effects, Bren, of raising interest rates may not affect AI CapEx in the near term.

9:31But does it affect consumers, whether it's through mortgage rates or credit card spending and how that could kind of filter back through into the economy in a way? Right. Well, so, I mean, you have the real economy, which is actually being driven by like a lot of data center, AI growth. But like individuals, people haven't seen mortgage rates, you know, sustainably at this six and a half, seven plus percent in a very, very, very long time. We had zero rates for so long that we're still in this digestion period. So I think housing is going to be really sluggish. I'm sure the home builders will remain sluggish.

10:07Credit card rates are higher. And so I do think there's this, you know, this dichotomy between how higher rates typically when the Fed is raising rates, they're trying to slow lending. And because the lending has gotten too fast and overheating the economy, that's not the case right now. And then I think you also have the double whammy that, you know, investment grade tech new issuance is going to be triple about three hundred and thirty billion from last year. So up triple. And I think that's also going to put upward pressure on the longer term treasuries. As investors say, would I rather own a 10 year Amazon bond or a 10 year treasury?

10:44I think most people are going to say a 10 year Amazon bond. And so I think that's going to continue to keep rates higher. This debt issuance coming from the hyperscalers. Yeah, the crowding out, those investment grade issuance numbers are so staggering. Shanali, you raised your year-end forecast for the 10-year, and you were expecting two more hikes in October and December. How do you think that affects the equation here? So one thing we haven't quite talked about yet, but we are sort of alluding to, is that when rates go higher, then you're discounting those cash flows in the future at a very meaningful elevation in interest rates.

11:18And for large cash generating companies, you're fine. But what about all those companies where we're relying on a lot of different calculus for future cash flow? And I think the software trade equally will be bifurcated moving forward as we see this start to play out. Beyond that, to what Bryn was talking about, I do think that the K-shaped economy, particularly heading into the midterms, what does that do? If we have higher rates, you know, I don't know how much one will filter through, but certainly three. Three, certainly if we have elevated higher oil prices or that tax on that lower income consumer.

11:53So the fiscal, if it has to step up to support parts of the economy, then OK, you're kind of in a rock and a hard place with where the long end of the curve ends up going. Because that pressure on the fiscal needs of the country get higher as we see higher interest rates. Yeah, no, it's a great point. Shanali, thank you. Bryn, Shannon, thank you all so much. Happy Friday. Have a great weekend. We are getting some breaking news out of Washington. Our Megan Casella has that for us. Hey, Megan. Leslie, President Trump just posting on True Social a major new advancement in his push to fight against what he calls the fake news media.

12:27He says he's banning three major news organizations, Politico, MSNOW and CNN, from the White House grounds entirely, he says, effective immediately. Let me read you this post from True Social in full. He says, I'm proud to announce that effective immediately. I am banning fake news CNN, MSNOW, who recently changed their name from MSNBC due to lack of viewership and credibility, and Politico, the recipients of an illegal and ridiculous$8 million subscription, an all-time record directly from the United States government under crooked Joe Biden in order to keep them alive. Seems like corruption to me from the White House as a result of their constant reporting fake news.

13:05Media outlets shouldn't be able to constantly write or report fiction and lies when they're covering the president of the United States, the Trump administration, or the United States of America, other fake news media outlets to follow. So, Leslie, at the end, they're suggesting that more bans just like this could be coming. And to recap a little bit, of course, this president has been going after the media even since his first term, has really been going after individual reporters, has at times banned and wire services from the pool at various times, but nothing that we've seen like this in terms of a wholesale banning of full organizations from the White House grounds, really moving forward, really advancing or ratcheting up, I should say, this fight against the fake news media, as he calls them, this fight against the media.

13:49And, of course, you're going to see lots of complaints on First Amendment grounds, on Freedom of the Press grounds. So much more to come on this. We'll have to see how strictly this is enforced, what it looks like on the grounds of the White House and whether, as he says there, there are going to be more bans coming. Leslie? Yeah, Megan, to your point, we haven't seen anything like this before. Just to help our viewers understand, what type of information can you get inside the White House that you're not able to get outside? How does that affect the reporting and the information gathering process?

14:21It's such a great question. And many reporters and many news organizations would say, of course, you can still be reporting from outside the building. But being a White House correspondent, having a room having a seat in that briefing room or even being able to walk around the grounds is part of covering the administration you can talk to administration officials who might be walking through the briefing room you'll you're there for meetings with officials when the president as he very often likes to do calls reporters into the oval office or anywhere on the white house grounds you're already sitting there you're able to observe things as they're happening things like think about all the construction that's been going on at the white house this year when i'm there on the grounds i'm able to see what's happening with my own eyes, if it's in the Rose Garden, if it's on the North Lawn with the new flagpoles or the new columns going up, whatever it might be.

15:05But really, overall, it's that you are an independent observer when you're at the White House and able to see what's going on. You're not relying on folks inside the building and inside the administration to be telling you what's happening. This looks like a move to make sure that certain outlets no longer have that access and other outlets do. And I'll say, Leslie, this administration has really prided itself on expanding what's known as the White House press pool, allowing influencers or new media into that pool. They say this is a way to make sure that it's not just the mainstream media that has access.

15:36So now not only are they doing that, and that was really a move to get a lot of friendly media inside the White House. Now they're banning a lot of these mainstream outlets as well. Yeah, big news in the media world. Megan, thank you for breaking it down for us. And we'll of course see what developments follow from this in terms of the actions that those outlets take. Megan Casella for us. Apple's new iPhone 18 Pro and Pro Max are on sale today. Mackenzie Cigalos joins us now with more. Mack. So Leslie, Apple's new Pro phones and watches hitting stores today, but CEO John Ternus is already looking ahead to the upcoming launch of Apple's first foldable.

16:11In fact, Ternus telling our Jim Cramer this morning that he thinks the Duo model is going to be unbelievable when it hits the market in less than four weeks from today. The stock has had a huge run-up into the launch. Apple up more than 20 % year-to-date, more than double the S &P 500 gains. And Evercore raised its price target today to$380, citing a stronger upgrade cycle and higher average selling prices. But the early demand signals are mixed. Jeffries says resale premiums on the 18 Pro Max fell about 80 % in the first few hours of launch. It's also seeing stronger signs in China, but much softer lead times in the U.S.

16:49And Jeffries thinks the duo could actually pull some buyers away from the Pro and Pro Max rather than simply add new demand. That is a key worry because Apple is coming off a strong iPhone 17 cycle, and the Pro models have accounted for more than half of iPhone sales so far this year. So even with the foldable getting most of the attention, Leslie, these two phones today still carry a lot of weight for the iPhone business. Yeah, the timing of it all is so fascinating, Mac. Thank you. Let's bring in Morgan Stanley's Eric Woodring for more on this. You've done a lot of channel checks as it pertains to the iPhone 18 Pro and Pro Max.

17:25What have you learned in terms of lead times, in terms of demand? Hey, Lizzie, thank you for having me on. So, listen, I think we shouldn't overemphasize lead times in the context of investing in Apple because lead times are really just an indication of the supply and demand balance or imbalance that you get early on. But, of course, that does matter because you want to understand how consumers think about the device and how those first movers are acting as maybe proxies for this cycle. So we take lead times every Tuesday, Thursday. We reported on this Tuesday night. You know, what we were seeing are lead times on Tuesday for the pro and the pro max are about two to four weeks long, depending on the region.

18:08That's roughly flat year over year. The only region where lead times were clearly lower year over year is China. There's an obvious reason for that, in my opinion, which is China is the market where the duo, the foldable will sell best. So I think you have consumers in China probably waiting to make the decision between your premium pro, your ultra premium pro max and the foldable. But I think we also need to make sure we remember that high end model builds in the second half of this calendar year, meaning pro and pro max iPhone builds are up 18 % year over year. There is better supply of Pro and Pro Max models this year relative to last year.

18:48So in the context of flat lead times, you know, I actually don't think that that's all that bad. Also, in the context of the fact that the Duo launches in or at least is available in mid-October, there will be consumers that want to look and touch and feel the Duo, compare that to the Pro Max and then make their decisions. So listen, a lot of factors go into this and everybody can kind of paint their own picture. My perspective is early demand seems fine. Supply is better. Lead times are flat. And we'll just have to have to continue to track that. Usually about two weeks into the availability of a phone, you kind of get peaking lead times.

19:26Maybe that's the next catalyst we need to look for. Do those lead times extend beyond two weeks or do they start to contract after two weeks like a normal cycle? And you said that the expectation is that the duo will sell really well in China. Why is that the expectation, given everything we've seen with the economy, everything we've seen from a geopolitical standpoint? We obviously have the U.S.-China meeting next week. But, you know, why is the expectation so strong for demand from China for that phone in particular? Sure. Simply put, the foldable is, excuse me, China is the market where the foldable has been most popular.

20:02Right. The foldable is not necessarily new to consumers. It's been about seven or eight years since the first foldable was launched. But if there is one country in the world that has adopted foldables more than any, it's China. And so also something that we noticed on the launch of the iPhone was the foldable is more expensive in China, Taiwan, Hong Kong than it is in the United States. I believe that's because Apple sees that market as a higher propensity to buy a foldable. and therefore they could ratchet up the pricing a little bit more than in the U.S., where I think foldables are really exclusive to Samsung right now, and therefore you have lower adoption.

20:40So the answer is, simply put, China is already the biggest market for foldable. Interesting. From a valuation standpoint, your earnings estimate implies a 35 times price-to-earnings multiple. How much of a risk is valuation at these levels and given what your forward expectations are? Yeah, so two things can be true at once right now. One, I can be very excited about the duo and think they're basically going to sell every foldable that they build over the next 12 months. But at the same time, I can say Apple has been on quite a good run up into the iPhone launch, and it's trading at a relatively rich valuation.

21:1633 times my fiscal 27 numbers, 30 times my fiscal 28 numbers. You know, in the context of history, about 34, 35 times multiple is peak. So we're right up there when it comes to valuation. And the view would be if you want this stock to continue to work, you know, we need to see estimates get revised higher. And the other thing just when it comes to valuation is Apple has this extremely valuable services business. Right. Think of it as a long term annuity stream, high margin annuity stream. You know, for the first time in several years, services is expected to grow sub 10 percent in the September quarter.

21:56You know, that plays a role in thinking about valuation. If you had services decelerate further than that, you might think that your peak multiple needs to be brought down a little bit just simply because we think that terminal value might be lower. I'm not saying that's the case. We do have services reaccelerating. But those are the two factors we need to consider with Apple at this point, just relatively full valuation and watch where services goes. So are those you see as the key risks to the downside right now? I do. I mean, I think someone else would probably point out gross margins and the fact that memory prices continue to move higher.

22:32Apple only raised your iPhone price by about$100 year over year. So you could see a squeeze in those gross margins. I'm a believer in that. We model that already. So I think the market kind of already understands memory prices as a risk. The new risks become, you know, generally, again, we talked about it on the earlier segment, higher rates, of course. But then what happens with services? I think that's where the discovery value really comes, either for the better or for the worse, potentially. Yeah. You're to date of 24 percent, though. Apple helping leave the Mag 7 higher. Eric, thanks for breaking down your thoughts for us.

23:08Appreciate it. Thanks so much for having me. Let's send it over to Brendan Gomez for a look at the biggest names moving into the close on this Friday afternoon. Hey there, Leslie. Tyson Foods popping today following JP Morgan upgrading the stock to overweight from neutral. Another bank citing both a potential upswing in beef earnings and industry production cuts partially mitigating emerging chicken headwinds. That's from rising feed costs, stock up about a percent and a half there. Elsewhere, Southwest getting a boost today after Rothschild & Co. upgraded the stock to neutral. Analysts there citing the company's revenue generating potential, saying it's in the best position to build capacity amongst the major airlines.

23:43Stock up about two percent and around five percent for the week. And then you have shares of SpaceX sliding today after the company announced it would be pushing back the expected date for its Starship launch. Initially set for September 22nd, SpaceX now aiming for a September 28th launch. Shares there down about a percent and a half on the news. Leslie? All right, Brandon, thank you. We are just getting started. Up next, the AI safety debate taking a sharp turn, another sharp turn. New regulation losing momentum in Washington. OpenAI revealing troubling model behavior and Silicon Valley split over whether the answer is more guardrails or full speed ahead.

24:17The AI whiplash and what it means for investors next. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC.

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26:21Welcome back. What looked to be more like more momentum for AI guardrails quickly crumbled this week. Kate Rooney joins us now with the latest. Kate, I don't even know how you can keep it all straight at this point in time. There are so many moving pieces in this noise. Help us make some sense of it all. Leslie, well, we could take the rest of the hour to talk about it. I will try to boil it down. And this week has been massive in the AI world. We have heard from some of the biggest names in tech this week. And right now they are very much divided on how fast the AI industry should be moving and what to do about the risk we've been talking about.

26:56So on Monday, it did look like we had some consensus for at least more guardrails. At the start of this week, it kicked off with Anthropics CEO Dario Amadei over the weekend, who argued for, quote, pacing AI development and then some global coordination and industry coordination as well. You had Sam Altman and Elon Musk agreeing with that. But throughout the week, it changed. It got a lot more fractured. You had Mark Zuckerberg, Jensen Wong acknowledging that, yes, AI poses real safety risk and you need safeguards, but they rallied against slowing development or any new laws. And then you had President Trump pushing back on the prospect of new federal AI regulation called some of the safety fears a hoax as well.

27:35And Washington is a big factor here. Sources I'm talking to in D.C. say that the progress in Congress stalled in terms of legislation, and it's a lot more politically unpopular, you know, as we end out this week here. Leslie, the whole topic, though, and this debate does center on the capabilities of these AI models as they get a lot more powerful. The latest example just this morning, independent security researchers using Anthropics Cloud to gain access to OpenAI's employee. ChatGPT accounts, the firm behind this confirming it, Hacktron AI. They say they were able to read and suggest some changes to OpenAI's private software.

28:12These were security researchers, we should point out. So they were participating in OpenAI's bug bounty program. So not necessarily bad actors, but highlighting the risk in all of this and the capability of the tech, Leslie. And then you have kind of outside observers, maybe not outside, but Alex Karp yesterday on CNBC, basically saying that these companies need to be nationalized because the liability risks are too high. And then on the other side of the spectrum, you have Steve Eisman, the big short investor, who said that they're manufacturing a crisis. It's totally overblown because they want to make sure that they are a duopoly, essentially, and that they get the regulatory protections.

28:52What do you make of those criticisms on our air on CNBC this week? Leslie, I think they both try to get at something that is in a lot of ways unknowable, which is the motivation from the CEOs themselves, is what is actually behind this. And Alex Karp, as part of his segment, and talked to Sarah and Carl about this, he said that Dara Amadei, whether you agree with him or not, has been principled and consistent on the messaging around safety, and that he really does believe in this, where I would say Steve Eisen's point was more, OK, they're doing this and trying to cover up the fact that they may be running out of money or need to do this for a variety of reasons.

29:31And so I think it all does get to what is what is the motive here? And I think that's what a lot of people in Silicon Valley have really tried to get at when looking at why folks are doing this. And I think that's where the debate has really centered. That's where a lot of people have kind of been speculating in terms of what's happening. But the liability risk, I would say back to Alex Karp for a second, was also one of the big headlines. As we talk about AI safety, it equals liability in some cases. As we expect to get this S1, I would assume, Leslie, and you know this better than anybody, it's going to show up in the risk factors.

30:05But what is actually, Karp said essentially the liability is so massive, that was his point on potentially nationalizing the company, saying no private company could ever absorb the amount of risk. And, you know, it's not something I would say that's being talked about, at least publicly in Silicon Valley. Tech investors, private investors are not necessarily taking that seriously or underwriting that. Yeah, they're not known. They're known as more of optimists. But to your point, I think a lot of it comes down to what the law says about liability and who's responsible and to what extent that works with an AI agent or a model or so forth.

30:39Kate Rooney, Thank you so much. Appreciate it. Up next, the trade on the banks following the Fed's first rate hike in more than three years. Closing Bell will be right back.

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32:26Welcome back with the Fed raising interest rates for the first time in three years. What is the impact on the bank stocks? Here to discuss is RBC Capital Markets managing partner, Gerard Cassidy. Gerard, it is good to see you. It was kind of surprising because we did see this knee-jerk reaction on Wednesday during the FOMC meeting for bank stocks. And I'm just curious what the cycle investment playbook typically is for a rate hike cycle and what might or might not be different this time. Thank you for having me on the program, Leslie. And it's a really good question, obviously, because the Fed has made it very clear that they're moving to fight inflation.

33:03And one of the tools they use, of course, is to raise short-term interest rates. And it's somewhat nuanced. When you look back over the last five credit tightening cycles, we wrote about this about a week ago, there's no perfect playbook. On the other hand, if we go into a credit cycle, we know the correlation to credit and bank stock prices is very tight. The correlation between bank stock prices and the Fed actions moving up short-term interest rates is, again, more nuanced. And I would say that depending on the health of the economy, it's going to really dictate how the stocks perform. because, believe it or not, in the tightening cycle of 2004 to 2006, the bank stocks did very well throughout that tightening cycle.

33:51But, of course, then we had the credit cycle in 08-09. On the other hand, in 1994-95, initially the stocks didn't do very well when Greenspan was raising short-term rates. But then they had a phenomenal run from 95 to 97. So it's really going to play out in how the economy handles the rate increases, the health of the economy, and then also the yield curve. Does it flatten out further from where it is today, or does it actually steepen? Right, and that may have been responsible for why we saw bank stocks sell off a little bit, because the yield curve was also flattening on Wednesday. We also had the Barclays Financial Services Conference this week, where we got to hear from a bunch of executives from the banking sector.

34:32It seemed like, at least at certain firms, the Wall Street side of the business could be a little bit muted relative to previous quarters and relative to last year, Goldman and B of A kind of insinuating that in their remarks. What do you make of that? I know it was tough comps last year, but just in terms of just the key driver of trading, which has been such an upside boost to these earnings numbers we've seen in recent quarters. You're right, Leslie. I mean, the numbers in the second quarter for the group were fantastic. The top five investment banks, money center banks, the trading revenues, equity trading revenues on a year-over-year basis were up 70 percent second quarter over second quarter last year.

35:15We've been maintaining that the challenge for the investment banks and the money center banks in the capital markets businesses is the so-called second derivative, the rate of change, which you identified. So when you have a quarter like last quarter up 70 percent year over year in equities trading this quarter, even though most of the banks indicated this week that we could see trading results up 15, maybe 20 percent year over year growth. But it's not 70 percent. And as we get into the later latter part of this year and think about first half of next year, the comps are going to be increasingly difficult.

35:50So I think that's the challenge. Business is good. Don't get us wrong. We're not calling for any collapse in the capital markets. But the rate of change, the second derivative, is going to start working against these numbers, and that could weigh up the stock prices. Yeah, the bar is just really high after such growth we've seen. Gerard, thank you so much. Gerard Cassidy. You're very welcome. Thank you. Up next, we are tracking the biggest movers as we head into the close. Brandon Gomez is standing by with that. Hey, Brandon. Hey, Leslie. We've got a warning in precious metals sending stocks lower, while a crypto company's big trading bet sends shares higher, and a high-profile change in footwear.

36:26Those names after this break. 14 minutes until the closing bell. Let's get back to Brennan Gomez for a look at the key stocks to watch today. Brennan. Hey, Leslie. Shares of Nucor and Steel Dynamics tumbling today after offering third-quarter guidance below the street's expectations. Nucor saying it expects earnings in steel mills and products to increase, but a decrease in its raw materials segment. Nucor off its session lows down about a percent, and Steel Dynamics down around four. Coinbase, meantime, soaring higher today after filing to list perpetual futures, also called perps, tied to individual large cap U.S.

37:00stocks. Now, the company plans to launch trading later this year with perps tied to roughly 60 major stocks, including Apple, Microsoft and NVIDIA. That stock up about 12 percent and on holding, maintaining flat now off its overnight highs following a partnership announcement with French soccer star Kylian Mbappe. The endorsement deal marks the Swiss sneaker company's first entry into the soccer market. Shares popped in early trading but are still down about 40 % on the year, Leslie. All right, Brandon, thank you. Brandon Gomez for us. We just got the latest IPO filing from a data center company looking to make a debut.

37:35This one known as Nscale. And I'm told by people familiar with the matter that it is targeting a multi-billion dollar listing and evaluation around$30 billion. The company owns every layer of a data center build out, the land, the building, the power, the chips, the software. They see that so-called full stack as a competitive advantage relative to other neoclouds, which lease but can't have much control over cost and performance. In terms of revenue, definitely skyrocketing. However, costs did too. The company says that it has more than$100 billion in contract value. Its customers include Microsoft, Anthropic, and NVIDIA.

38:13Nscale joins a slew of data center companies that have gone public recently, including some backed by Blackstone and Brookfield, and SoftBank's SB Energy has filed. However, yesterday we saw nuclear provider Holtec postpone its listing, reportedly due to turbulence in the AI trade. And of course, the big question is what this all means for Anthropic and OpenAI, both of which are confidentially filed. Up next, shares of Netflix slipping. We'll tell you why and speak with a shareholder. That and much more as we take you inside the market zone.

38:50We are now in the closing bell market zone. Mike Santoli and U.S. Bancorp BTIG's Jonathan Krinsky are here to break down these crucial moments of the trading day. Plus, Sima Modi is looking at the strength in software and cyber names for us. And Julia Boorstin with the big news out of Disney and why Netflix shares are taking a hit today. Mike, let's start with you. We've seen a bit of a rebound in the S &P and Nasdaq as the trading day went on. Yeah, obviously within a pretty narrow band for the week. The index is kind of surviving, if not thriving. We're flattish basically on the week. And I think that a lot of that is because just enough of the big names have managed to get revived and support the index.

39:29They're a pretty good 5 % two-day rally in semiconductors. But, of course, they're still, as a group, 20 % off their highs. It's the kind of market we have. It's kind of day-to-day, one thing or the other is working. And it hasn't been able to really get up much of a head of steam. And it's still the case that the bond market and oil markets seem to dictate on a given day whether equities have permission to rally further or not. I think the big debate is whether we've had enough of a sentiment and positioning reset and you have enough stocks pulled back enough that we can kind of rebuild from here.

40:02Going to be next week's business to figure that out. Yes, because it is Friday. What's coming up on overtime? Yeah, we have actually the CEO of a firm, Max Lepchin, who's going to talk about specifically how AI tools are helping them improve their loan, their underwriting process and having better results on that. So kind of a good use case for AI in fintech. And a fellow Illini alum at that. Mike Santoli, thank you. Oh, there you go. We're following two stories on the MediaVite today. Disney hiring its first CTO and Netflix hit with a big downgrade. Julia Borsten tracking all of that for us. Julia.

40:41Hey, Leslie. Well, Disney is creating the new role of chief technology officer reporting directly to CEO Josh DeMauro and is hiring for this new position, Karandeep Anand. Until now, he was CEO of Character AI, which is a platform for talking to fictional and custom bots. He was previously at Brex, Meta, and Microsoft. This move by Josh Morrow has been CEO for six months now, speaks to the value he places on technology as a growth driver for Disney and also the power he sees of AI in particular. Meanwhile, shares of Netflix are sinking today after Wells Fargo downgraded the stock to underweight and cut its price target to$57.

41:20Wells Fargo flagging concerns about weakening engagement, saying that the original's content slate is weaker than Netflix's slate in prior periods. and saying that as Netflix promotes title diversity over concentration, it misses creating water cooler moments. Leslie? Interesting, Julia. Thank you. Let's bring in Netflix shareholder Capital Wealth Planning CEO and CNBC contributor Kevin Simpson. Kevin, what do you make in terms of just the content slate? Do they need more breakout hits for this stock to really work again? Yeah, Leslie, it was a big call for sure. I think Wells Fargo's argument was implicitly about a battle for time, not merely streaming subscriptions.

42:04Netflix has hundreds of millions of subscribers, so that's not the problem. But if each household is paying less and they're watching YouTube, TikTok, other short forms, then you absolutely have to capture the viewers. So I agree. You need that big moment. You need that big story if you want people to watch. So from that standpoint, I agree with the criticism, Leslie. As we think about just the affordability dynamic for consumers, is a Netflix or streaming a place that people cut when they can't afford gas or they can't afford a mortgage or, you know, all the different things we've been talking about this week with regard to rates going higher?

42:39You know, I don't think so. I think when you look at your budget, Netflix is still the last thing you're going to cut. But if they can't improve on some level, then I think that that sanctity becomes less of a guarantee. Now, they're spending a ton of money. They're expanding into live sports, gaming, podcasts. So they're really trying. But I think at some point, breath isn't a substitute for having shows that people absolutely have to watch. And that just goes back to Julie's watercore comment. Yeah, and making those breakout hits a necessity for actually keeping that subscription. Kevin, thank you.

43:13Kevin Simpson for us. Let's get to Seema Modi on the software strength we are seeing today. Seema. Well, Leslie, quite the week. Software is on pace for its best week since late August. And if you zoom out, it's up about 17 percent, the IGV, since the June 2022 low, led by cybersecurity names. The rally really widening this week beyond CrowdStrike and Palo Alto. Names like Atlassian, Sentinel One, gaining as well on this notion that if the AI labs, Leslie, decide that a third party is needed to oversee or provide the guardrails, cybersecurity could emerge as a winner. Analysts are now already anticipating budgets for cybersecurity names to rise.

43:49While the AI safety debate did take center stage at Dreamforce with both OpenAI CEO Sam Altman and Anthropic CEO Daria Amadei speaking, Salesforce itself saw its stock decline about 3 % this week, even after raising its 2030 revenue targets above consensus and unveiling Allforce that uses NVIDIA's open source model to bring Salesforce data into any interface. So while there were some wins, Leslie, some losers too. Yeah. Thank you, Seema. Seema Modi for us. Let's bring in U.S. Bancorp PDIG's Jonathan Krinsky to break down this trading day. There's more dispersion in the AI trade. Zima alluded to it there, but we're seeing it today as well with the chips.

44:26What do you think that means for the AI trade itself? Well, look, I mean, I think you can clearly say that the trend and the trade itself is maturing. It's too soon to say whether this has implications for the end of the cycle, but it's clear that this is what we saw in 2000. when the Nasdaq and the Sox peaked in March 2000. You had that drawdown in the spring. And by the summer, there was actually a handful of technology and semiconductor names that actually made it back to new all-time highs. And we're starting to see that. You have names like AMD, Corvo, Skyworks. Those are back near 52-week or all-time highs.

45:03And then you have a host of other names, some of the memory names and some of the kind of semi-cap equipment names are kind of churning near their 200-day moving averages down about 30 % or 40 % from highs. So, you know, I think it's good for stock pickers in the space because you can kind of, you know, generate some alpha within the sector. And I think ultimately, though, if you're going to get the overall stocks back to the all-time highs, you're going to need to see more participation from the semis themselves. So if you are a stock picker, is this the kind of time where you'd want to focus on names that are near new highs?

45:37Or do you want to be buying on any dips that you see? No, we think you probably want to stick with the relative leadership at this point because, you know, typically as the cycle matures, those weak names, you know, they've already had their run, right? And so the fact that they're staying weak is probably a sign that they're not going to be, you know, leadership at least in the next cycle. So I think you want to stick with the names that are showing the most strength at this point. And as we look at the leadership today, a lot of that is chips and kind of some of the more momentum driven volatility inducing names.

46:09Do you expect to see more of that volatility throughout the remainder of the year? Yeah, I mean, we're not only seeing dispersion in the AI space, but really across the market cap structure. If you look at small caps, they're down about 7 % off highs. I think this is, you know, when people say that the interest rates in crude is not having impact on the market, they're looking at the S &P 500. But if you look at below the surface, retail consumer discretionary has been getting destroyed. We're seeing triple C spreads start to blow out. So I think, you know, you want to move up in quality and kind of be cautious on the areas that are showing that relative weakness.

46:45Those are the parts that are more impacted by rates right now. All right, Jonathan, some words of wisdom to close out this Friday trading session. I'm John Linkrinsky. I really appreciate your time today and have a nice weekend. Looks like we may get a gain in the NASDAQ and the S &P. The NASDAQ is going to close up by 4%. The S &P up by one-tenth of one percent, but better than where we were earlier in the session with the tenure above 5%. That does it for Cody Bell. Let's get into overtime with Melissa Lee and Mike Cantoli.

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