Flying Cars, Deep Value in Korea, and Tech on Deck 10/16/26

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1:06Leslie, thank you very much. The rotation out of AI continues as Elon Musk and Apple's duo steal the scene today. I'm Kelly Evans and welcome to The Exchange. AI weakness sending the Nasdaq lower again. It's now down 3 % this week with today's 1.5 % drop. That's its worst weekly performance since July. Meanwhile, the S &P for what it's worth down three quarters of a But the names on the next board will tell you the story. Corweave, Nebius, and Iren all sharply lower again. Corweave's now below 62. Memory in the broader semis trade, that's also weaker. Get this. The Sox Semi ETF is down for the ninth straight session.

1:43That's its longest losing streak in two decades. Pay attention to this. DRAM down 4%, Sox down 2. The good news, that de-risking is driving bond yields lower. The 10-year swinging 25 basis points from peak to drop this week, settling around 512 today, up a couple basis points. But our next guest says CoreWeave is not the canary in the coal mine for the AI trade. Let's bring in Sylvan Capital's Michael Sansaterra. Perfect voice to recap everything that's happened this week, Michael. We've had a chance to, I don't know, get out the notebook. You've heard from Brad Gerstner this week and many, many others.

2:15And what does it leave you thinking? It leaves me thinking we're going to pull back for AI again. We've seen a couple of these now. And it's exciting and terrifying and hand-wringing. But at the end of the day, the fundamentals look strong still. And you get these little windows of noise that I think give investors a chance to look at long-term positions and buy stocks. So when you hear the longest losing streak for the chips in 20 years, right, and we know what kind of run they were on coming into this, doesn't that mean that to me it kind of feels like the trade is over, right? And how do you think about it?

2:52The trade might be over. The trade is one thing. The investment is another, right? I think that the value of the hyperbolic move in semis gets overstated, right? If earnings are going up 100 % across the board in a space and stocks go up 120%, you can expect some reckoning in both. So I think that trade, to your point, is really the key here. Fundamentally, though, we're looking into earnings season. We're understanding what the demand is for compute, what the appetite is for CapEx, and things look pretty strong. Now, CoreWeave specifically, it's not a stock we own. We don't own it. Seeing issues with their unsecured debt is an absolute reason to be concerned as far as CoreWeave shareholders are concerned.

3:34And I can't speak to the ins and outs of if you should really be worried about the stock or not. What I can tell you, though, is that the hyperscalers are borrowing money at 5.2 % to 6.2%. We have not seen on a market-adjusted basis. You're not seeing the squeeze in the places where CapEx and free cash flow are the most important. And so core weave is is not a great thing, but it's also not a canary necessarily. It's just not the same kind of balance sheet as the places where the lion's share of these assets are really coming from. And the analyst we spoke with yesterday who's been cautious on these neoclouds, as they're called, he said the reason why is that ultimately their competition is the hyperscaler.

4:11So I can't say whether that's the way it's going or not, but that's certainly where you're placing your bets. Can you run through your kind of, I won't say trades, your investments and kind of piece by piece, not only who they are, but how long you plan to own them and what kind of price action would even, you know, you'd pay that much attention to right now? Right. So I'm going to answer the last part first. So price action isn't necessarily tell you anything. Price action can go up and down, be crazy at any time. So that doesn't matter. What matters is the fundamentals of each business. There's only three to six things that drive the condition for growth at these companies.

4:46So we own and enjoy the fact that we own. We'll continue to own until those key metrics break. Alphabet, Microsoft, Amazon, also some Apple, but it's in an underweight. Meta is a stock we also like. They're actually making moves to be sort of that fourth hyperscaler, if you will. There's fundamental reasons to sell those stocks when they arrive, but not beforehand. Some of the best growth stocks in the most disconcerting periods of the market have still done better. Some of these larger names have actually fared downturns better, fared sell-offs better. We want to stay with the fundamentals of those companies.

5:25As we look forward and we still see a healthy environment, a lot of good capex, ROI popping up in more places on AI spend, those companies will continue to, I think, gain the lion's share of the economic profit. The Core Weaves, the Neoclouds, they are also RANS for sure. And there's not to say that they can't be good stocks, but they've got to fight massive balance sheets and massive installed bases for corporate clients. So it's no easy task for the littler guys to do well. We talked a long time as NVIDIA did better and better and better through the last three years. Who's going to unseat NVIDIA, right?

5:59Who's going to be the next NVIDIA? There won't be a next NVIDIA in this cycle. NVIDIA is NVIDIA in this cycle. There'll be other players that do well. There'll be other semiconductor names that do well. There'll be other software names that do well. But we want to build a portfolio that's got a little bit of everything, software, hardware, services, taking advantage of AI, understanding that this business transition will take years to complete. Be patient. Stay with the winners. You're more likely to have economic profit that way. NVIDIA, 18 % of the fund. I don't know if I have the most current information.

6:30Alphabet, 13 % Microsoft. I mean, these are your biggest positions. I just want to quickly ask you about maybe a tougher one, maybe not, which is GE Vernova. Much smaller position, but a stock that has been treated almost as if it's a neocloud, the way the market's been acting lately. So given that that's a business model that seems a lot different, one you know a lot more about, and if the data points, as far as you and others keep telling us, are still positive for the next couple of years out, what do you make of its sell-off? Yeah, I think it's easy to take profits in these windows where you're at market highs and you have a lot of stocks that have great gains.

7:03You're getting into the fourth quarter of the year. You're looking at your tax loss selling. Where can you take some gains? Where can you take some losses to offset? I think GE Renova is very well positioned, particularly from a bookings perspective. The demand for power continues, not just in data centers alone, but infrastructure-wise in the United States. They have a fantastic vision into how many years of supply they can provide as a ramp production for incremental power increases. we think that that company is going to look like a consistent, we call it sort of a tweener. It's not really secular growth.

7:38It's not really cyclical growth. But it can beat expectations going forward as the bookings get realized into revenue and earnings. And if they do execute on margins as we think they can, the expectations are low. So that's the kind of stock that when you see a pullback in it, and if you have a time horizon that's greater than two hours, which I know some of my trading friends don't, you can buy positions there and be comfortable with it, I think, longer term. And it is still at 42 percent year to date despite the sell off since the summer. Last question, you kind of mentioned this in passing.

8:07You said at some point we'll get fundamental signs that it's time to leave these these stocks. What would those signs be to you? Yeah, it could be a host of things. You know, I followed tech stocks in the 90s. And so I've seen I've seen a whole host of bad companies try to come public. That was a good sign. I've seen the capital markets dry up. That that was another good sign. But I think what you'll see ultimately is either you'll get real ROI continuing to accelerate and you'll see real profitability from the folks that are using these AI tools or you won't. And if you start to see cracks and breaks in that, that would be the thing that would really concern you.

8:44That said, debt levels do matter. And again, we talked about the core weaves versus the hyperscalers. As long as we don't get way over our skis on the numbers of core weaves, as long as we don't get way over our skis on the numbers of folks chasing the next hot dot in what they think is AI, I think that the space can continue to do well. But there'll be lots of opportunities to see where, you know, if deals start falling through for funding, if we start to see a consistent, like I say, plethora of companies that have no business coming public, those would be the first flags to say, yeah, this market's getting so hot.

9:17But that's a bubble that happens when there's no demand to meet the supply. That's when supply actually outstrips demand. That's what happened in the Internet at the end. That's not happening now. In fact, we're still in the opposite. We still have more compute power demand than we have supply of it. So we're just not there. Will it come? Sure. Is it tomorrow or five years from now? Hard to say, but you don't want to second guess it until you see something in it. All right. Words of wisdom to end the week on. Michael, thanks so much. Really appreciate it. Truly. Michael Sanzatera. Yeah, you too.

9:47Let's turn now to the Korean stock market, the KOSPI, an overnight signal lately of what we can expect in the tech trade here in the U.S. And that's because two AI chip makers comprise more than half the index, Samsung and SK Hynix. And it's been a terrible week, as you can see. The KOSPI dropped more than 14 percent for its worst week since 2008. They're semi ETF down 10 percent. The iShares AI ETF off 11. But our next guest says investors are too focused on the tech part of the KOSPI and could be missing out on the other half, which has deep value. Let's bring in Dan Rasmussen. He's the founder and portfolio manager at Verdet.

10:25If the Korean traders are listening, Dan, I want them to turn this up because there is panic. There is panic in the country and maybe most of them are in more of the AI stocks. But I was shocked when I read your piece this week saying, wait a minute, there might be some value in the Korean stock market more broadly. So explain that. Absolutely. So Korea is the epicenter of the trade. You have two brokerage accounts for every Korean citizen. You have frenzied trading activity. And historically, that's that's been a long term trend, a lot of trading activity among Korean retail investors. And this AI frenzy has just driven the country to an intense focus in the stock market.

11:05There's actually a political movement in Korea called the ANTS. And not only do the ANTS drive share prices up and down like GameStop here, they also vote. And so all the populist politicians in Korea are very pro the stock market going up. So it's like imagine that AOC's number one campaign platform was making the equity market go up. That's what you have in Korea. It's a frenzy. But if you look outside of Hynix and Samsung, which are trade like all the semiconductor stocks we were just talking about, what you see is a massive amount of companies that are dirt, dirt cheap. So, about half of the Korean stocks trade below book value.

11:46When you look at the cheapest quintile of stocks in Korea, they traded about eight times earnings. The cheapest quintile in Europe or Japan is 12. The cheapest quintile in the U.S. is 16. So if you want to buy deep value, you can buy deep value companies at about half the valuation in Korea that you can in the United States. This is a great this graph is a great illustration of just how many cheap stocks there are in South Korea. When Berkshire starts buying Korean commodity, what was in Japan they were buying? I mean, this is an analogous situation. Trading companies. Yeah, something something like that.

12:21Yeah. So Buffett came into Japan at really just the right moment as he was wont to time these things so well. And what happened is in 2023, Japan instituted corporate governance reforms. And that forced Japanese companies to start returning cash to shareholders in a way they hadn't done for probably 30 or 40 years. So you've seen this sort of hockey stick turn in the Japanese market since those corporate governance reforms started. And that's now spreading to Korea. So in 2024, Korea announced their value up program modeled after Japan. And that's starting to have an impact on these Korean deep value stocks where these companies that for years, they're family owned, they're family controlled.

13:01There's not a big incentive to drive the stock market price up or pay attention to minority shareholders. And all of a sudden that's changing with like every month some new piece of legislation announced that forces something like fiduciary duty for board members or punishes people that try to subordinate minority shareholders, etc. So it's a really exciting time because we now have not only cheapness, but a real catalyst in the form of corporate governance reform. So final question for investors who might be sitting here thinking, yeah, maybe I want a little exposure in a, I don't know, 529, a 401k, whatever account.

13:35Probably the easiest is to get broad Korean ETFs. I don't know how much granularity you can really get on the Korean ETF piece here in the U.S. I mean, do you have any advice on that front? You know, it's tough because, again, the Korean ETFs are generally half Samsung and Hynex. So it's hard to diverge from that into the stuff that's actually cheap. But that's what I find attractive, right? It's hard to access. Now, Korean access is improving. So Interactive Brokers just opened in Korea earlier this year. Korea's really trying to get developed market status and change all the things that have blocked market access.

14:08So I think it won't be too long, hopefully, before you could buy individual Korean stocks in your brokerage. That's a fascinating point and how important those kind of categories are, right, to go from maybe emerging to developed and things like that. Again, never would have thought amid that run up there that so many of the names were actually so cheap. Dan, thanks so much. Appreciate it. Thank you, Kelly. My pleasure. Dan Resmussen of Verdat advisors. Coming up, Meta, believe it or not, is turning negative on the week and on track for its first three-week losing streak since July. This comes as they announced a new AI partnership with Apple.

14:40Will it satisfy investors who want to return on their AI investments? We'll get a take from Sam Lesson on that ahead. Meta's down, wow, three and a half percent today. But first, the attorney general of Kansas joins us in a first on CNBC interview on the heels of their lawsuit against OpenAI. He'll make his case, weigh in on the data center debate, and look ahead to their midterm race. That's coming up next on The Exchange. This is The Exchange on CNBC.

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16:40Welcome back. We're continuing to cover the growing debate against AI across the country, not just in data center build-out, but also whether or not chatbots cause serious harm. This week, eight states took that debate to court, suing OpenAI over claims that Chachipiti harms children. Kansas is one of those states. The suit coming with just 18 days to go until the midterms, where Kansas has emerged as a surprising Senate battleground state as well. Let's bring in Kansas Attorney General Chris Kobach, who joins us on the program for more. Attorney General, it's great to have you here. Good to be with you.

17:14And talk to us about the kind of impetus behind this suit. Yeah, this lawsuit was filed on Wednesday. Simultaneously, eight states, a bipartisan group, by the way, brought suit in eight different state courts, all of us alleging that OpenAI has essentially prioritized profit over protecting consumers and has misled consumers about the safety of these AI chatbots for children. And so we point to all kinds of really disturbing harms, things like AI chatbots coaching people to commit suicide, things like giving medical advice, incorrect medical advice with deadly consequences, coaching kids to self-harm.

17:57And so under our state consumer protection laws, these are the same laws that were used to sue big tobacco in the 1990s. We can bring these lawsuits to force OpenAI to change their practices in the case of an injunction that a judge might issue. Or if they want to settle, we can compel them to change their practices as part of the settlement terms. And were you part of the meta settlement as well? Yes, I was. OK, so this, you know, and that was quite lucrative, obviously, for the states involved. But typically, typically our state consumer protection statutes have a penalty to deter actors out there from deceiving consumers.

18:36And so, yeah, in Kansas, it's ten thousand dollars per violation. So oftentimes, yeah, these these corporations that do violate our consumer protection statutes will have to pay penalties as well. We spoke with the attorney general of Nebraska yesterday, and he mentioned that some of the most severe cases were not necessarily from his state, although he had his concerns. What would you say are some Kansas examples of the harm that Chachipiti has caused? Well, the most egregious cases were not from Kansas. But, you know, the other thing about this is probably we only see the tip of the iceberg.

19:08We don't see all of the other cases where a minor was encouraged to do something that resulted in self-harm and they didn't report it to authorities or was told to take some medication that was completely inappropriate and they didn't report it to authorities. So my guess is it's happening all over the country. And in many instances, because no one was hospitalized or died, you don't have reports of it. But we all know that anyone who's witnessed what OpenAI and ChatGPT can do is that you have these sycophantic chatbots that build trust. And most adults, we hope, are able to realize when the app is, you know, essentially giving them so much compliments, so much praise that something is up.

19:56But oftentimes kids, especially, you know, adolescent kids in that 13, 14, 15 age group, they won't suspect that something is up and they won't be suspicious when this chatbot that loves them gives them bad advice. Right. Look, obviously, as parents or even as anyone who uses these products, it's a little queasy. My question would be, and it's more of a legal technical one, but if the harms aren't occurring in your state or in Nebraska, but in another state, why are you able to participate in a multi-state lawsuit? Well, first of all, let me make clear, this isn't a multi-state lawsuit. Oftentimes they are multi-state.

20:32These are eight separate lawsuits brought in eight separate states. So in my suit, it's just the state of Kansas. And so you don't have to, in a consumer protection action, you don't have to show, you know, a specific number of people in your state that have suffered a measurable injury. You just have to show that the company is deceiving the consumer. And we absolutely have evidence of that, whether it's in the company advertising its product as being safe for miners when we know from the content that it is not, or in other respects where the company has made public statements that are deceptive and misleading.

21:05So that's that's at the core of all of these consumer protection lawsuits. Would it apply to anybody who's making I'll call it a chatbot, but kind of a large language model right now? Because, boy, there are a lot of them. Yeah. So the lawsuit is brought only against OpenAI because OpenAI has been the most egregious of the offenders. When other companies were holding back and not releasing products because they wanted to develop some safety protocols, OpenAI pushed forward so they could capture as much of the market as possible. So they're the most egregious offender. But no one in this industry, in this space, should think that it's only OpenAI who has to be very careful about what they tell American consumers and what they put on the market.

21:44And finally, and this kind of brings us into the midterm race. Again, as I understand it, your Senate race is somewhat tight. You also have a company we've had on the show before, Digital Realty Trust, offering$1 ,000 a year to its neighbors to win approval for a data center in Kansas, which I find fascinating. as this continues to be a sort of huge interest to local people, whether or not to allow these data centers in. Why the timing of this lawsuit? Do you think that there is an aspect here where it gives momentum one way or the other into the midterms or in terms of politics? Or is it strictly independent of that?

22:20No, the suit against OpenAI is completely independent of that. These lawsuits take months in preparation, and we have to put together all of the evidence in a case where you have multiple states suing. We intentionally sued simultaneously. Obviously, that was not a coincidence. But we are working together and sharing the evidence among the states that are suing. So, no, the timing has nothing to do with the upcoming elections. But you're right to point to this very interesting data center debate that's really kind of jumped onto the political scene in the last few months. And it's a very interesting issue because you have people on the right and the left who are upset about this.

23:04From an attorney general's perspective, my job is to enforce Kansas laws. And so when any of these campaigns or data centers or efforts to have a county commission vote one way or there, if they violate a state law, that's where I jump in. And we've already been received complaints and we're investigating some of those complaints. But it is a it has become a very big issue. There's no question about it. And a lot of focus now on the way these centers are being run and so on and so forth. Attorney General, we'll leave it there for now. But thanks for making the time today. My pleasure. Kansas Attorney General Chris Kobach.

23:39Meantime, we have a news alert out of Washington. Eamon Javers with the story. Eamon? Kelly, that's right. President Trump talking to reporters here at the White House just a few moments ago. And in that conversation with reporters, the president denied that he was the person who ordered a slowdown of Starlink's government service in Ukraine. Remember, that's been a point of some contention between President Trump and President Vladimir Zelensky of Ukraine, who's complained that the Starlink service that the Ukrainian military has been using was deliberately slowed down by the United States, making it impossible for Ukrainian military officers to intercept incoming rocket-powered Russian drones and therefore putting Ukrainian lives at risk during the course of this week.

24:24The president was asked if he was responsible for that. He said, I don't know if it was anybody, but it wasn't me. So the president denying responsibility. Meanwhile, Elon Musk has put out a statement earlier in the week saying that it wasn't him either who slowed down that service, saying that that service is at the direction of the U.S. government. So something of a mystery here now as to who ordered that shutdown. Separately, on the issue of the president's beleaguered press secretary, Katie Zachariah, the new press secretary who began this week, She had a bit of a rough outing in the briefing room earlier this week.

24:59The president sounded to my ear, Kelly, as if he's already made up his mind to move on from her. He said, I hope she has a good life. I want her to be happy. It's more important to be happy than to put up with this. He said the press has treated her very unfairly, and he's going to be speaking to her when he returns from his rally in Georgia that he's on his way to right now. He said, I'll be speaking with her tonight, but I don't think she needs this. So to me, Kelly, it sounds like this is a president who's made up his mind to move on and maybe get somebody else for the job. He told reporters that there are a lot of people who do want the job as press secretary.

25:34So he's clearly already thinking of new candidates. Kelly, back over to you. All right, Eamon, thank you. And that's fascinating about Starlink. Something obviously happened. Ukrainians were furious. Eamon Javers, thank you. Speaking of Starlink, Elon Musk last night unveiling the new Tesla Roadster, equipped with SpaceX thrusters, which flew over cars and can go from zero to 60 in less than one second. Is he trying to make the case for a future tie up between Tesla and SpaceX? That's where the speculation is going. Although Tesla shares are down 3 percent today and 21 percent this year. It's the only Mag 7 name in the red since Jan 1.

26:08We'll dig into that more ahead.

26:16Welcome back. Markets acting a little squirrely and erratic this Friday afternoon. The Dow erasing an early 400-point gain and is down 217 right now. It's the only major average set to end the week higher, though, up about half a percent. The Nasdaq struggling today and the biggest loser since Monday. Down more than 4 % for its worst week since June. Just guys want to quickly show crude oil prices, which, as we mentioned briefly at the very top of the hour, But we are seeing some upward pressure there in both WTI and Brent oil. And that's certainly one reason why the markets have taken a different tone this afternoon.

26:47Let's get to Frank Holland for the CNBC News update. Frank. Good afternoon, Kelly. A key SpaceX AI policy leader appeared before the New York City Council this morning and faced some tough questions over Grok's generation of sexualized images. Council Speaker Julie Menning questioning the safeguards in place, asking why she was able to pull up sexualized images of herself on Grok. The company's head of global government affairs responding that the company has strict controls in place and would have the safety team look into that specific incident. Russia and the U.S. are discussing a range of joint deals, including nuclear-powered data centers, according to an envoy of President Vladimir Putin.

27:20Speaking at an energy conference in Moscow today, the envoy said the two countries will soon announce several new initiatives following last week's agreement on diesel. And Apple is getting ready for a legal fight over its tap-to-pay rules with the U.K.'s Competition and Markets Authority. That's according to the Financial Times, which says the U.K. watchdog is set to recommend changes to the iPhone's operating system and let its users choose alternatives to Apple Pay. Apple is likely to challenge that decision through the courts, according to the FT. Kelly, back over to you. All right. Thank you, Frank.

27:48Coming up, Apple bucking today's downtrend. It's the only Mag 7 name in the green on this Friday, and it's on track for its eighth positive week in nine. This comes as the iPhone duo, its foldable phone, goes on presale and CEO John Ternus makes his debut on the cover of Time, telling the magazine that the memory shortage is a quote crisis and suggesting an openness to using Chinese chips, saying all options should be on the table. We'll dig into the company's new partnership with Meta next.

28:19Welcome back. The foldable iPhone, the Duo, is now up for pre-order. It's Apple's first foldable phone. It costs about$2 ,000. Might make some customers hesitate, except we're not seeing that in the data right now. Mackenzie Sigalos has more in today's tech check. Mackenzie, if you want one, it might already be too late. Exactly right. That$2 ,000 starting price doesn't appear to be scaring buyers away with pre-orders essentially selling out and Apple now quoting ship dates in late January 2027. Now, one longtime Apple analyst says that he has never seen iPhone lead times this long in almost 20 years of tracking them.

28:54And he's now modeling for 20 million duo units next year. That is 2x the average street estimate. Now, the caveat is that we still don't know how constrained production is. But the early rush is the first real test of Apple's arguably larger bet, whether the most significant iPhone redesign in its history can get customers to spend more and push the iPhone even further upmarket as a status symbol. IDC expects about 7 million duo shipments this year alone. That is as many foldables as Samsung and Huawei each shipped across all of 2025. And this is happening, of course, as the broader smartphone market just posted its worst Q3 in 14 years.

29:35Counterpoint saying Apple still gained share to 22 percent, and that doesn't account for it now competing with its own foldable, which is a much more valuable slice of the market. Just over 2 percent of all smartphone units sold, but nearly 7 percent of revenue. An analyst I spoke to had actually expected Apple to price the duo closer to 2 ,500. So at current cost, it looks like Apple's trying to take share, And the early pre-order activity suggests there's real interest. The question now is how much of those long lead times reflect demand versus Apple simply not having enough supply at launch.

30:10Right. Or is it, you know, kind of a fun status symbol right now, but does it peter out a little bit? We'll see. But still a very strong launch, at least it seems right now. Mackenzie, thanks. Those duo pre-orders are not the only news out of Apple either this week. The company is also teaming up with former rival Meta to allow users to run Meta's open source model, Muse Spark Open, on Apple desktop computers. Joining me now to discuss that and more is Slow Ventures co-founder Sam Lesson. Sam, I didn't feel like this was that big a deal. Maybe I'm wrong. And now Meta is actually on a three-week losing streak.

30:42So I just wonder how – and the launch of Muse could not have gone better. How fun is Alexander Wang, right? The whole thing, the new vibe around the company, but is it going to stick? Are people going to keep using it? Are they just going to get frustrated after a little while and move on?

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32:27I think Muse is a great product, and I think it's going to stick is the quick answer. There's a long road to haul. I think the implications of Muse taking off and how it changes the open web and how it changes how humans buy things and interact, They're pretty profound. They're going to be messy and challenging. But thematically, I seem to be finally on a glide path where people will use consumer agents. The joy has been real. The value has been real. I'm very bullish on Muse. And Alexander Wayne's mean game is hilarious. Look, only at a company, a founder-controlled company, would they ever even allow him to post?

33:01And I wonder, anyway, I'm not going to go in that direction. Here's what I do wonder about. So now Apple and Meta, they were enemies. Now they're friends, I guess. Is that a big deal? Well, I think the reality is sophisticated companies and platforms can be both enemies and friends at the same time, right? I think this is a great example of kind of grown-up companies saying there are things in which we're highly aligned around open source models, around opportunities to run models locally. So let's work together on those. I don't think that erases any of the tensions around app store control, you know, meta's hardware ambitions, things like that.

33:35But you know, okay, I'm moving on from that because you're right. And let's go back to Muse and whether it's going to stick or not. because a lot of people will use it a few times and then it kind of peters out. Or this is an example. This was not me using Muse. It was actually Gemini yesterday. I was trying to get it to make some things in Canva. Actually, I think I was trying to imitate something you had done with quote cards, right? And I was like, yeah, I want some of these quote cards. I spent 45 minutes trying to get the agent to make these quote cards using my Canva account and I ended up giving up.

34:03I probably could have done it myself more quickly. Have you had those experiences? Well, I'm happy to teach you how to make those quote cards. and I have my own custom setup I've used that's pretty sophisticated that allows me to do a lot of really great stuff. Look, my experience having kind of pushed on the edge of this for a long time is that there is a learning curve to what you can and can't do with these things. Part of the challenge with Muse from day one is it's a cold start problem. This is a really cool capability. What can I do with it? I think what you're seeing is that the high-end exploratory consumers are finding a lot to do with it.

34:34I was talking to my uncle the other day who was floored by how incredible it was. And he used so much of it, he got pushed into the paid tier, which I didn't even know existed at the time. So I think the answer is that people who are exploratory are finding those use cases. The company can then take those and double down on those. And Facebook is incredible. Meta is incredible at marketing those use cases across the board. So I do think we're on a road where this is going to happen. But again, it's going to be messy and complicated as you drive consumer adoption widely, helping people connect with those real use cases that are most valuable to them.

35:06And again, it's an open vessel. It can do almost anything. And so figuring out where those opportunities are and then how to make the business deals behind them work. Right. Is the key. I mean, one of the most interesting things going on is what Amazon is doing, where they kind of shut down commerce. That's the real story here, which is the technology and the product exists to make this all happen. But the business and politics have to work also or this whole thing won't work. And I loved the tweet from Musk who said when people were kind of just commenting about Amazon not allowing agents to shop on its website, he just said, time for a new Amazon.

35:39I mean, that's how entrepreneurs think. And I do wonder and worry about that strategy. Maybe it's the right way to go, but I think it's an open question. We will see. I mean, this is going to be the war of the next several years. You know, we had this war a decade ago with APIs. What APIs were open? What were closed? Who wanted to keep people on their platforms? Who was just a capability? It was a huge war no one seems to remember. We're just going to replay this entire war again with higher stakes now and deeper commerce integrations. Yeah. Meanwhile, look, it's one thing when we're talking about, oh, can my agent make me quote cards?

36:10And then the flying car actually comes. When I first saw those videos, these videos here last night, they literally look AI generated to me. I don't know if you had this. I'm thinking, look at this. This looks fake. My reaction was clearly Musk is building the case to merge the companies. I mean, he stuck SpaceX technology on a Tesla car so it could do a flip and land like a rocket booster. Other than shock and awe, there's only one reason to do that. He's the greatest marketer in the world, which is he wants these companies to be one. And is there any way in which this could be? My sons keep asking, when are we going to get a hover car?

36:42I don't know where they got the idea. I can't wait to show them this video and say, forget all the regulatory. I just mean, is there any real practical? If I'm getting a roadster or some, this is somehow, is this all just for show? It is all just for show. It's a great show, to be clear. Like, it's a great show. But, you know, I've wanted a flying car since I was a kid. I mean, this is the Founders Fund we were at, told we were going to get flying cars. Everyone wants this stuff. But I think one of the real moments of the day, you have to think about broadly, whether it's with AI or with a lot of these things, is the gap between I can demonstrate having done it once and the possibility versus, like, this is a production thing that can be done at scale in the real world is just a massive difference.

37:24You know, the nice part about space is there's not much out there, right? You can do a lot of cool stuff. I would not be holding my breath for my flying car. As someone who did originally put down$50 ,000 nine years ago for the original Tesla Roadster. Well, maybe a couple more years you'll get. I guess my final observation or question is this. I know a lot of investors are excited about the story because whether you're in Tesla's down today. Don't you love America? This debuts last night and Tesla shares are down 3%. They're down 20 % on the year. I know there's a keen investor angle here. but why should the rest of us care if SpaceX and Tesla combine?

37:56I don't think you should. I mean, it's the honest reality. It's an easier way for Elon to hit his pay package. It's a great single narrative of there's a company now which is branded as Future Co, which does some unbelievable stuff, right? To be clear, I think the real moment that we're all at, whether it's with SpaceX or Anthropic or a lot of these things, is there's two markets. There's a financial modeled market of profits and rationality that we're all used to, and then there's a fact like a meme and storytelling market, whether that's in the crypto world or Tesla, SpaceX or Anthropic. And people are invested in both.

38:31But, you know, they have very different properties. Right. Exactly. Sam, thank you. I appreciate your time today. Thank you. Sam Lesson of Slow Ventures. Coming up, we just mentioned the Roadster making a splashy debut after a decade of delays. We'll hear from Musk himself about that next. And don't miss our interview with FTC Chairman Andrew Ferguson. We'll discuss their probes into Anthropic and OpenAI. That's next hour on Power Lunch. Stay with us.

38:58Shares of Tesla, as we mentioned, are lower today after the company debuted the flying car. Phil LeBeau has more details. Phil? Well, it's the new Tesla Roadster, which will go into production in 2028. Not exactly flying, but pretty darn close to it. This was a preview, a debut, an unveil, whatever you want to call it, for the roadster last night that had everybody, still has everybody talking in terms of look at what this vehicle can do here. By the way, this got the most attention. It was the zero to 60 time that I heard about from people. They said under one second. Yeah, 0.81 is the zero to 60 time.

39:34And there's some practical technology that is built into this vehicle, especially when they talk about a fan suction ground system, which keeps the ground, the vehicle closer to the ground. Here's Musk talking about some of the practical applications of it. An actual benefit on the track or just driving where the downforce of the car means you can corner incredibly well. All right. So what is Morgan Stanley and some of the other analysts? What do they have to say? Well, Andrew Percoco at Morgan Stanley says this is less about near-term volume and more about demonstrating the art of the possible, pushing the boundaries of physics, engineering, and innovation.

40:19And as I mentioned earlier, it starts production, at least the plan right now, production is to start in 2028. Let's see if they stick to that schedule. It's going to be very limited volume. We don't even have pricing yet, Kelly, but you can bet this is going to be one of many things that will be asked about next week in further detail when Elon Musk is on the analyst conference call as you take a look at shares of Tesla. And we're comparing Tesla with the S &P 500. This has been underperforming relative to the S &P 500 for most of the year. And, you know, it has a lot of people saying, well, where's the investment here?

40:54It's down 17%. Again, they report after the bell next Wednesday. And it's the conference call, as always, Kelly, that people will be focused on. It is the tie up with SpaceX. That is all anyone's going to be talking about now. So in that sense, he's pulled it off again. Phil, thank you very much. Phil LeBeau. Coming up, earnings season ramping up. Like we were just saying, a lot of companies report next week, not just Tesla, or I should say SpaceX. It's also Netflix and Meta, just to name a few. How Jeff Kilburg is positioning into these results, we'll talk about next.

41:28Welcome back. We had the big banks. Feels like a long time ago, but they did kick off earnings season earlier this week. We've got three big tech names reporting next week, including Netflix, Meta, and SpaceX. Joining us with their trades ahead of those reports. Victoria, they keep trying to make you Jeff Kilburg. First, they say that it's Jeff Kilburg. Then they call you a guy. Anyway, a CIO of G-Squared Private Wealth and a CNBC contributor. Maybe a birthday girl, too. Anyway, happy birthday. Let's start with Netflix. Those shares are selling off today. Kind of a pattern. They're eking out a little bit of a gain this week after the company announced it plans to layoff 6 % of the workforce, and that its content chief is out after a decade.

42:07Barclays has a neutral. They say, well, their content is strong. The layoff news will further amplify concerns around growth as engagement seems to be declining. What do you think about the stock? What would you do with it? Yeah, it's going to be a show-me quarter for them. Did we rip the Band-Aid off last quarter with slowing growth? Are they able to perform now as kind of a more mature blue-chip company than they were like this startup disruptor when they came out on streaming? Look, this is no longer a startup. Like this company generates massive free cash flow, solid revenue growth, but it's just not impressive as much as a growth stock anymore.

42:37They need to convince investors this is a stock worth holding in the media space. They're facing so much competition. So for me, can they drive more watchable hours? Are they able to do some pivots in content? What about this ad growth that we keep hearing about? Are we going to get more than$3 billion in ad revenue? What's the trajectory for that? This is really one of those, okay, bad mesh last quarter. Was that the worst of it? Or is there more to come? So this has been a hold for us. We've been selling it out of our core portfolio. It's only been about 1.5 % now. But it's one of those that I am a little bit worried about, to be honest with you, Kelly.

43:09Not that I should necessarily spring this on you. But because Disney's been on more of a winning streak. Skydance was kind of a mess last week with some issues around the warrants around its launch. I mean, is there anyone you're excited about in the category if you're not excited about Netflix? I mean, I'm a little excited about Disney. Doomsday would be great if they could make Marvel actually work for them this year. A good Star Wars movie would be phenomenal for them. And they're a little bit cheap, and they're also so diversified. And Parks has been a really great bright spot for them. But I like Disney.

43:36I think Paramount and Warner Brothers is interesting. But my concern is there's going to be a race to the bottom. Prices for streaming have gone up exponentially the last five years. Some of these streaming services have hiked prices 100 % or 200 % in five years alone. Now, all of a sudden, you're going to have a pretty wide slate and more expensive streaming. people might start cutting back, right? The average is about three to four streaming platforms. Suddenly those prices aren't$7.99 a month anymore. They're$20. Bring back the bundle. You know, this is like Uber all over again, the taxi companies.

44:07We're going to recreate cable, Kelly. That's what it's going to be. Let's do it. And let's move along to Meta now, which is up 15 % since Muse debuted. Bank of America expects a third quarter revenue beat, but is lowering its estimates a little bit on Forex headwinds. They write that all of the online media stocks, Meta has the least risk of AI disruption to its core business, but could have higher capex next year. What do you make of this one into earnings? What would you do with it here? I love Meta here. I would buy it. It is a core holding for us. I think they're executing so well on AI. One of the best retail AI plays because they have 3.6 billion daily average people on all of their platforms.

44:44Muse is going to be something that's exciting. We talk about Tesla's art of the possible. Meta needs to sell us on Muse's art of the possible. What is this next step in transformation? You know, we got none of us loved the metaverse era that they just went through. But the Muse era might be so exciting. And it was one of the top ranked downloads in the staying power. There is phenomenal. I don't expect a huge revenue impact per se yet, but it's what is the future? How are people using it? How are they going to monetize it? And it just helps them protect from disruption from TikTok or YouTube. You know, how are you continuing to engage people and get eyeballs across the platform for ad sales or cross selling and promotions?

45:20So I think it's really fascinating. And it's one of us that we are very bullish on that on meta going into earnings. Absolutely. All right. Let's circle back to SpaceX then and kind of get into that one here for a second. Those shares are lower after the Tesla debut. The stock is actually down 11 percent this week, but it did have a nice pop kind of coming into the week. Evercore raised its target price today to 275. We're at 145 right now. They write transformative catalysts are closer than they appear and highlight five factors that should drive sentiment through your end, including CapEx, available compute, potential Starlink mobile service obviously has the whole industry talking.

45:57What do you think about SpaceX? I think it's a wonderful company. I think it might be a tough time to own it if rates continue to be a headwind. And I think that's what you've seen this week. Look, they have an aggressive build out they want to do, but everything they want to do costs a lot of money. Yeah, they've got 100 billion on the balance sheet from the IPO. So they're going to blow past that with some of their CapEx expectations. CapEx coming in$18,$19 billion, doable. CapEx at$25 and revenue only at$13 billion. That might spook investors a little bit because this Corwee thing isn't going away.

46:25If AI debt suddenly is going to take a much higher premium to sell, that's going to have a ripple effect impact. We know they're going to get their lift from the Anthropic deal. We think revenue growth is great. Look, Starlink is phenomenal. But to build out this mobile platform they want to build out, that's more infrastructure. to build out the AI platform they want to build out. That's more CapEx. To build out the satellites, everything they want to do takes tremendous amount of CapEx. And so I look at this stock and I think it's a wonderful transformative stock, probably honestly best liked across the street.

46:54Nobody can put their price target high enough, you know, but at the same point, they're going to run into the reality of race just like every other AI build-out company is right now. And in a weird way then, it benefits them that kind of those AI trades are taking rates down a little bit this week. Victoria, thanks, appreciate it. Good to see you today. Have a great weekend. Victoria Green. And that's it for us. Thank you for watching The Exchange. Brian's out. I'll join Dom Chu for Power Lunch right after the break.

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