Anthropic’s Public IPO Filing, Big Tech on Deck, and Down the (AI)sle 10/26/26

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. at Jared Jewelers we know it's about more than fine jewelry it's the moment they open the box that smile they can't hide knowing you chose exactly right because the right gift can bring a lifetime of meaning a promise, a milestone, a memory in the making make every moment unforgettable find great gifts starting at$250 Jared, make the holiday last forever shop Jared Jewelers You're listening to The Exchange.

1:01Here's today's show.

1:05Thank you, Scott. Anthropic, the maker of Claude Code. I don't know if you've heard, but they formerly registered to go public. That excitement is sending tech stocks higher today. I'm Kelly Evans, and welcome to The Exchange. The semis and the chip equipment names are seeing some of the strongest gains. They moderated a little, but look at NXP still up 5%. percent. Micron, Broadcom, NVIDIA, all higher. We won't get Anthropics official pricing for the IPO until it's amended filing closer to the actual date. But it's still pacing to possibly eclipse SpaceX as the largest IPO of all time. Speaking of SpaceX, Elon Musk said over the weekend that he sees a guppy style extinction event coming for the neoclouds and that 200 or so could fail.

1:46The names are down earlier, but they've made a comeback this afternoon. Take a look at this chart. CoreWeave, Nebius, and IREN are all higher after initially selling off. 12 % swing for CoreWeave today from the session lows. SpaceX also separately closing a$40 billion debt deal to buy NVIDIA chips. Meta is working on a$95 billion equity raise today. Meta, by the way, is around the flatline. NVIDIA might be part of that deal along with AMD and Broadcom. They're all interested in buying shares. And this comes as Amazon's Andy Jassy says their 2026 cloud capacity is sold out. Next year is mostly so, and they already have meaningful commitments for 2028.

2:24So with all of that said, let's start with the name at the center of it all today. Anthropic, of course. Kate Rooney has more detail from their IPO filing. Kate, I'd say what jumped out to me just in the first couple pages is their emphasis on scale. And they talk about, you know, this paper they wrote in 2020 about how scale is the most important. The scaling laws of AI are rival or will surpass what we see with Moore's Law for Semiconductors. And to lead with a statement about how important scale is explains to me why all of these AI infrastructure names might be excited about that today. Yeah, they are arguing that the more they spend, the more that it also translates into revenue.

3:04And we have been unpacking this S1 all day, Kelly. It could, as you mentioned, be the biggest IPO in history and definitely one of the most complex from a governance standpoint. The S1, as I mentioned, dropped this morning. It showed breakneck revenue growth. we saw lines about massive compute commitments and almost 100 pages of risk factors. Anthropic does plan to plow most of the cash it's raising back into CapEx. So that's compute, that's infrastructure. It also outlined compute commitments, at least$270 billion among just a handful of names, Amazon, Microsoft, and Alphabet in the coming years.

3:37Costs for this company were more than half of the size of revenue, at least in the first half of this year. Revenue grew more than 1 ,000 percent. It was closer to 1 ,300 percent from a year ago. Losses were about 700 million, but those narrowed from almost 2 billion in losses just last year. Anthropic was profitable, at least on an adjusted basis. And then total in that losses for the first half, 81 billion. But the vast majority of that, Kelly, was due to accounting around convertible debt. Over to governance that I mentioned. Anthropic's founders are set to keep majority voting power through a single special share.

4:12It is called a Class F share. It's going to be owned by the seven co-founders, carries 50.1 percent of the vote. Anthropic does have five different voting classes. There is a Class T for its long-term benefit trust. That group makes decisions, helps elect board members. So that's extremely unique. And then the risk factors. It includes political backlash. They talk about the model risk, things like self-preserving behavior. They say there have been attempts to resist shutdown, conceal or manipulate information in terms of model behavior. examples where the tech has acted coercive, deceptive or manipulative.

4:46Customer concentration, Kelly, also a risk. There's two customers that accounted for nearly a quarter of revenue just last year. And then finally, open source. We've talked a lot about this. These are some of the models out of China. They cost a lot less. That could add pricing pressure on Anthropics AI offerings going forward. Yeah, I'm just going back to kind of these opening paragraphs when you sort of think about, well, we've known this is coming. So why would, you know, infrastructure, AI infrastructure names even react, you know. But when they just lead off this strongly and they say, you know, it's Anthropik's thesis that the exponential incognition is likely to continue, eventually reaching the level of what we have called a country of geniuses in a data center.

5:27But yeah, they just talk about the predictions made on the basis of scaling laws have proved true time and again. Analogous to Moore's law for chips, where compute power doubled every 12 to 18 months for several decades. They say, we believe the impact of an exponential in machine cognition will be vastly greater than even that of the exponential in computer ships. I mean, this is the way they're leading off this entire thing, which is really saying something. It's a great point. And starting with this almost philosophical view, I think is very anthropic from a personality standpoint. But it also speaks to some of the bullishness around infrastructure that you talked about.

6:05The other thing I would point out, and we were sort of, Leslie Picker and I were control F looking for the numbers. I'm glad you got to some of the meat of just how they led this off and the personality side of it. But they talked about sort of revenue efficiency. I mean, this company from operating standpoint has just gotten much more efficient. And they argue here that the dollars that they're spending in compute have gotten more efficient. They've been able to get more profitable and disciplined. I think that's one thing that investors looking at this S1 are quite bullish about. I've been talking to some of the VCs today who are in this name, and that's one thing that they are honing in on margins, first of all, above 80 percent.

6:42So any tech investors looking at that saying, wow. But I think the question going forward is, can they maintain that? And there is some evidence in here to show that if they can keep spending but also being efficient, that's what investors are going to be looking for and dissecting as we get more information, as you mentioned. And this is sort of the first draft of the S-1. We'll get more going forward as we get closer to that listing date. And they are trying to tie this back to how valuable the company can be, which is what we're all trying to figure out, right? But they say... No TAM, though, interestingly.

7:12Oh, forget TAM. Total addressable market. I'm over TAM. That was one that we... I'm TAM-ed out. They say this describes how increasing compute data, model size, and training environments in combination can produce a rapid increase in AI's general cognitive capabilities and, in turn, its economic value. So if that's true, there is still a lot of upside, no matter the size of this. But we'll debate that with our next guest. Kate, thanks for now. Appreciate it. Kate Rooney there. Here to discuss and react to this looming mega IPO are RedPoint's Erika Brescia and Axios' Dan Primmick. It's great to have you both here.

7:42Dan, I'll just lead off with you. What else jumps out to you about this filing? Do we know? I mean, reportedly they could raise up to$100 billion. I think SpaceX was$75. So they're looking to raise a ton of money. kind of emphasizing, as I was drawing out there, the reason why so much capital might be both useful to the firm and might still generate a return for a company that could be$2 trillion at the IPO. Yeah, it's interesting. This is one of those S1s. Obviously, whenever we look back at numbers, that's not necessarily precedent for what's going to come forward. But I think Anthropics kind of saying, hey, we've shown you the last six months, kind of forget about that.

8:16We're about to spend an enormous amount on compute. You public markets are going to help us finance that, even though they have over$100 billion of cash on hand. And it's just a completely different paradigm going forward. As you say, they're looking for scale. They're going to spend an absolute fortune on compute. That's what's going to bring them here. And I will say the one thing that's not in here is Q3 numbers. I know they've been leaked. I expect that'll probably be in an amended S1 in the next few weeks. Do you have a date? Do you think, Dan, is the most likely that we're going to see this IPO at this point?

8:45I think it's the week before Thanksgiving is late this year. I think it's the week, the week, whatever the first full week is before then. I don't know if that's the week of the 16th or something like that. I think that's probably when we see it. That's at least when they could go out. Do they wait a few days? It's possible. That kind of follows the SpaceX calendar. Right. A feast for the markets, I was going to say, kind of before the holiday feast. Erica, what are your thoughts and reactions to what we've learned here about Anthropic today? Look, it's an absolutely blockbuster business. I think the positive trend in profitability is extremely impressive.

9:18especially given how early it is in this AI transformation that we're in the middle of, right? I mean, this is going to be the most dramatic transformation of how organizations in the world around us operates of our lifetimes. And I think it's really easy to lose sight of how early it is. And to see a business like Anthropic doing this well this early on in the journey is incredibly impressive. We're seeing, like I said, increase in profitability. We are seeing a spread in the number of very significant customers that I think will continue to grow. Distillation doesn't seem to be a huge issue.

9:58Everybody talks about open source and open weight models. And yes, those are coming. We're going to see a lot of SLMs in the enterprise over time as we learn how to get the most out of AI. But there's still just astronomical opportunity ahead for Anthropic. And I think this is a really exciting opportunity for retail investors to get a piece and to get to participate in this transformation outside of buying chip stocks. I was listening to an interview that Dan Loeb gave earlier this summer, Erica, and he talked about how he thought the three most important companies for this kind of logarithmic phase of AI adoption and growth that we're entering.

10:37So, again, he and many don't believe the strongest growth is behind us. It could potentially be in front of us. But he said he thought the three most important companies for that were Anthropic, NVIDIA and kind of the Elon Musk empire companies. Kind of without saying whether you literally specifically agree with that. Do you think that captures the moment that we're in? I think it does. I mean, I'm surprised to not hear open AI on that list. It's still a very formidable beast in and of itself and, you know, more focused on the consumer adoption of AI, whereas I think of Anthropic as more focused on the enterprise adoption.

11:13But I think that absolutely captures the moment. And I very much agree that most of the growth is ahead of us, not behind us here. That, Erica, just kind of finally on that point. I mean, there's been a lot of talk in SpaceX and now that, and I'm sure these narratives are going to ramp up into the IPO. A lot of smart people are going to say that this is kind of being dumped on retail, right? They're going to point to the numbers and say the valuation doesn't make any sense. But what would you say in response to that as to why you think people could buy on the IPO? Forget if you can't get in it.

11:47You know, I'm just talking about at the open and still have, you know, the opportunity to double or triple or maybe more your money if you hold it for a while. Well, I personally don't love buying anything on the actual day of an IPO. You know, we see these pops all of the time and then things come back down to reality. But I think this is a fantastic long term hold. look, again, the world around us is going to change. This is an opportunity to take part in the financial upside of that change, regardless of, you know, your vocation. And so I think just like I bought SpaceX for my son, I think Anthropic is a great long-term buy and will give people an opportunity to participate in what's to come.

12:29I hear about, Dan, lots of grandparents who bought SpaceX for their grandkids. I don't know if Anthropic, because it's more of an enterprise tool will necessarily engender the same kind of thing. And the company, admittedly, has had some of the worst press of any of the AI companies. I don't know if that can ever change. I mean, their whole filing talks about how their corporate culture is intentional. It is different. They're kind of like, we know we're weird, but we're going to stay weird. That said, investors, there are a lot of big, smart investors who think this company is one of the most important companies for this whole AI thing.

13:03Look at what Claude has done to completely revel. They're the reason we even talk about agentic AI, right? You know, open Claude and then Claude and now off to Muse and these other tools. So I'm just curious if you think they can overcome kind of the bad PR that they've had for a while coming into this. Well, some of which comes from themselves. I mean, they even acknowledge in this filing that this isn't just outside critics or former employees. This is coming often from inside the house when they talk about, you know, the existential threat to humanity, which, by the way, is my favorite part of this entire S1.

13:32Not that that was in there. We kind of expected it. But then it's followed by which could impact our financial performance. It goes from this crazy thing, the very boilerplate financial, like it's a plumbing supplies company all of a sudden. Look, I think, can it overcome it? I think Anthropic deciding to flip its S1 now and go now at least reflects that they're very confident that they can. Remember, it would have been very easy for them to push this into 27 like OpenAI did. It would have been very easy for them to push and say, well, you know what? There's lots of political uncertainty because the midterms are in a week.

14:01We don't want to file and then price after that, not knowing what's going to happen. They're kind of saying, damn, the torpedoes. We in part because, you know, they have this huge compute build out and they need the cash. But they're saying we believe in what we're doing. We believe in the business. We're going forward either way. And they do believe they can overcome the PR piece. All right. Dan and Erica, really appreciate it today. Thank you, Dan Primack and Erica Brescia there. And so let's move on and ask that bigger question once again. Should investors snap up shares of Anthropic when it goes public?

14:29maybe in a couple of weeks. Let's ask Denny Fish now. He's the portfolio manager of the Janice Henderson Global Technology and Innovation Fund, four-star Morningstar Fund, by the way, up 20 % this year. Denny, it's great to have you here. What do you think? On Anthropic? Sure. On whether investors should buy it at the IPO. Well, we don't know what it's going to price at, you know, number one. So we need to understand in that first. But I think going back to what your previous guest talked about, I mean, this is a generational moment. And, you know, we'll look back in a decade, and this was the biggest paradigm shift in technology that will shape our lives like nothing else has.

15:10And so, you know, the devil comes down to the details, and we still don't have all the details yet other than the S1. And we'll see where price is at. Where else does that have you investing with such conviction and confidence right now? Yeah. So I think if there's one thing that you can take out of Anthropik's message, that is that it's compute multiplier, meaning the efficiency that they're getting out of each unit of compute continues to get better. And as a result, we continue to see scaling laws continuing to grow in an exponential fashion. And as a result, as far as the eye can see we're going to continue to need more compute.

15:49And there will be lots of ways to continue to drive value throughout this cycle. But if that holds true for the next three to five years, which we expect that to continue, then you can actually feel comfortable in a lot of areas of the market, like semi-cap equipment or foundry, because none of this gets done without these businesses. And those businesses are monopolies, oligopolies, or duopolies with great unit economics that will, they're cyclical growth companies, and they're in the most powerful cycle that we've ever seen for their industries. And so I think those are really interesting areas because they're just great businesses that benefit regardless of who wins.

16:32Would you include memory in there along with Semicap and Foundry? Yeah. So here's the difference and here's the nuance. You know, Semicap and Foundry, if you look at their business models, they're very, very close partners with their end users. It's a very tight ecosystem. And as a result, they take price in a responsible way. And so this isn't to say that memory is not going to be a good space for the next three to five years. It very well could be with long-term supply agreements and where pricing's come. But remember, so much of the earnings growth has been from pricing. And at some point, pricing will revert with supply.

17:09just to question when that happens and what the cushion from the LTSAs are. So I think like on a three to five basis, three to five year basis, in terms of modeling out semi-cap and modeling out foundry, you probably have a narrower range of outcomes than you do with memory, for example. And in other words, you're saying the semi-cap and foundry names are because they're kind of more partners with their customers. They're not going to overly drive up price. And maybe the others who do so leave themselves a little bit more vulnerable to that, to that bad taste. You do say that while you don't think AI is a bubble, you think we have entered the phase where balance sheets and return on investment separate the winners from the losers.

17:48So we've talked a little bit about kind of differentiating that out. Would you put neocloud business models as the losers? Does it just depend? How else and where else does this apply? Yeah. So you hit it on the head. It just depends. The problem is all neoclouds kind of get lumped into this bucket of neoclouds. And every neocloud is different. You have neoclouds that are completely vertically integrated, that have cost advantages. Like, for example, SpaceX's recent earnings call, if you look at the XAI business there, and what they're doing and their cost per gigawatt relative to everyone else in the industry, it's just a lot better, if you believe what they're saying.

18:27And I tend to believe Elon. But then you look across the entire kind of scope of neoclouds, you have neoclouds that are trying to come to market and, you know, 95 % of the execution is on the come. That's a lot more uncertain. That's harder. You have companies that are completely vertically integrated. They're probably in a better spot than companies that aren't vertically integrated or can't benefit from spot pricing like XAI is. So I think you got to look at each one individually. Some of them have amazing unit economics and have nuances to their businesses that just make them better than the others.

19:02Sure. NVIDIA is your top position. I'm sorry, Taiwan Semi and NVIDIA are both about 14 percent of the portfolio. Then you have Microsoft, Apple, Lam Research, ASML, Micron, AMD, Samsung Electronics and Broadcom. Anything in the software world or anywhere else that you like enough that it might, you know, one day rival the positions at the top of the fund? Yeah, I mean, that could always be the case. I mean, if you look through our fund, you'll see that we've placed bets in the infrastructure layer that we think benefit from the ongoing build out of AI. And then as we have just a heck of a lot more inference.

19:36And so, for example, you'll see Snowflake in the portfolio, Datadog, and they both benefit. You know, Snowflake is a data platform, kind of like Databricks, who's a private company right now. And then Datadog, for example, that actually benefits from observability as inference continues to grow. All right, Denny, great to have you here today. Thanks. I'd love to bring you back when we get that IPO pricing for Anthropic and see what you make of it. Sure thing. Denny Fish from Janice Henderson. We've got a market flash on shares of Dollar General, which are at session lows right now, after the FTC and 20 states are suing the store for charging more than advertised.

20:11The suit alleges that for years, Dollar General repeatedly mislabeled prices and overcharged consumers. They claim the company failed to correct the issues despite extensive knowledge of the problem, and the shares are down about 2.4 percent. Coming up, it's Big Spenders Week. We'll hear from Alphabet, Microsoft, and Amazon about their CapEx plans and their earnings reports, along with a third of the Dow and the S &P 500 also reporting, by the way. We'll tell you what investors want to hear next. And complaints about the new foldable iPhone are starting to make headlines. Are they serious enough to dent Apple's stock performance?

20:45The exchange is back after this.

20:50This is The Exchange on CNBC.

21:17finished. 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. 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. 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 market update podcast, or find Schwab Market Update wherever you get your podcasts.

21:59At Jared Jewelers, we know it's about more than fine jewelry. It's the moment they open the box, that smile they can't hide, knowing you chose exactly right. Because the right gift can bring a lifetime of meaning, a promise, a milestone, a memory in the making. Make every moment unforgettable. Find great gifts starting at$250. Jared, make the holiday last forever. Shop Jared Jewelers.

22:30Welcome back. Three of the companies specifically called out an Anthropics IPO are reporting earnings this week, I should say, and what will be a daily test of the AI trade. Anthropics filing today shows they've committed around$260 billion in cloud spend across the three giants, Amazon, Microsoft, and Alphabet, over the next seven to 10 years. Here for our earnings exchange today is Victoria Green. She's the CIO at G-Squared Private Wealth and a CNBC contributor. It's great to see you again. Thanks, Kelly. Let's start with Microsoft. And by the way, there's a reason for that, because just in the past hour, we've learned the company is offering voluntary, voluntary buyouts to 60 ,000 people.

23:10By some accounts, this is more than a quarter of its workforce in an effort to cut costs. Now, interestingly enough, and this surprised me, the stock has still been outperforming Amazon, Alphabet, and Meta this year. It's up about 9%. Of course, we'll be watching CapEx. Piper Sandler says they'll also be watching Azure supply and demand. Cantor Fitzgerald is keeping tabs on co-pilot revenue. What do you do with this one? I love this stock here. I think Microsoft is a very quality play here, and it's beyond just Azure and what's happening on the cloud side. That's a huge thing, right? The Azure number, you got to hit it.

23:40You want to beat the whisper number at least 46 % growth. 45 is kind of the print. We want to see that 47 % growth. To me, it's underappreciated for Copilot. Copilot has 30 million paid seats right now, and if they're going from E5 to E7, that's$60 ahead to$99 ahead. We're anticipating that should be like 60, 70 million. As all of these AI risks continue to amount, people want Microsoft running their AI. I think they're the safe port in a storm here in AI because they're not just AI. They're also what's happening on O365. They're diversified. They're quality. They're still printing free cash flow.

24:13They're not necessarily in debt. I think the CapEx number is going to be huge. No way they're not letting people off without raising CapEx. Quick, just follow up to that. The shares are only up 1 % today after, again, these would be huge layoffs, like not layoffs. This would be a huge downsizing of the company. Would you expect a bigger reaction for one way or the other for this kind of announcement? I think there's too much, so much happening right now. I think people say, let me wait and see what the earnings have to say. There has to be a reason behind these layoffs and the desire to reduce this amount of staffing means likely the CapEx number is big.

24:43So it's a good, it's a punch, counterpunch for Microsoft today because on one hand, yes, it's great to be slimmed down. It's great to reduce overhead and costs. On the other, it's very, very likely they're about to be spending tens of billions of dollars more on the AI side. You know, fascinating, again, because people will take that narrative and run with it. You know, here's a company doing big, let's not call them layoffs, so that they can invest in AI. It's streamlining, Kelly. It's streamlining. Next up is Amazon. DA Davidson sees an anthropic tailwind here for Amazon Web Services. They think the consumer is resilient.

25:15That should support the retail business. Although Gil Luria, their analyst, warns that the company's insular approach to agentic AI to AI shopping, you know, could cause it to lose market share. Curious what you think of Amazon into the quarter. I like Amazon. Of the three, they're my least favorite. They're kind of more of a hold for me just because, one, they could have a messy quarter because Prime Day got put in Q2, not Q3. So you could see a little bit there on the consumer side. Two, by trying to protect their infrastructure, as you pointed out, they may be missing out on generated AI searches that could be driving more and more towards Amazon.

25:46And then three, they have more competition. Look, you know, Walmart's not sleeping on this at all. And I kind of see Amazon as this hybrid almost between like a Google and a Walmart. And they're great. We expect AWS to grow. The question is, what is the trajectory of that growth? They've had five straight quarters. They've increased their growth rate, right? If they suddenly can't print above 37 % growth for AWS, they could maybe start signaling, oh, my goodness, is there a slowdown happening on this hyperscaler side, on the AWS side? Well-run company, a lot of good diversified verticals. We'll see how much they end up having to spend on CapEx.

26:16I mean, those are the two bogeys. What's AWS? Growth rate. What's the capex been? And what's the outlook going forward for the rest of this year? And then especially 2027. All right. Great. Well said. Let's get to Alphabet then. They're the kind of an interesting one, right? They were a laggard. Then they're a leader. Then they're a laggard. Or maybe they're just a bit lost in the current AI landscape, kind of in investors' minds anyhow. BMO raised its price target to reflect 50 percent upside, 480 a share. They think AI is a positive, helping search engagement and monetization. And the cloud, yes, they say, is an increasingly important growth engine.

26:46What's your view here? Yeah. No, I love Google here. I think they're well done. I really would like to see a Gemini app to compete with Muse, right? So Muse has seen us beating them to the punch. Let's get this Google Gemini app. I think there is a Gemini app. And if I'm not mistaken, I believe I use it. But again, there's a difference between, OK, I'm using it like a chatbot and I've tried to do so many gentic stuff with it. My husband has had the same experience. Our Google accounts start to crash, either the platform itself or it gets locked up or the Gmail. So, yes, it's not there yet. There's some things to be worked out.

27:13Muse made a splash. Gemini hasn't made a splash. They need to continue moving forward. some of their models have had great success. We want to see that further monetized. I do think YouTube is unappreciated here. I think they're what's eating Netflix's lunch. YouTube, the ad spending is great. And then obviously Google Cloud. The other thing I point out is that both Google and Microsoft have very good venture portfolios. Google's venture portfolio has been a big part of their success, both with SpaceX and now with their Anthropic stake. It's about 14%, right? So they're about to cash in on that.

27:42So again, it's a little bit of a venture play. But I look at them and say, all of this search is staying there. We haven't seen ChatDTP or somebody else come in and stop the search revenue. So I think their ad pricing power is still there. They're still innovated. Gemini, you know, fits and starts with Gemini, right? It's slow. It's good. The app might be buggy. You know, they really need to roll that out and say, this is your agentic AI. You know, you already use us for everything else. Trust us there. And I think that's another positive for Google is they are very trusted. If you've got Gmail, you know, corporations use them as kind of their backdrop.

28:12So I see Google and Microsoft, if you're building out your AI, and in a day and age where there's so much risk out there, you know, we've talked about cybersecurity multiple times, you want a trusted partner to platform off of. And it's Google or Microsoft that is absolutely the most trusted. All right. We'll see how it goes this week. But, Victoria, thanks. Really appreciate it. Thanks, Kelly. Victoria Green. Coming up, an unexpected win to a record fourth term for Brazil's left-wing president. That has Brazilian stocks plunging today. The fallout for investors and emerging markets is next. Look at the iShares MSCI Brazil.

28:44It's down 20 percent. And as we head to break, the new all-time high list today extends beyond the AI trade, although Anthropics listing is sending the Nasdaq itself to new highs, the exchange, I mean, along with Exxon, Chevron, Permian Resources and Hanover Insurance. We're back after this.

29:09Welcome back. Tech stocks are jumping after Anthropics IPO filing. The company could raise the most ever in an IPO and is reigniting some concerns about the size of the AI spending cycle. But our next guest says AI is neither Beanie Baby nor Birkenbag. Carol Schleif is the chief market strategist at BMO Wealth Management. What an apt way to frame this, Carol. I'm tracking. So Beanie Baby was like the dot-com. It should have told us, right, that Beanie Baby was dot-com bubble. Birkin bag is like a luxury. Why don't you explain it? What do you mean by that? Well, the interesting thing is investors have been looking for a very long time trying to figure out if it's a bubble or not, if it's a fad like Beanie Babies were.

29:52Let me tell you, I have three millennial children, so I was very much caught up in the Beanie Baby craze that was the mid-'90s to the late-'90s. And trying to figure out, everyone was convinced at the time there was lasting value in the end in those, and there ended up not being because of the mismatch of a lot of different things. On the other hand, you have Birkin bags where there still is a lot of value. It's very exclusive, very tough to get, have to have a long waiting list. We don't think AI is either one of those. It's not necessarily a bubble waiting to happen. It's a big industrial revolution.

30:24And it's a major secular trend that's got a lot of cyclical industries swept up in it right now. So primarily, what are you doing for your kind of clients or investors? I mean, is it basically making sure that they keep exposure? Are you giving them more exposure than like just owning the S &P might give them? Are they trying to get out? Are they trying to get in? Well, there's some of each on the trying to get out or get in. We have leaned into the technology, if you will, by additional exposure through some of our thematic plays that we do. And it's not necessarily A.I. strictly. It's A.I. adjacent and thinking all of the other things that it touches.

31:01It's part of our long term capital markets themes. It was part of last year's that will be part of this year's. Because this build-out is really important to remember, and there are major differences with where we were in the 95 to 2000 build-up, because the key difference here is the demand is here. When ChatGPT was launched, we had the ability to download it immediately and look, which means within two months, Chat had 200 million users. I mean, we've never seen anything scale like that. We had a recent McKinsey report that talked about 40 percent of large scale companies are actively deploying agentic agents throughout.

31:39They're not just dabbling in it. They're actively deploying. That's a scale of ramp unlike anything we've seen. And it's exposed a lot of backup, if you will, in the fact that we don't have enough grid to power that. We don't have enough chips to power it. And that's where all the spending and the need to raise capital comes from. Yeah. So you're just to kind of make that more granular, then it doesn't sound like you're saying to people, you know, make sure you're in bonds, make sure you're in, you know, commodity. It sounds like you're saying this is an ethical time to be an equity investor. And I don't know where appropriate leaning in.

32:18Well, I think we would nuance that because diversification matters. It depends on where you're at in your cycle. that the advice to a 20-something Gen Z is going to be different than someone who's in their 60s, 70s, 80s, and or where their other cash flow financial wherewithal is. Because the one thing we have been presented with as investors is we do have the opportunity to invest in fixed income, unlike four or five years ago when you got paid nothing to be in fixed income. There's options out there for investors. And so having a diversified portfolio makes sense. getting there won't be straight line.

32:55This secular bill that's going to be bumpy, going from private company to public company is likely to be lumpy too, because evaluation metrics are different in private markets than they are in public markets. All right. Carol, appreciate it for now. And look, I owned a lot of the beanie. I was not as much into it as my siblings, but we still have them. And now that the grandkids play, I'm like, every time they take a tag off, my heart breaks. I know. Mine too. My grandkids pull tags off. Yeah. Like, no, that's a princess. It's worth a lot. Exactly. Yeah. Carol, thank you. Thank you. Carol Schleif of Bebo.

33:28Coming up, David's Bridal is putting the A.I. in aisle when it comes to wedding planning. We go inside the company's big bet on agentic A.I. with CEO Kelly Cook next on The Exchange.

33:45Welcome back. David's Bridal is headed for divorce. I'm sorry to tell you, but the Bridal Shop is planning to spin off its AI wedding planning platform, Pearl, into a public company next year. The platform offers agentic AI planning, streamlining appointments, and communications for brides. David's Bridal CEO, Kelly Cook, will become the CEO of the new public company once the deal closes. And she is here in studio to explain more about this. Kelly, it is great to have you here. Welcome. I'd love to meet another Kelly. I love it. We don't often get to talk wedding dresses and AI, let alone in the same breath.

34:20So how did you guys end up with an AI business that you're spinning off? Let me tell you, here's how it starts, Kelly. He gets down on one knee, he proposes, and she's crying and happy. That lasts for 15 minutes. And then absolute panic sets in because she has to plan a wedding that is 300 steps long. It's an 18-month journey. Our job was to de-stress that. And we tell our brides, it's all about your confidence in your dream. Confidence is going after Moby Dick in a rowboat and taking the tartar sauce with you. We want you confident, brides. So I couldn't handle this. So we just did a lunch. So I sympathize with the brides.

35:01This is a true, we did a lunch. I was like, there's no way I can take this on. So I sympathize with those who need these tools and don't want the cost and hassle of trying to maybe go with a professional who's going to do it one-on-one. But so what is Pearl? I mean, how long has this business existed and how big is it and what does it do? What are the financials like? Sure. So here's what Pearl is. Pearl is an agentic AI wedding and planning ecosystem. And it plans her wedding within minutes, Kelly. If you think about this business in this industry, It's highly fragmented. It's dying for modernization.

35:36And brides have had to use spreadsheets and tools and platforms. And not to mention, Kelly, it's not just the bride. There's hundreds of thousands of brands that are trying to serve that bride as well. You've got photographers and bakers and so forth. And we needed an ecosystem that took the stress out of that. And that's what Pearl is. it actually plans her wedding within minutes. And not only that does it plan it, the agentic side of it actually takes actions for her. So as an example, when her fiance says, I want to invite my cousins to the wedding, she panics when she realizes there's 47 of them and now the budget's blown.

36:19And so Pearl's agentic solution actually updates all those planning steps for her as an example if the budget changes. I just find this fascinating because obviously every company is going to need and want to have some aspect of agentic AI. You guys are just being very dynamic and responsive and even spinning it out on its own, which is a big step. So I'd just like to hear more about how that came to pass and what your hopes are for it. Sure. So when you look at the business that we built inside, David, it's the Pearl business. It's definitely time for us to take a proposed action like this, because we've got margin rates that are projected to exceed 30 % this year.

37:00That margin rate goes up in 2027. So when we looked at it, it was time for us to think about this rapidly growing business inside David's Bridal. And David's Bridal still has a remarkable piece of this because there's nothing as good as that moment where she's in a store, Kelly, actually putting on the dress. So AI won't replace that. So the companies have this commercial flywheel where you've got Pearl and the first party insights that are exclusively about her wedding. If she wants cigar rolling at the wedding, we've got your plan. If you want warm cookies and ice cold milk at the wedding, that's her.

37:40So the first party insights are exclusively about her. So there's this flywheel between both companies. And the time is now for us to have a proposed transaction. How much does Pearl cost to the user? And why couldn't those who are just looking or using any other AI tool, why couldn't they say, well, I've got Claude, I've got Gemini, I've got ChatGPT, whatever it is, dots, and I'll just use that to do the same thing. Sure. So let me explain why Perl is different and our AI solution is different. It's not just one thing that makes it different, Kelly. It's a combination of elements. So the first thing that's different about what we do is we actually have the bride.

38:2390 % of the brides already engage in the ecosystem. So we're not trying to find them or buy them. We already have them. The second thing is we have these insights about them that actually create this very customized planning experience from step one to step 300. The third thing that we have is we have Love Stories TV, Kelly, that has 80 ,000 wedding videos on it. Wow. By the way, do you want to know the number one wedding video every May 4th? Star Wars. That's a... Star Wars. Yeah, Star Wars. But we have the content for her. So you're combing your library of existing videos to help understand what people want and how to deliver that to them.

39:06Everything. All of those insights. and she has a very specific dream about her wedding. And that fourth component that makes us different than everything else is that physical moment in the store. And when you take all four of those elements together and then you add on the four monetization streams, it's a very compelling growth story. So that's why the proposed transaction timing is really good for us now. Well, again, Kelly, thank you for coming in to explain it to us. I never had thought that your company would be one of the first to illustrate to us what AI could do from within traditional retail.

39:43Thank you, Kelly. We're proud. It's great to hear about it. We'll be following along on your new journey. Thank you. Kelly Cook, thanks so much. My pleasure. Of David's Bridal. Coming up, just four days. That's the average shipping time for an iPhone 18 Pro, according to Bank of America. But you'll have to wait till 2027 if you want a foldable duo. That, plus some of the early complaints rolling in, is next.

40:09Welcome back. The channel checks on Apple's iPhone Duo, the foldable one, are rolling in after its first full weekend on store shelves. Mackenzie Sigalos has more in today's tech check. Mackenzie? So, Cal, we now have the first sell-side availability in channel checks after this opening weekend for the Duo. Walk-in inventory is essentially gone across the markets that analysts are tracking, and delivery weights are hovering right there around three months still. IDC holding its estimate at 7 million duo shipments this quarter because of supply bottlenecks. JP Morgan says the broader iPhone lineup is also proving resilient despite the price hikes, with 18 Pro and Pro Max lead times now right in line with last year's 17 super cycle.

40:51Now, the less encouraging signals are in the secondary market. You've got resale premiums in China falling to as low as 10 percent versus the expected 50 percent. And Apple really needs its foldables to do well in China, which is the largest market in the world for this smartphone category. And then some owners are reporting bright lines, dead pixels and inner screen failures around the hinge after very limited use. Apple just now telling me that they're aware of an issue impacting the inner display on what they characterize as a small number of iPhone duo units. They won't say how many. They added that if users experience this issue, they should contact AppleCare for a replacement.

41:29That durability question is especially important because Duo is just one part of this broader product blitz under Apple's new hardware-minded CEO. This morning, Apple unveiled an 8.5-inch OLED iPad Mini, which is surprisingly close in size to Duo's inner screen, but starting at around one-third the price of the Duo. Kel? I don't know. You know, it's kind of par for the course, right? First generation, foldable form factor. I think when I go back to why, oh, are we going to Julia here? Okay, sorry, Mac, we got to go. Thank you, Mackenzie. We got to squeeze in Julia. News alert on Skydance. We have like 50 seconds.

42:06Julia, what's up? That's right. Skydance's co-CEO's David Ellison and Enon Kreese announcing a voluntary buyout program. There's been an anticipation of some layoffs. This seems to be coming before that. the company announcing voluntary buyouts, also announcing that they are doing a five-day-a-week office policy, saying many people are already in the office five days a week, but they will be doing a phased return to the office five days a week for those who are not currently five days a week, saying they do not take any of this lightly and they are trying to build a company that tells the stories people around the world love.

42:40Kelly, we see shares now down about 6%. Yeah, I know they have a ton of debt. I get it. But, you know, their$7 equity, It's like an$8 billion market cap at this point. You know, if you bet on the leadership figuring this out, and I don't know how they do, but it sounds like they think this is an important aspect of being able to earn their way out. Julia, thanks. Appreciate it. Julia Boorstin, tough day for those employees from Microsoft getting that voluntary buyout. That's it for us. Thank you for watching The Exchange. I'll join Brian Sullivan for Power Lunch right after this break.

43:12You've been listening to The Exchange. Make sure you're subscribed to get each episode every day, same time, same place.

43:44including risk of loss. Fidelity Brokerage Services, LLC, member NYSE SIPC.