OpenAI’s Latest Models, Bitcoin’s Recent Rally, Tech Portfolio Check 9/22/26

0:00This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. I've given my blood, my sweat, my tears to this island. What happened here? We came here seeking a great treasure.

0:37We've been out here for 14 years. After centuries of mystery. You have to hold the proof in your hands. The lifelong quest. Time to go get it. Whoa, what the heck? Has finally paid off. You found that in the money pit. This is what we've spent our entire lives searching for. The Curse of Oak Island. New season tonight at nine. Only on History.

1:06Well, don't look now, but the S &P 500 is now just 1 % from a new record high. Welcome to Power Lunch, everybody. It came up quickly and kind of quietly, but the tech trade is back. Record highs for the NASDAQ and Apple. Meta, by the way, Kelly, on pace for its best day in, checks notes, 13 years. Wow. And speaking of that broader appetite for risk, Bitcoin is above 86 ,000 again, its highest level since Jan. After a punishing sell-off that had many questioning the crypto trade. Now with risk assets finding their footing, noted investor Tom Lee telling this program that crypto winter is over. Is it a durable breakout?

1:45We'll debate Bitcoin's next move. All right. It is another big run for stocks, but not all. And not all may be well under the hood. All right. Not taking anything away from where we are near the records. But listen to this. Just a couple of S &P 500 stocks hitting new 52-week highs. There's about eight, I think, today, but 30 making new 52-week or multi-year lows. The last time the index rose at least 1 % and finished within 1 % of a new record and new lows, outnumbered new highs, was all the way back in December of 1999. If you're old enough to remember, as some of us were, that was just a couple of months before the dot-com bubble burst.

2:29So is this just kind of a weird, bless you, stat in the data, or does it actually mean something else? We don't know. But Stuart Kaiser may know. He is head of U.S. equity trading strategy at Citi. And he joins us. And we're going to hope that you can stay with us for a few blocks. I'm glad to get you out here to the wildest swamps of Jersey. Happy to be here. Thank you very much. Glad you're here. So there's the stat. Markets almost at new highs, but again, only powered by a couple of stocks. You heard the historical reference. It's not a great one. Does it matter, though, or is it just a cool stat?

3:05Yeah, I think right now it's a cool stat just because if you look at last week, you were looking for two pieces of information. One is how are markets going to react to a rate hike, and two, how is this sort of AI slowdown impacting the AI trade? And in both those cases, I think the answer was bigger is better. And so what we've seen is MAG7 and those large cap tech stocks kind of lead things higher post-Fed. And that would sort of naturally give you higher markets without maybe as many stocks participating. If you were super optimist, you'd say this is evidence of broadening out. But I actually think what it is is last week just kind of pushed people into these larger, safer, large cap growth in tech stocks.

3:39And that's probably why you're seeing that in the data. Yeah, I like Brian's question. Is this just a cool stat or does it really mean something? because there's a lot of things where you could say it feels like the late night. And yet you go, well, just last week we had this new news launch, right? And there's this new energy behind. Is this the kind of faddish stuff that marks a top, at least even in the near term? Or is this the kind of stuff that says we're still at Netscape days? It's like 1994. You know what I mean? Honestly, if you talk to a lot of people in the AI investment space, they'll tell you we're still early innings.

4:11And if you're going to slow down model development, you're going to kind of stretch this out a bit. That would also kind of put you in the earlier part of the investment cycle. But fair enough. And we've had a couple-year rally that's been extremely strong. You have lots of stocks up triple digits year to date, much less double digits. So I think it's fair to ask the question with the markets where we are and the Fed hiking rates, et cetera. But our view, Heath Terry on our side, who's our AI guru, he thinks we're still kind of early innings. And you're going to nearly quadruple CapEx spending over the next few years.

4:39And that to us would suggest you're not at the end of this train quite yet. I was at the Nasdaq in 1999. And I know I was four years old. But anywho, those are fake companies, a lot of them. CMGI, ICG, Commerce One. These are companies that never had earnings and never had revenues. I'm not picking on those names, even though they're long gone. But these are real companies. Your point about Meta, well taken, Kelly. I mean, Meta is one of the biggest companies in the world and released a product that has added 200 and some billion in market cap. Crazy. In two days. This is not, I think, then. I would agree with you.

5:13I think the only thing that feels like then in the eyes of skeptics is a lot of these companies are now free cash flow negative again, which is something we haven't seen in about 20 years. But if you're worried about that and you say, well, you know, the credit spreads have tripled on these companies in the last 12 months, but there are 65 basis points. Right. So, you know, these are real companies with real earnings, with real free cash flow generation potential. And also what they're telling you is we're borrowing at about six and we plan to earn 25 or 30 on those investments. And if that's the case, it's really hard not to encourage them to keep investing.

5:41That's also a separate question. Are these individually great investments versus are we at the top of the cycle? But perhaps to this very point, Kate Rooney joins us now with a news alert on OpenAI. Kate, what's happening? Hey, Kelly. Well, a new AI model released today from OpenAI. This is just coming out. It's the newest version of an existing suite of models. So it's Chachi, BT, Sol and Luna 6, to be exact. The theme of the day, though, is cost. So OpenAI says compared to prior generations, these are 50 percent cheaper, describes it as a step up across this model family on cost efficiency. And then also says it is priced below Anthropics models as well.

6:20Price is really becoming one of the biggest battlegrounds right now in AI. CFOs we talked to, CEOs are trying to rein in their own budgets. And we've talked before as well about open source, cheaper models coming out of China, in large part adding to some of that pressure. A couple of hours ago, we also heard from Anthropic, which unveiled its own new model, Opus 5.5. The headline was the same, guys. It was about efficiency and cost. They said a couple hours ago, it performs at its best model level, which is fable on most work, but it costs 40 percent less to run than some of the older generations out there.

6:54These two models do also come after the industry, starting with Anthropic CEO Dario Amadei, called for, quote, pacing the frontier of AI. Bioanthropic says as part of that, they did extensive alignment testing. They went through pre-release evaluations as well from outside organizations, plus extra safeguards for cyber and bioweapons in particular. Both labs also talked about something called alignment. So OpenAI, for example, said they lowered the rates of misleading claims about their coding work alignment, basically making sure that the AI has the same goals as the rest of us. I love when we come up with new terms for things like, you know, no, it's just going and doing its own thing.

7:32But Kate, to the point about cost here, and it's interesting to see now one announcement an hour ago, now the competitor with this announcement. So Claude said it's now going to be 40 percent cheaper. And how much cheaper is OpenAI going to be? Well, 50 percent compared to its previous model that had already had some sort of discount. So it's difficult to do these apples to apples comparisons. And it's not like an iPhone where you can say this one's a thousand bucks and Android is 800 or whatever it is. They all are priced on, you know, per million tokens. overall, OpenAI is priced slightly cheaper than Claude.

8:05But what all of the executives are now saying is that it's all about efficiency and saying executives on the enterprise side are going to be willing to pay a little bit more because they know the job is going to get done. They're not going to have to pay for more tokens. They're going to say, all right, if I give this to Claude, I know that it's just going to do the job. And therefore, maybe in the end, my prices are lower. But as I mentioned, this is the battleground. It's not really enough anymore to just have the best, flashiest model. They are very strategically saying, oh, by the way, it's also cheaper.

8:32So CFOs, pay attention. All right, Kate Rooney. Kate, thank you very much. So, Stuart, I'm struggling with this story, and here's why. If I hear that United and American Airlines are in a pricing war, I'm thinking that's bad for those companies, right? Maybe good for consumers, but bad for the margins. If I hear Burger King and McDonald's are in a pricing war, bad for the companies, good for the consumers. How do I read that? It's a good question. I think Kate kind of made the point that you have the cost of the token and you have the, quote unquote, cost of the intelligence. Right. And these models are developing so much faster that the cost of the intelligence is just much more cost effective.

9:07I do think, frankly, for the frontier models, the debate still is about revenues, almost how Amazon was 15 or 20 years ago. Right. Ignore the margins. Let's focus on the revenues. And I think what they're saying is, look, our models are developing so much faster. The cost of intelligence is so much lower that our revenue numbers are just going to keep growing massively. And look, my view on this is if you don't like the capex spending, well, you could argue that this justifies the capex spending. The models are getting bigger, faster and more efficient, much faster than anybody kind of would have imagined.

9:37So in that sense, it's good trade, good for the overall AI traded investment. Though for those individual companies, I think, you know, there is going to be some downward pressure on margins. It's almost hard to dismiss. I also wonder how much these business models are going to evolve. I just can't imagine in a few more years time it's going to be cost per token. It just it reminds me a little bit of in the old days, like dial up Internet. You know, you'd pay. I forget the pricing plans. It'd be like, you know, it'd be like seventy dollars for Stuart and I are laughing. Yeah. But I remember these days, too.

10:05And so ultimately you or self. Remember when it was when you had to pay per text message, 10 cents per text message. And your kids would rack up these huge bills on that. This feels to me like the token era of using. I don't know what comes next, but, you know, is the economics going to be great here? I don't know, but it feels like it's ultimately going to give way to something else. I don't know. I mean, I would have to agree with you. I mean, as these technologies evolve, the pricing evolves as well. I mean, as I mentioned, Amazon early on was just we want to grow revenues, we want to grow market share, and now you've got Prime and Tier pricing and AdBase, et cetera.

10:36So, you know, I would tend to agree that, you know, the evolution of the pricing is unknown at this point. So can I ask you one quick different way, asking for a friend? Can something be bad in the market? Can something be bad-ish for OpenAI and Anthropic and others that are private companies? Can something be bad for them, but good for the public equity markets? Because the market writ large right now is acting like it is. I mean, look, even if you went all the way back to DeepSeek a couple years ago, the logic was, wow, this is bad for five or 10 companies. It's good for every other public and private company globally.

11:13So, yeah, it can be positive for efficiency. It can be positive for productivity and growth, even though you might get theoretically some margin compression on a few companies. Yes, I think that's 100 percent the case. Yeah. And it goes back to how long those companies. It's more of an IPO question, I think, in some ways. The timing of the IPO. What are their costs look like as they're paying as people are paying them? You know, that is that compresses. Sid Teitha, we have JP Morgan CEO Jamie Dimon still sounding the alarm about inflation. Here's what he told Squawk Box Asia today. So part of that inflation number, maybe the die's already been cast.

11:47It isn't about what the Fed does next raise. And so and of course they have to react to what they see. So we'll see. I'm hoping that inflation stays here and starts to come down. I don't bet on that. I think there's a chance it won't. And it may even go up a little bit. Let's ask our friend Rick Santelli. Rick, if you think Jamie Dimon is right about that, again, just to repeat what he said, he said, I'm not sure it's going to come down. It might stay here or even go up a little bit. You know, I think that's actually a pretty safe bet. And unfortunately, I think the driving forces that are pushing prices up are beyond the reach of rate hikes by the Federal Reserve.

12:22Let's look at a couple categories on spending. If you look at global military spending, for example, he's right. The war in the Mideast and other factors, many countries are spending quite a bit of dough. But there's another side of that story. With drones and technology, maybe it's not going to be as expensive or inflationary. Then, of course, there's sovereign debt and deficits. That's a category I don't see doing anything better down the road. However, we've seen markets ignore these things for years, so that could be a split decision. To me, the most damaging aspect of what can bring and cause inflation to be sticky is the corporate AI build-out.

12:58Just think, last year we spent, what,$300 billion on the build-out? This year,$700 billion on the way to$1 trillion. And yes, it's boosted GDP, but it's also making inflation sticky. And the last category is geopolitics. That could go either way. The second chapter of the war in the Mideast doesn't seem like it's going as well as the first chapter. We overestimated the goodwill potentially. But should it end in a fashion that benefits the U.S. and the Straits of Hormuz, that could be a mixed decision as well. Those are the variables. And I think it's important to note that inflation is somewhat sticky.

13:34And it's hard to argue with the logic of a banker who gets to see the flows that Mr. Diamond sees. Good stuff. Rick Santelli, thank you very much. We'll get more on it in a second. By the way, oil is down about 3 % because the U.S. and Iran apparently are using the UN week to talk. Since I guess the theme of the show is the 90s. Can we just say that? Let's just play some 90s music. Welcome back to the 90s. Thank you. It's a good decade. Let's do it. It really was. No one knew where you were. It was fantastic. So I go back to 1995. Because in 1994, the Federal Reserve raised rates by 2.5%, or as the market would say, 250 basis points.

14:10Right. Guess what happened in 1995 or the S &P 500 at its best year in 30 years, going back 30 years, 37.3 percent return 1995. We have not seen a year like that since then. So my point slash question, I guess, is, Stuart, are higher rates necessarily going to kill the market because they didn't in the mid 90s? We don't think so, honestly. We think two to three hikes and then the Fed on hold until inflation comes in a bit is a totally fine operating environment for equity markets, as long as the CapEx spending continues and those earnings continue to rise higher. So we think it's a little bit of a tactical headwind, but it's a buying opportunity if we pull back on higher rates.

14:51I'm trying to remember the playbook from back then, but I thought that after Greenspan, it triggered the Orange County bankruptcy and all of these sort of calamitous things at the time. That's a deep pull. I think then he backed off. If I'm not mistaken, there was some sense of, OK, I see what's happened. I'm backing up. It was also interesting to hear the former Treasury Secretary Mnuchin was on Squawk Box this morning. He said he did not think Warsh should hike rates anymore from here. Yeah, look, I think it's an open question. And Rick made, I think, a great point. If we went back the last five years, you know, COVID, Ukraine, supply chain, fiscal spend, CapEx spend, Iran war.

15:23The Fed has really no ability to impact that spending unless they're going to hike rates aggressively and really hurt demand. So in that sense, like if you're hiking, you actually might be creating a growth risk that you didn't have before to try to fight an inflation trend that maybe you can't influence anyway. So from a risk management perspective, I think it's a worthwhile debate to have. All right. Stuart, we'll see you in a little bit. Thank you so much for joining us. We're not letting you free just yet. All right. And we are just getting started here on Power Lunch. Bitcoin rising with stocks, holding right around 86 ,000.

15:55That's its highest level in eight months. So has the crypto winter, like Tom Lee said yesterday, finally thawed? We'll speak with a crypto investor who says the next bull run is already underway. And as we just noted, oil, it was up a little bit moments ago. Now it is down. Some new headlines you have to hear around Iran, Hormuz, Trump and more. You'll hear all that and get a market update with the Nasdaq at a record next.

16:30If you like YouTube, you'll love YouTube Premium. Hi, I'm Sean Evans from Hot Ones, and I want to tell you about YouTube Premium. It has offline downloads, so you can watch without Wi-Fi. Background play, so you can lock your phone, and it still plays, baby. Oh, and it is completely ad-free. Yes, I said it, ad-free. Try YouTube Premium for two months free at youtube.com slash premium. Trial eligibility varies. Terms apply. Cancel any time. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done.

17:14You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required.

17:52risk, including risk of loss. Fidelity Brokerage Services, LLC, member NYSE SIPC.

18:02All right, folks, as we just said, we got some breaking news that is happening right now that is moving oil prices and maybe the overall market. Megan Gosella with more. Megan. Brian, that's right. We just heard from President Trump speaking on the sidelines of the U.N. saying that U.S. officials had a three-hour meeting with an Iranian delegation on the sidelines of that General Assembly going on in New York. The president called it a good meeting and a productive meeting, said it was his Middle East envoy Steve Witkoff and Jared Kushner meeting with the Iranians. Here's some of what he said about it.

18:31They had a very good meeting and we'll see how it turns out. But certainly it's to their advantage to make a deal. And if we can do that, it's preferable, I guess. Now, Witkoff also was asked how he felt about this and he said, quote, I feel very good right now, but wouldn't say any more about how that meeting went. The president also said he expects there to be another meeting between the two sides quite soon. Now, guys, by my count, this is the first meeting in about two months for these two countries. Back since July, that was when that interim peace deal did sort of start to fall apart. We haven't seen them meet face-to-face since then.

19:05So we saw oil fall on this on the hopes of there being a deal. I will, though, remind you that just earlier today in his speech to the U.N. General Assembly, President Trump did say that he expects a deal not until after the midterms in November. Guys. Megan Cassella. Megan, thank you very much. All right. Let's talk more now about this. I'm bringing in Denton Cinquegrana. He is chief oil analyst at Dow Jones Energy, also a man who, by the way, was stuck at Newark Airport yesterday with all the flight problems. We are glad you got out. Stuart, we think you did anyway. Stuart Kaiser is still with us to talk about this.

19:35So, Denton, let's talk about this. I know the news is just happening right now. There's no clear. We have no way to know what is going to come of this. The market is taking it in a good way, meaning a bearish way. Prices are coming back down. What's your take? Yeah, I mean, got to take the president at his word that it was a good meeting and prices are reacting. Obviously, you have the WTI contract up right now on the screen there. That's the October contract that expires today. The November contract is down even more and trading below$90 a barrel, down even more than October is. So obviously, these markets are taking it to be real and really selling off based on those headlines.

20:17But also, you know, oil inventories in the United States are actually in pretty solid shape. We're kind of at the five-year average, maybe a little bit above. So inventories are comfortable here in the U.S. It's really the rest of the world that's having a struggle with oil inventories right now. Yeah, that being said, Denton, I think the question is, is the worst over? when we see these declines in oil? If it stays there, hopefully, what does that mean for diesel? What does it mean for gasoline? What are the other kind of risks or things to think about? Even right now, we're seeing a headline again about whether the administration would do an export ban on diesel.

20:53What impact would that have? Yeah, I mean, if there was an export ban on diesel, I think it would be short-term positive for prices in the fact that prices would come down. But over the long-term, that would have a much worse impact. If you look at Gulf Coast diesel inventories right now, they're really close to where they are on a five-year average basis. All the deficit is on the East Coast and on the West Coast when you look at inventories versus the past five years. So take it and now you continue to steamroll. So you export, you ban exports, storage, pipeline capacity. These are all finite.

21:30At some point, inventories start to build up too much. They back up into the system. Refineries have to reduce runs because they have no place to put anything. But not only do you lose diesel production after that, you'll lose gasoline production, you'll lose jet fuel production. But a lot of refineries would probably also go into maintenance. But again, short term, it would bring prices down. But over the longer term, I don't think it's going to be drastically helpful. Yeah, if there's a diesel export ban, prices will ultimately probably go higher, not lower. That said, Stuart Kaiser still with us.

22:02From an equity perspective yesterday, I thought the theme was oil down, yields down, stocks up, oil's down, markets are up a little bit but not a lot. What's the relationship between oil, bond yields, and stocks right now? I think between oil and stocks, you really need pretty extreme moves in gasoline prices and oil to get equity markets attention. Obviously, TI above$100 did that. National gasoline prices at$450 did that. But I think it's a little bit of a fool me once type situation here. We've had good headlines. The prices come down. Then we get bad headlines. the prices go up. So to me, you will get a lot of equity relief if oil prices come down, but there will be natural skepticism about how long that might be maintained for.

22:41If you look at prediction markets, you know, the Senate odds right now are 60-40 in favor of the Democrats. The numbers were 55-45 in favor of the GOP less than a month ago. So clearly the higher oil prices, higher diesel prices, the affordability narrative is really getting into politics ahead of the midterms. So in that sense, I think you might be of the view that you're going to get some more good news here, you know, pre-election. Although, like, to people's point, is it the kind of good news that has a hangover? You know, good news now problems. If they time it just right, you could get good news and then everything calms down.

23:12I mean, to quote Besant, they are the House. They might have some sense of how this is going to go. But if not, you get this, like, little pop now. You're still facing a problem, especially with heat. Isn't heating oil the same thing as diesel? I heard that you just add pink dye to one of them. I don't know if that's true. But that cost for households over the winter is still going to be a big impact. A hundred percent. And the fact is consumers don't care about all the details, right? They care about what is the price I'm paying for my diesel? What's the price I'm paying? And if you're a politician, you want to get consumer sentiment going in the right direction ahead of the election.

23:43So agree with that and the experts on the oil about how supply and demand works, et cetera. But in the near term, a consumer cares about price. Well, and so, Denton, let's talk about that, because outside of the peace talks with Iran and the U.S., And we hope that this really this time we mean it amounts to something because we're going on month seven, by the way, of the conflict slash war. Saudis quietly at four month high on exports. Yes, part of their pipeline got blown up. They're exporting more by ship. How confident are you right now in global supply demand fundamentals? Yeah, so I think things are relatively balanced or getting more balanced, at least on the side of things.

24:21Again, really for much of the last three months, this has not been a crude oil story as much as it has been a refined product story and refined product shortages in different pockets throughout the world. But let's say everything tries to get back to normal over the next couple of days and there's a peace agreement or, as the president said, not until after the midterm. So let's say let's go there and say, yes, there's a peace agreement. the straight reopens, it's going to take some time for ships to reposition, for production to get back up to the levels they once were. How much time? How long do you think, Denton?

24:55Three months? Three weeks? Three years? We think about 18 weeks. 18 weeks? So that brings us squarely into the first quarter of next year. Wow. 18 weeks. That is a long time. Yeah, four and a half, five months. Denton, really appreciate. By the way, not as long as you had to wait at Newark Airport yesterday. I'm kidding, but I am glad that you made it out as much as you did. You're caught up in all that nonsense, Denton. Thank you very much. Actually, Brian, I'm home right now. But after this, I get to go back to the airport and pick up my suitcase. So I got that going for me. So you didn't get out?

25:31No. You just gave up? Yeah, I gave up. By the way, it was nine and a half hours between flights. Not a bad call on your part, Denton, but you're a smart guy. We know that. Thank you very much. Stuart Kaiser, thank you. Thank you. All right, don't forget to sign up for our weekly newsletter, Power Insider. The latest edition is just out, by the way. Number one trending story on cbc.com right now, because I think, Kelly, I say the three worst words anyone on Wall Street or maybe the media can say. You know what those three words are? It looks like you say, we don't know. We don't know. Nobody on this end of the camera or on Wall Street wants to say that.

26:11But JP Morgan said that. And I think others will admit that. We'll talk more about that. Talk about some stocks they do like as well. You could scan that QR code, go to the website, call your mom, whatever it needs to do, please sign up. I think there's a serious potential in here. Things we don't know. That would be a long series. Although we're on TV, we could just pretend we do know. I'm just saying, if it's that popular. We'll say it like we know it, but we don't. I'll be like, yeah, that's exactly right. I don't even know. Bitcoin. speaking of things we don't know, is up double digits over the past week.

26:44Despite the Clarity Act's collapse in Congress, what could they do to keep the crypto rally running? They haven't needed much help. We'll talk about that next.

26:59If you like YouTube, you'll love YouTube Premium. It's destroying athlete, creator, and YouTube Maxer. YouTube Premium enhances how I use YouTube with awesome features like offline downloads so I can download my favorite training videos before I hit the gym. So no Wi-Fi doesn't turn leg day into loading day. Plus, I get ad-free videos, background play, and so much more. YouTube Premium, it's like YouTube got some extra gains. Try YouTube Premium for two months free at youtube.com slash premium. Trial eligibility varies. Terms apply. Cancel any time. Weren't agents supposed to take things off your plate?

27:33Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. Introducing Fidelity Trader Plus. With customizable tools and charts you can access across all your devices. Try our most powerful trading platform yet at fidelity.com slash trader plus.

28:08Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC. Member NYSE SIPC.

28:18Is the crypto winter officially over, even as we're heading into winter, kind of, first day of fall? That's the big question right now as Bitcoin, Ether and the rest of the complex have surged in the last several sessions in spite of the Senate blocking the Clarity Act from advancing last week. So what explains the pop? You could say a string of other bullish crypto headlines that have been coming out. Most consequentially, the SEC issuing a temporary exemption that will allow limited trading of tokenized stocks in the U.S. You can see how crypto, Ether, Robinhood and Coinbase have moved since that decision last Thursday.

28:48Here on set with us is Neoclassic Capital's co-founder and managing partner, Michael Buccella. Buccella. Anyway, it's a running joke. It is great to have you here. And we're not I'm not trying to conflate clarity with Bitcoin. The Bitcoiners told us it mattered, even though there's not really a one to one obvious relationship there. So just talk about what you think is driving the action in crypto lately. Sure. So I've been I've been trying to indicate that it doesn't matter nearly as much as I think the market wanted it to matter. It's something to point to. It's something to say Congress and the broader government are coming around to understanding our industry.

29:22But the last two times I was on, I said we can still pursue our industry without without government intervention. And I think it's been interesting to see Bitcoin was resilient in the face of that last week and then also kind of flipped and turned sort of market correlated this week, where you had a billion dollars of inflows into the Bitcoin ETF yesterday. Yes. And so we see a resiliency and then a participation on the upside. So bad news is good news. Good news is good news. We're in a good place for crypto. My Bitcoin friends, and I have many of them, are all excited about the inflows, a billion.

29:51It's a nice round number. It's a nice, but I'm like a billion dollars. We need a lot more. But if that's what it takes to move it that much, then OK, then you can really get a pop. I just OK, you go back a couple of a couple of years. You have President Trump's election, goes over 100, goes to all-time highs. He's at the Bitcoin conference. All this excitement. Everything has come to pass. So do we go back to fundamentals with Bitcoin? How would you even explain those? What else could be drivers here? So not everything has come to pass. And a lot of things came to pass that we didn't want to come to pass.

30:23Really? Yeah. I mean, so, you know, a lot of there's been a lot of things that happened in the crypto markets that, you know, are a bit of a blemish. But there's been a handful of things that have worked really well, but we're still progressing. So a lot of the market still continues to develop offshore. I mean, I think a lot of the inhibitions of both sides of the house to come together forces development offshore. We see enormous volumes inflect there. And then the U.S. says we want a piece of that. So then we start, you know, educating our regulators. We've only got a handful of pieces of the market that are proliferating offshore to come on shore to date.

30:53And you have every platform like Robinhood, Coinbase, Twitter, X. any consumer retail platform in the U.S. wants a piece of perps. They want a piece of prediction markets. I was happy to hear my old colleague Stu Kaiser reference a prediction market because, you know, it's good to hear that I'm mainstream these days, although there's obviously speculation around volumes there. But I would just say, generally speaking, we've gotten, you know, a handful of things that have been useful waiting for a lot more. What's the biggest risk to crypto and Bitcoin right now? There's a lot of political pushback, too.

31:26Like political pushback was a lot on Bitcoin. Now it's on data centers, but they're kind of the same thing. It's the same people in Congress, by the way. Yeah, I would say the biggest risk to so Bitcoin and everything else, I kind of separate the two. I think you have technological innovation and financial market innovation that's driving certain altcoins that have that are generating real value, real revenue. You have, you know, platforms like Hyperliquid that are generating enormous revenue. You have lending platforms like Morpho. So you have these. But you also have a lot of garbage out there.

31:57But you also have a lot of garbage out there. And you also have, I would say, you know, network effects around assets that don't necessarily generate revenue, but provide a use. So, you know, there's been a lot of talk around Zcash. And whether it's fair value, overvalued, undervalued, I'm not going to, you know, pontificate on that. But I will say there is a large and growing network of people who view privacy as a very valuable asset. And so that represents privacy in a way. I think the macro obviously indicates where general risk assets go. Crypto is still risk assets. I think if we can allow innovation to work in crypto, the altcoins can work as well.

32:33I'm just trying to listen to kind of the philosophical explanation for these. Because Zcash, if it's private enough, they're probably going to end up outlawing it or putting some guardrails around that. I mean, some of the others, like Bitcoin, it still feels like it's just an adoption story. Are there literally more buyers than sellers on any given day? Is there any other way to explain its value and where it should trade? I'll give an analogy. I was in Switzerland a few weeks ago, two friends sitting there saying, the U.S. is$40 trillion in debt. How do we get out of this? And I said, it's really difficult to think of a way out.

33:03And so he said, well, we just long U.S.-denominated assets, you know, scarce assets, gold. I said, the Swiss trade is great. The franc is strong. Gold is strong. Bitcoin is strong. And so if you think about this future state where, you know, fiat currencies are dying, Bitcoin seems like a resilient asset. And the other side of it is as we develop more regulatory approvals onshore here in the U.S., it becomes a more static asset where you can borrow against it, more financeable. So Coinbase just announced fixed rate loans against Bitcoin. So the more financeable we can make it, the less people have to sell it to monetize it.

33:37Yeah, I take your point. But you could also own U.S. stocks. You could own U.S. real estate. Like you said, you could own other U.S. assets that might have a clearer value point in the long run. Bitcoin is still new. I mean, it may yet find a landing point. But it's kind of a bet about two things. Yes, a bet about debasement to some extent, but also a bet that it has intrinsic value and that it will hold it. There's other ways to express the debasement trade. Yeah, correct. And by all means, express it however way you feel. I think Bitcoin is probably the best expression of that. and all those other assets can be tokenized and be mobilized collateral at some point in the future if we allow tokenization to continue.

34:12I think we're going down that path. So we'll see you back soon. Michael, thanks so much. Really appreciate it. Michael Bucella of Neoclassic Capital. All right. We've got a power check on a pharmaceutical stock that is surging today. This is a hint. The company could give Eli Lilly a run for its money in the weight loss drug market. What is that mystery chart? We'll tell you after the break.

34:41Take a look at shares of Viking Therapeutics. The stock is roaring higher today after reporting positive data for its GLP-1 weight loss drug. It's up 31 percent. This could compete with Eli Lilly's ZepBound. But Invermed Associates chairman and Home Depot co-founder Ken Langone is still a believer in Lilly. He joined Squawk Box this morning with a bold take on those shares, with a prediction implying 70 percent upside in the years ahead. Best is yet to come. I think I shouldn't tout it. I think Lilly is going to be a two thousand dollar stock in the next three or four years. Well, our next guest is also all in on Lilly.

35:21It's one of his firm's top three holdings. Tom Hulick is strategy asset manager, CEO, and he's here on set with us. Tom, it's great to have you. Thank you for having me. You know, what I just love is someone like Ken Langone giving such a big prediction about Lilly. But in general, at a time when AI is sending stocks up, you know, 30, 50 percent, it feels like every few weeks, you go, only a double? I mean, in some ways, that was my reaction to it, even as big of a call as he's making, because that would be, what, a$2 trillion company at this point? It's a big call, but the GLP sector has a lot of room to grow.

35:51And if you think about Lilly and Viking. Pun intended. Right. Right. If anybody can reduce their weight by 40 percent and get healthier, there's a lot of hope out there. When you have Lilly or Viking, for example, we don't cover Viking, but one of our best stock picks this year was Lilly. And it could be a multi-trillion dollar company. It could be. But at the same time, we're also talking every day on this program about GLP-1 is already kind of fading into the rearview mirror for some. Look at Novo's struggles. So how do we know that this is going to still be a growth driver and not something that we just endlessly talk about for a few years of how are they going to replace its growth?

36:32Well, in pharma and biotech, phase one safety of delivery vaccines slash, let's say, a injection. But now we're moving into the next generation of orals, the pill. Right. And so as Dave Rick said from the call yesterday on CNBC, he said that, look, we're building a six and a half billion dollar manufacturing facility that's going to start to develop our pill form of the GLP drug. Pills are easier to take than a shot. It's the next level. It's still being very effective and there's still a lot of people who are obese. And then the next generation people are starting to see reduced inflammation.

37:13organization and what's next. Maybe it's going to help you with your heart. Lots of great things going there, and it could be one of the best stock picks that we've had. Johnson & Johnson is also in your top 10 holdings. Yes. Totally different story. What's attractive about J &J? Well, I think the pharma industry is not talked about enough. And if you take a look at what the future looks like in pharma and biotech, there are a lot of patent cliffs that are happening. There are lots of new generation drugs that are happening, let's just say in cancer or heart or brain areas, GLP. These companies have to find next generation drugs to fill up their pipeline.

37:58J &J, for that matter, is going to be big in, let's just say, neurological and also in cancer. But then you've got other companies like a Merck or somebody else who, a Roche or an Amgen, who are going to be fast followers in this area. We're going to see a biotech and a pharma boom in the next decade because there's so many improvements that can be made. And look at some of these stocks. I mean, that's certainly exciting. Have you used Muse yet? I downloaded it today. You did? And I'm impressed. We use a lot of Claude and Anthropoc Claude and we use ChatGPT. But I actually downloaded muse over.

38:39You've got to see what all the fuss is about. Right. And it can schedule my calendar, or it could coordinate my calendars. It could actually potentially schedule a trip for me. It could make payments. Would you give it access to all of that, though? I'm going to give it access to my calendars because I have a problem with calendar functioning right now. But why not? These are AI agents. It's the consumer way to play the AI generation stack in that ecosystem. And I think Meta has something to improve on. You have Broadcom, Alphabet, Cisco, Microsoft, Apple, all in your top 10, along with a few others outside of tech.

39:12But how does this, which is kind of like open claw for the consumer now, it's a real consumer app, apparently with some faster adoption than ChatGPT first had back in the day. How does it really change the investing landscape if it remains a phenomenon? Well, if you look at the ecosystem, we don't need to talk about all the tech stocks that are contributing to the NVIDIAs, etc. But when you go down and you look at something like Meta, the next generation AI agents are becoming more personal assistants for people. I think that there is a lot of room to grow in that area. We've graduated from the adoption from Claude or for ChatGPT to Claude and now maybe Muse.

39:53And it's just like the it's a commodity. It'll be a commodity for people and what you best use it for. Is it a utility or commodity? because I want to invest in the former and not the latter. Well, I think that what you have is a revenue-generating consumer feature that will drive earnings for Meta going forward. All right. There's the stock at 740 today, fractionally lower, but up 35 % in a month. Tom, thanks so much. Good to see you. Thank you very much. Tom Hulick, Strategy Managers. All right. Let's get over to Mackenzie Cigalos with a CNBC News update. Brian, the Trump administration said today that last month it canceled 315 ,000 Obamacare health plans covering about 760 ,000 people.

40:35Vice President J.D. Vance announced the move, which is part of a White House task force targeting fraud. He says it will save the government$2.2 billion. Vance says the enrollees did not meet eligibility requirements and that some may not even exist. Xbox is laying off another 268 workers just months after more than 1 ,600 employees were let go in July. In an internal memo shared today by the Microsoft Gaming Division, these cuts bring Xbox three-quarters of the way through its restructuring, which will see 3 ,200 roles eliminated by next summer. And country star Ella Langley just broke Mariah Carey's record for the most weeks spent by a single at number one on the Billboard Hot 100 chart.

41:17Her hit Choose in Texas has spent 23 weeks at number one, carries all I want for Christmas, previously held the title and could recapture it during this upcoming holiday season when it usually shoots back up to the top of the charts. Kelly, back to you. Interesting stuff, Mackenzie. Thanks. AMD hitting another record high a day after topping the trillion dollar market cap. Our market navigator on using options to play for more upside. That's next.

41:54Welcome back to Power Lunch. Time now for our Market Navigator segment. Advanced Micro Devices is on a roll. The company's moving higher for a sixth straight day. Those shares are up more than 20 percent in just the last week. The company topped the one trillion dollar mark for market cap for the first time ever on Monday. And our next guest thinks it won't stop there. Joining Joining us now for the options play is chief strategist and CNBC contributor Tony Zhang. Tony, thank you very much for joining us here with options play and everything else. Let's talk a little bit about AMD, the momentum to the upside, and how you use options to risk manage around an upside position.

42:30Yeah, Dom, thank you so much. We had that breakout yesterday above that 550 level. The stock's been range bounded between 450, 550 since May. broke out yesterday on the news that they were lifting prices about 10 % across all of their product range, AI chips, graphics cards, chipsets. And this is all on the back of incredible demand for their CPU and GPU server racks. So the way we want to play with this, especially when we break out to a new all-time high and looking for further upside, is to use options to play for that upside with limited risk. So I'm going out to the November expiration. I'm looking at buying the $600,$750 call spread.

43:09Earlier today, you can pay a little over$48 for that call spread, which only equates to about 7 % of the stock's value. You essentially get upside exposure to AMD all the way up to$750 through November expiration. But if, let's say, this stock does decline back into the trading range, maybe it pulls back. If we do see some softness with the market, you're only risking 7 % of the stock's values to do so. So that's the type of structure that I really like when you get a breakout to new all-time highs and you're in uncharted territory and you still want upside exposure and you want to chase that momentum with limited risks of the downside.

43:48So this is all about wanting to be a little less bullish than outright, because if you're really bullish, you would just pay outright to own the 600 call. You're trying to cheapen it by selling away the 750 upside from there. What exactly does that mean in terms of what your view is on AMD? Yeah, so keep in mind that we have a November expiration on this. And my view is that 750 is a more than reasonable price target here by November, which is we're talking about a little under two months away. And that substantially cheapens the cost of buying this call option to the upside. So instead of risking more than 10 % of the stock's value here, I'm reducing my overall risk to less than 8%.

44:29And that has a pretty significant impact on both how much capital is required to get into this particular trade, and more importantly, the amount of the risk of the return on investment if this stock does continue to run. Basically, what I'm saying is that from the options market perspective, we see a relatively small percentage possibility of the stock being above 750 by November. So instead of paying for that upside, essentially taking the premium by selling that 750. And that increases our rate of return if we are correct on this move to the upside. All right. There's Tony Zhang with the option play on events.

45:06My good advice is thank you very much for that. We appreciate it. Keep it right here. We got more Power Lunch coming up right after this break. We'll be right back.

45:28Before we go, a quick programming note. Qualcomm CEO Cristiano Amon will join us tomorrow live from their Snapdragon Summit, where they're expected to talk about the next generation flagship mobile platform. By the stock, I mean, with some of the levitation we've seen throughout the chip space lately, it's actually having a pretty nice moment. And we're going to end with an RBI, and it's a little bit lighter, because today we're getting bearish. No, not on the market, but we're getting bearish because there's bears. It is Fat Bear Week, and that's exactly what it sounds like. Each year, the public votes for their favorite brown bear at Alaska's Katmai National Park.

46:05Some of those bears may be on your screen right now, hopefully running next to us. But that's a live look at a bear hunting salmon. I literally thought Fat Bear Week was a market piece of trivia. No, that bear right now, he's looking for a picnic basket. If you're listening on the radio, folks, we just saw pictures of fat grizzly bears. Thanks for watching. Closing bell starts now. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S.

46:42and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast or find Schwab Market Update wherever you get your podcasts.