A Picks-And-Shovels Bet on AI Growth… And Low Income Consumers Under Pressure 10/3/25

0:02Live from the Nasdaq market set in the heart of New York City's Times Square this is fast money Here's what's on tap tonight. Bold up for the broad rally. Stocks closing out the week at record levels. And it's not just AI driving the gains. Can small caps, pharma, utilities and more drive this market even higher? We'll debate that. Plus, data center details. We are sorting through the nitty gritty of what actually goes into one of these power providers and the ins and outs behind the AI fuel demand. And later, Dr. Copper makes a house call this week as the metal climbs to two month highs. why investors are taking their chips off the table in the casino space, and our traders are set to reveal their charts of the week.

0:39I'm Melissa Lee, coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Bono and Eisen, and Steve Grasso. We start off with a rally that keeps on rolling. Markets shrugging off the traditionally weak season, as well as the government shutdown. The Dow and S &P 500 managing to squeeze out fresh record closes, but all three indices closing out the week with solid gains. And it wasn't just the AI and semi-surge fueling these gains. Small cap seeing a breakout. The Russell 2000 hitting record levels now up more than 11 percent in 2025, catching up with the broader market.

1:09Pharma stocks coming back to life this week. Pfizer, Merck, Eli Lilly, all with double digit percent gains. The XPH pharma ETF up more than four percent this week and nearly 20 percent over the last few months. Even defensive sectors like utilities and industrials climbing higher. Plus, the moves in momentum names not slowing down either. Stocks like Robinhood Coinbase continuing to run both at more than 20 percent this week. So does this broadening out mean this full run could continue rolling on? Tim? Well, first of all, it's a fascinating payroll number this morning. Oh, yeah. OK, no payroll.

1:44And therefore, let's just move past that. And so if you think about the broadening of the market, I would argue industrials have led the S &P all year. Utilities have been a kind of a go-go area to be. But the pharma small caps this week was great. People are looking for rotation. They are looking for opportunities to not be tied to what feels like a frothy trade. But I'm going to get back to, I think, outside of pharma, the big event for me this week were that semiconductors hit all-time relative high against the S &P. And the deal flow, the dynamics. And, you know, today we have more data center deals.

2:18We're going to have a great conversation about data centers later on in the show, so stick to that. But, you know, you have Fujitsu, Hitachi, NVIDIA. You have all these guys that are global players getting involved in the data center. You had the open AI deal. You had different types of infrastructure investments into AI. So there's nothing about that that's letting up here. It does mean that the frothiness around the trade and the trade today certainly felt like you had the barbell of some of this value stuff. But, boy, you know, get into crypto, get into quantum, get into the parts of the real go-go FOMO parts of the market.

2:52And they closed basically at their highs. And what you couldn't do is you couldn't trade off the payrolls number. So you don't have the volatility if you don't have anything to trade off of. So people don't trade off of a dull market. Not to say that this is dull, but the consistency of which it's gone up, there's nothing to stick it down now. No jobs number. Yields are pretty intact. So the 5, the 10, the 30. We've seen those cascade lower. And now we haven't seen them pop. They're not even back to 50 % retracement yet. So I think people feel comfortable where the market's at. Someone like me, though, will say November, December, seasonally great months for the market.

3:35September, October, not great months. Do we do a reverse now? So now I'm starting to think, does the sell-off come later? Oh, so we're pulling forward, basically. Or has the sell-off just been avoided with the government is shut down and the market has rallied? We don't usually see that in the first couple of days of a government shutdown. Do we throw a flag for a third-person reference when someone says someone like me might have... Bob Dole made it possible. Steve Brasso would say. I feel like... Okay, I'm sorry. What is sort of maybe heartening about this week, though, is that it wasn't the MAG-7 that was advancing, right?

4:13I mean, that's basically our point, that there's sort of a broader advance going on here. And maybe that makes you feel better about the levels that we are at. Well, I think that's definitely constructive when you look at the multiple of the overall S &P. So if you're seeing a broadening out away from just the Mag7, away from just AI and data center plays, away from just the adjacent utility plays, away from crypto, which, as Steve had mentioned earlier, has been quite volatile itself, I think that's actually supportive of expecting to see larger forward returns. So I think from that point of view, it's constructive.

4:44Listen, you're moving out of some of the beta now, but when you're moving into IWM, names like that, even on a relative basis, I get that it's playing the catch-up trade and has now hit this new all-time high. But I still think on a relative basis, if you want to kind of move away from the very concentrated tech part of the S &P, maybe you look at RSP. Your seal gives you a nice, broad type of exposure, but you're not completely abandoning what has gotten you here to this point. Some would say, though, that for small caps, I mean, they're trading at such a discount to the S &P 500 that it is a sector that you should look at.

5:22Now, I'm going to misquote you, but I know that at one point Tim said, I hate small caps. I don't know why we talk about them. Yet here we are talking about them at record highs. We don't use the H word in my house. Okay, sorry. You dislike. We dislike. Dislike small caps. And I think I said something maybe even more insulting, which was there's no reason for small caps. So, yes, I think it's great. I think what's happening in a week like this, we're talking about the broadening of the market, at least the parts. This is a week that makes a lot of portfolio managers and probably a lot of wealth managers and advisors feel better.

5:55Because the RSP, the ETF that Bono is referencing, is a very common allocation. It's the equal weighted S &P. And after a couple of years of the outperformance and growth, there's a lot of people that were scared to allocate towards the growthier parts of the market. So, you know, this is kind of a relief for a lot of people that want to be invested but haven't had, you know, been out there and never wanted to be over their skis. So I think it's an interesting week. Remember, we've also talked about how banks have struggled a little bit this week. But the places where if you were not invested into the growthier parts of the market and you were invested in banks and utilities and even certain parts of discretionary, you've had a fantastic year.

6:34And those aren't big weights, though. I mean, let's let's be financials are creeping up there. But health care's underperformance is something that's really makes this week feel better for a lot of people, myself included. I have a lot of allocations there. Yeah, I mean, Pfizer almost single-handedly helped reverse the health care trade at this point. Is that an area that you're interested in? Yes, only because of the underperformance that you see. Because if you crowd into the same names who have been producing the profits for the overall market, you wind up not thinking you're going to gain as much of a profit going forward.

7:08So that's why people go into the Russell. Russell is 40 % unprofitable. Is that number down to 20 % now, 30 %? But you're buying something that is definitely reliant on floating weight interest, floating rate interest charges. So they borrow short term. They don't borrow long term. They can't finance borrowing long term. So if you don't believe that rates are going to come down precipitously, then the Russell is not going to outperform. So people will go right back into mega cap tech right after they're in this. Right. I guess the question here is, are you looking at this point in time, at this phase in the market to allocate to things that have been underperforming, allocate to sort of the turnaround stories in the market, allocate to the less popular areas?

7:52Sure. If you want to kind of draw down your beta, protect your portfolio a little bit. I actually think that we're kind of looking through this possible government shutdown being a bit more protracted. So if you have a bit more pessimistic lens, you think perhaps, you know, the Fed chair says, OK, well, actually, we're data dependent, but we don't have any data to depend on. And therefore, we need to either pause or pivot or we actually don't know what to do. We're not really able to make any kind of forward looking predictions. Yeah, well, then I think you do draw down and you look for some of those catch-up trades.

8:18In fact, you've seen a name like Moderna actually kind of start to reverse. So there are little pockets of that happening. I just question whether it has the capacity to move from MAG7 names or S &P top 50 names into some of these smaller pockets. I just I just think that leads to volatility and increases drawdown risk. We do have a news alert on a hotly anticipated A.I. company scrapping its IPO plans. Mackenzie Cigal has got the details. Mac. Hey, Mel. So A.I. chipmaker Cerebris is pulling its IPO in a filing with the SEC. The company saying it no longer intends to move forward with the deal at this time.

8:54Now, it had originally filed last September but faced hurdles, including regulatory scrutiny and questions over its reliance on a single customer. Now, the move also comes just days after Cerebris raised more than a billion dollars in private funding and an eight billion dollar valuation, buying it more time to stay private. Mel? A billion dollars raised. Mackenzie, thank you. Mackenzie Cigalas, no reason to go public. This sounds that kind of money in the in the private market. It sounds like, oh, boy, this is a week where OpenAI got a$500 billion valuation in the private markets by raising$6.6 billion.

9:29So, no, we talk about this all the time. And private markets are providing another opportunity. At least, first of all, companies are staying private longer. There are opportunities. There is liquidity. There are opportunities for investors, for retail investors, for high net worth to have access to these markets. And I think that is a dynamic, though, that is very much indicative of the kind of liquidity that's overall out there in markets. Well, one of the market's biggest underperformers may soon join the rally. CNBC's contributor, Peter Bookvar, is behind that call. He's the chief investment officer at 1.BFG Wealth Partners.

10:01Peter, great to have you with us. Read your note this morning, as I normally do, and you highlighted some comments from ConAgra. So there's both the trade related to ConAgra, which you have, but also the commentary that you pulled out of the conference call. I want to start off with the commentary and what it tells us about the consumer, because management sounded very downbeat on consumer sentiment, on the ability of households to deal with rising costs. And it also raised its cost estimates in terms of tariff exposure and raw material exposure. Yeah, this has been a multi-quarter, even almost going back to 2024 about this.

10:36They refer to a barbell economy and something we've heard time and time again from a variety of different companies where that lower income consumer is value is is is enabling value seeking behavior. And then on the other side of the barbell, of course, is the upper income spender where the cost of living is not an issue. And because Canagra caters to that lower income consumer via their frozen food business, their snacks business, they've been challenged on top of seven plus percent increase in costs. About half of that is rising prices of certain commodities that they rely on, like turkey and beef and pork, and then the rest being tariffs with respect to packaging, steel and aluminum that negatively impacts them.

11:23But if you take this further, because they're frozen foods, take a frozen meal that you would find at a supermarket. If you can get a meal for five, six bucks, that's going to become more enticing. So actually, their frozen food business is growing. And on the snack business, interestingly enough, snacks are considered a discretionary item right now. But one of the items of snacks that they're doing well in is beef jerky's, their Slim Jim brand, which they call their meat snacks. And that actually rose 4 percent in the corner. But very much a mixed bag, for sure, in terms of business. But these stocks have gotten so beaten up, so destroyed across the entire consumer products and food business.

12:05because of all that commodity pressure, because of the volume pressure. But the stocks are so cheap with very generous dividend yields that we've been buying them, and I find them very attractive in a highly valued market. Right. So staples look good, look poised for a turnaround. But in terms of what I coined this off of your note, the Slim Jim indicator, Peter, I mean, what this is telling us about how, you know, the difficult times the consumer is facing. I mean, they're projecting that these sort of value-oriented choices are going to persist for the rest of the year. So what does that tell you about the strength of the consumer, the strength of the economy?

12:42Well, if you listen to the Michigan Consumer Confidence number, if you own stocks, you're doing fine. If you don't, you are really stressed. And a lot of Canagra's customers don't own stocks. They're lower-income consumers living paycheck to paycheck. But they do provide a lot of value to that consumer. Again, if you can buy a meal for$6, that's attractive. If you can buy a Slim Jim for$1.50 and get your daily protein, that's really attractive. So they're trying to cater more to that value customer. And they actually said if the economy was better, if that lower income consumer was healthier, they would provide more premium type products.

13:25But because they're not, they know they really have to hone in and get that value seeking customer. Peter, when you look at the economy right now, this looks like a I'm reading the tea leaves or I'm reading through your statement. Is this a recession call on your part or is this just where we're at right now with things being so expensive? because obviously staples and utilities until recent past have been sort of your recessionary defensive plays. Is this a defensive play, worrying about the economy two months, three months, six months? Or is this where we're at right now, what price is being too high?

14:03Well, it's number one, highlighting how mixed and uneven the U.S. economy is. Number two, I'm calling out a tremendous value in the market. Now, granted, these stocks are cheap for a reason. and their businesses have been challenged. But if the economy continues to slow, if this labor market continues to slow, the market may shift back to health care and staples as more defensive parts of the economy. I mean, if you take out this entire AI build-out, first-half GDP would be about flat. I mean, the U.S. economy and the U.S. stock market is all in on this AI tech trade. So if there's any wobbliness to that, that will affect the economy.

14:44in terms of the build-out, affect the stock market in terms of upper-income spending. The defensive areas of the market, like staples, where if you don't include the tariff sell-off in April, these stocks are back to where they were last January. It's a cheap part of the market. But again, I acknowledge the challenges of their business, but the stocks already reflect that. Peter, thank you. I never give up an opportunity to talk Slim Jim. Slim Jim indicator. Peter Bokvar. Thanks. But just to underscore the point, I mean, it is staggering what Peter just mentioned. If you strip out AI, GDP would have been flat.

15:17So what happens if there is a hiccup to AI? Are you positioned for that or you don't think it's going to happen? I'm not positioned for that because the opportunity cost to being positioned for that has been too high. And at the end of the day, any money manager has to really compare itself to whatever that, whether it's ACWI or S &P, whatever that benchmark index is going to be, or else you forego new investment. That's the situation that we're in. I think the concentration risk, I think the performance of this very concentrated trade supports that notion. When I think about investing, let me say one thing.

15:53Peter Bookfar is always right, but I have to push back on Slim Jims being cheap. I mean, last time I checked, Slim Jims aren't cheap. And try to buy, like, that two-ounce pack of beef jerky, like the peppered beef jerky you like, Mel? You like the organic, seasonal beef jerky. Well, yeah. Like the regular. Because I'm obviously, yeah. I mean, healthy beef jerky is an oxymoron. Having said all that, I mean, I could order a steak at Smith and Walensky's cheaper than buying a bag of beef jerky. Anyway, when I think about investing, I think about investing for clients. I think more about where I'm relatively overweight or underweight.

16:24I don't think about all in on AI. I don't think about and I think there's been an opportunity to have exposure. Remember, if you look at just the weightings of the S &P and companies in the S &P, Amazon's not a tech company. Meta's not a tech company. They're communications companies. There's this, there's that. So you have to think about both weightings and where you are relative to a benchmark. What Peter's saying about staples is fascinating. They've underperformed the S &P by 41 percent since the end of December of 22. Some of these companies are not cheap. Some of these companies have been beaten up.

16:54Some of them have more exposure than others. This is a great opportunity for stock picking in a place where I think you're supposed to always own some staples. It's just a question of which ones. Yeah. Which ones, Grasso? Well, he brought up Conagra brands. Look at the yield on Conagra. It's over 7 percent. And you don't buy something for the year because that yield could be wiped out with one day sell off. But to Peter's point, if we're going into a lower rates environment and you're looking for something where people are going to be buying Slim Jim's and food and they're going to have their protein fix a lot cheaper.

17:23Canagra is a great bet, too. Have you ever had a Slim Jim? Of course I have. It's a fabulous, fabulous food. Am I human? There's nothing wrong with Slim Jim. It's great to know. We're all weak in our own ways. We're on the road. We're on the road. Now to the latest on the U.S. government shutdown and how much longer it could last. CNBC's Emily Wilkins has a developing story from Capitol Hill. Emily. Hey, Melissa. Well, yeah, Congress at this point is locked in a stalemate as the shutdown is set to go through the weekend into Monday. Just a little bit ago, the Senate tried again and failed a fourth time to open up the government.

18:00And you've heard from now both Speaker Mike Johnson as well as Senate Minority Leader Chuck Schumer. They are both betting that the other side is going to be the one to cave first. We have troops and TSA agents and Border Patrol agents who are working without pay protecting the country. And you have FEMA services, health insurance policies, for example, that are being stalled in the middle of a hurricane season because the Democrats want to play political games. As people get their new health care bills and they see how much it is, it's shocking how much it is, and they go and say who did it. And we Democrats are going to be there day in and day out and say the president and the Republicans did it.

18:47the senate will return next week but the house will be out after speaker johnson canceled the house's session next week to keep the pressure on the senate to pass that bill that as you remember has already cleared the house but has still has yet to get the 60 votes that are needed for passage melissa right emily thank you emily wilkins obviously this all happens the midterm elections are coming who's going to own this do you think well that's the the tug of war here. So both of them are pressing that the other side is going to own it. They seem dug in. They seem as if the Republicans are going to let, and you've noticed a lot of the press conferences now are trying to come out and basically say they're to blame, they're to blame, and they're going to keep doing this.

19:30So the longest shutdown was 35 days. Second longest was 21 days. I don't think it'll be that long, but I don't think it's going to be resolved. In two days, three days, I think we're going to take the weekend and we might be shocked sometime in the middle of next week. All right. We do have some breaking news we want to get to from the White House on President Trump's proposal for peace between Israel and Hamas. Eamon Javers has got the details. Eamon. Melissa, we've got a new statement here from President Trump on social media responding to the Hamas statement a short while ago. The president here putting a little pressure on Israel.

20:03He says, based on the statement just issued by Hamas, I believe they are ready for a lasting peace. Israel must immediately stop the bombing of Gaza so that we can get the hostages out safely and quickly. Right now, it's far too dangerous to do that. We are already in discussions on details to be worked out. This is not about Gaza alone. This is about long sought peace in the Middle East. That's the statement from the president responding to Hamas, which in their statement suggested they were willing to turn over all of the hostages alive and dead, tragically, but also putting some conditions on that.

20:38So it sounds like Hamas is taking a step toward negotiations and the president is welcoming that step with open arms here. No indication of when that hostage exchange might take place, but you can see from the president's statement there that he's already thinking about the technical details of how you get those hostages out in a very, very dangerous part of the world, given everything that's going on there. We're also told, Melissa that the president is working on a video statement in the Oval Office and we should see something on camera from him at some point this evening as well. Back over to you.

21:11All right. Eamon, thank you. Eamon Jaffers. Coming up, Copper's big week, what the resurgence in the metal means for the miners and the global economy and a quantum leap for the quantum stocks. Can you still jump into this trade or should you sit this one out? We'll debate that. More Fast Money in two.

21:31This is Fast Money with Melissa Lee right here on CNBC.

21:41Welcome back to Fast Money Copper with its biggest weekly rally in over a year as the supply disruption and the weaker dollar put a charge into the price of metal. Miners rallying on this new southern copper. Freeport, Lundin, mining and MP ending the week in the green. Is there more room to run in this mover? Obviously, it was the FCX mudslide incident that sort of crimped supply immediately. Yeah, the Grashford mine, which is one of the largest in the world, and force majeure. And typically, copper mines are in places where there's a lot of political instability, especially Indonesia, parts of Latin America.

22:14And so what's been going on with copper, though, and if you look at certain futures, they've told you we were already at highs. They've been extremely volatile. If you look at three month LME futures, we're at 16 month highs. If you if you look at where we're trading in the U.S. here, we're essentially at highs from back to the summer. But the dynamic is we will be, at least according to folks within the industry, at a deficit in copper. You add that to the fact that China continues to at least invest in their electric grid. The other thing that we're not talking about, if we're looking for AI trades and data center trades, copper is a major, major input in the build out of electricity and power grids.

22:52So if you want to think about the demand side of the equation and just say, I can't get really excited in the supply disruption side because that doesn't work for oil. Well, it does work for copper, but it will work even more so. Yes, I like the trade. I even like that copper chart going all the way back, similar to when gold really started to take off. I think that uptrend in copper is alive. Freeport, southern copper, I like BHP and Rio Tinto because they're more integrated. But yes, I like it. The biggest supply deficit since 2004, according to StockGen. Remember also Bank of America earlier this week upgraded FCX on the back of what what has gone on to the Grassberg mine saying, you know what?