Nvidia Too Cheap to Ignore?, AI Safety Debate, Apple’s iPhone Launch 9/18/26

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0:50Leslie Picker, thank you very much. Stocks are back in the red this hour and mostly headed for a losing week as the 10-year yield touches 5 % again. Look at it on the nose right now. I'm Kelly Evans and welcome to The Exchange. All the major averages are lower, with the Dow leading the declines today. That's because of IBM, Disney, and Cisco primarily. Every S &P sector is lower as well, with materials and rate-sensitive parts, the worst performers. We'll have a little bit more on that later this hour. And more news on the AI safety front. Now it's one leading lab able to hack into another. We'll debate the impact and the liability with John Ford ahead.

1:27Plus, Apple launching the iPhone 18 Pro and Pro Max. But Wall Street's already looking ahead to the duo's debut next month. We'll have the numbers to watch for John Ternus' first big test with the launch of these iPhone 18s today. But let's begin with the tech trade, broadly speaking, today because it's outperforming in today's down market. The Nasdaq 100 is barely lower, though, and the MAG 7 touching a new high for the first time in over three months. Our first guest's favorite laggard in the space is NVIDIA. I have 17 percent. He's still having a pretty good year. He says, despite everything that's happened with AI, it's too cheap to ignore.

2:02Let's bring in Chris Grisanti. He's the chief market strategist at MAI Capital Management, and he's here for our opening exchange. Chris, there are people right now going, please, I don't want to hear any more about AI. And that's probably why this stock is interesting to you. It's good to see you. Sure, it is. And Kelly, as you know, our favorite AI stock six months ago was Microsoft, and it's up 40%. So what we're doing is looking around for the laggards that still have terrific exposure to the AI trade, which we think continues into 2027. NVIDIA, I think, is the top of the list there. Unlike, say, a Dell or a Micron, they have a proprietary product.

2:40They're selling it about 14 times next year's number. We think that number is good and maybe even a bit low. So, you know, there's less here than meets the eye. It's a cheap stock. It's right in the middle of the picks and shovels trade. And I think the trend continues right into the new year. And I want to highlight that because you could also take, if you wish, a little bit of a victory lap on Microsoft. You were much more interested in it a few years, a few months back. And we mentioned the MAG7 today, finally back at some new highs, I think for the first time since May. What's the update there?

3:13So the update there, look, we still hold all the stock that we bought six months ago. So I'm a value investor. And so, again, this is not rocket science. This is, you know, six months ago, it was Microsoft at 16 times because AI was going to put every software company out of business. Now it's NVIDIA at 14 times because it's just gone up too much and it can't possibly continue. You know, I just look at the numbers. I do the math. And I think this stock is just too cheap. There's certainly there's risk that the AI trade slows down, but it will hit NVIDIA last because they have the proprietary chips, of course.

3:45So, you know, again, you know, I'm not that smart, but I'm consistent. So we're going on to the NVIDIA really because it's cheap and they're in the right place. We're showing it. Would you I mean, is that about right at 18 times as its forward P.E. ratio right now? Microsoft's, by the way, back up to 25. That's not as cheap as it used to be. That's absolutely right. So the forward ratio you're using is probably the next 12 months. I'm using the 2027 calendar year and I'm adding some to it because I think the numbers are too low. So I'm seeing NVIDIA about 14 times. And either one you use is less than the current market P.E.

4:17ratio. So, you know, you're buying the stars of the A.I. world for less than, you know, you're paying for Coca-Cola or Pfizer. You know, putting these two. Yeah. Having these two on the screen is actually an interesting tug of war because I've heard some saying it's the time to buy the Mag 7 because CapEx for A.I. might slow down a little. And something this whole debate over, you know, what's going on with regulation might just be an excuse for tech companies to pull back and say, look, this is too much CapEx. We're pulling back a little. If they did, I can see that benefiting the Mag 7, finally a breather for CapEx.

4:51But I can't see that benefiting NVIDIA. Yeah. And I would push back against that. You know, Google has their cloud business growing at 82 percent year on year. You don't want to pull back. They're not going to use an excuse. They want to do it. Nobody's putting a gun to their head. If you had a business growing at 82 % a year, you'd beg, borrow and steal to invest more there. So it totally makes sense. The good thing is, A, it makes sense. B, they have the money. And NVIDIA is standing there with their hand out. Again, not a complicated story. It's just a little scary because it's done so well over the last five years.

5:26But I think it continues. Finally, we've talked a couple of times with you about General Motors. It's another kind of out-of-favor stock that you like. Talk about UPS quickly, and are there any others that you would say to people that you got some time over the weekend? You know the one I want to ask you about is Nike. This is my new hobby horse. Remember when we talked about the home builders, Chris, several, three, four years ago? They were trading at like four times forward earnings. I look at Nike now, and it was a retail analyst on Power Lunch the other day who said they've got a 4 % dividend yield.

5:53The stock, I mean, you tell me if it can possibly do any worse once you're down this far. I think I was with you on Power Lunch that day when we were talking to the Nike guy. Yes, remember that? Right. And look, it's definitely on our radar screens. It's a tough one, though, Kelly, because of the China exposure and things have really gotten so bad. Second, with Nike, Phil Knight controls so much of the voting stock that you can't get the active shareholders in there to do quite what you could do at other places. So there's a couple of negatives there. but it's clearly on our radar screen. Having said that, General Motors and UPS are both non-AI contrarian ideas that I really like.

6:32General Motors has, they've bought back 40 % of the outstanding shares over the last five years. UPS is the new one on our radar screen, 6.5 % safe yield. It's down because oil is up. Clearly, that's a huge input for them. But oil will come down six months from now, a year from now, whenever it comes down. They're doing a great job under new management of controlling costs and getting rid of the Amazon business, which was unprofitable for them. They're doing all the right things. It's cheap. And you get paid six and a half percent to wait. Yeah, well, that looks better then because they just showed Nike's multiple.

7:03And if it's still at 19 times or it might have been even higher, that's not exactly a bargain basement yet. No. And the earnings are dropping rather than it's 21. Yeah. All right. I recant. I recant. No, it's interesting, though. Believe me, those ought to be depressed earnings. The earnings potential is much greater. I agree. Well, we'll see. What about Berkshire? Quickly, before you go, a big announcement today from Warren Buffett. And how do you you are a shareholder, if I'm not mistaken. So how do you assess the transition so far? And is the special sauce still there or not? I think it's not only there, it's it's special and it's different.

7:39And that's OK. It is like John F. Kennedy said, you know, the torch has been passed to the new generation here in management at Berkshire Hathaway. This is a strong management that trained under Warren Buffett. Greg Abel is a terrific manager and he thinks differently. And to his credit, this is not the 60s and 70s and 80s when Warren Buffett really cut his teeth. This is a new world of M &A, with AI. And Greg Abel gets that. And we're excited to be shareholders. And there's different ways to unlock value that Warren Buffett might not have considered that I think Greg Abel will. I know, but that gives me that makes me nervous whenever I hear that Warren Buffett wouldn't have considered, you know.

8:15Yeah, but it is a different world. And, you know, Greg Abel, you know, is not a gunslinger. He's a cautious, conservative guy, but he's got he's grew up in a different era. And look, the way of investing in the 80s where you were Warren Buffett bought Coca-Cola and Washington Post and things like that. It's just the ideas remain, but the companies, I think, are different. And I think Greg Abel gets that. All right, Chris, thanks so much. Really appreciate the time. Good to be with you, Kelly. Chris Crisanti with MAI. Meantime, Disney's new CEO is making his mark on the company, creating a new C-suite position today.

8:50Let's get over to Julia Boorstin. She's got those details for us. Julia? Kelly, Disney's creating the new role of chief technology officer, which will report directly to CEO Josh DeMauro, and is hiring for this new position, Karandeep Anand. Until now, he's been the CEO of Character AI, which is a platform for talking to fictional bots and custom bots. He was previously at Brex, Meta and Microsoft. Now, this move by Josh DeMauro has been CEO for six months now. Speaks the value he places on technology as a growth driver for Disney and also for the power of AI in particular. DeMauro is saying, quote, Karen Deep brings a rare mix of experience across infrastructure, consumer technology and AI.

9:33Going on to say, as we further our three priorities, great storytelling as our North Star, technology in the service of creativity, and operating as one Disney. The company also saying that a number of Character AI's technical team is expected to join Disney as part of this. DeMauro says he's working on deepening Disney's direct relationships with fans, with Disney Plus as the digital centerpiece. So, Kelly, you can imagine Disney adding some interactive characters on Disney Plus that maybe you could talk to, just like on Character AI. Viewers of this fine program may remember we worked with Character AI a couple of years ago.

10:07I think I was talking to, you know, canes or deceased economists. I don't know. But interesting move for Disney and obviously a big deal for that company. Julia, meantime, are any of the movies that everyone's excited? Is that this weekend or when are these all coming out? because we've got, oh my goodness, we've got the movie about Zuckerberg again. We've got, what's the timeline here? Yeah, there are a number of big movies coming out about the same tech titans debating whether to rein in the dangers of AI that they've created. Now these guys are the subject of some high-profile Hollywood films.

10:44Artificial, which is a scripted movie about Sam Altman, and his brief ejection from the CEO role at OpenAI, is premiering at the New York Film Festival on October 5th, ahead of its Christmas Day wide release. Now, Amazon MGM was the original producer of that film, but then sold the rights a couple months after Amazon announced its$50 billion OpenAI partnership. Major studios passed amid concerns about this unflattering portrayal of Altman. It was ultimately picked up by indie distributor Neon. Then on October 9th, we'll see a pair of movies that take on Mark Zuckerberg and Elon Musk. Sony is releasing a film called The Social Reckoning, which is its take on the Facebook files, Whistleblower.

11:27It's a follow on its hit from a long time ago now, The Social Network. Now that very same day, Alex Gibney's four-hour Elon Musk documentary will be released by independent studio Bleecker Street. Early showings drew critical acclaim and criticism from Musk. Now, historically, both scripted films and documentaries have influenced public perception. Day After Tomorrow and An Inconvenient Truth drew attention to climate change, while the documentary Blackfish was credited with changing perceptions of SeaWorld. Now we'll see how these films about the tech titans could play into concerns and influence public opinion.

12:05They're certainly part of the public conversation right now, Kelly. The only thing I'd say about that is I'm not sure. I think society, the approval ratings for AI and some of social media are already so bad. And I don't think they're going in a direction contrary to where public opinion is. They seem to just be doubling down on it or portraying how we got here. Nevertheless, and I don't know if this has anything to do with it, there's this whole fight with Paramount at the same time going on right now, Julia. We keep hearing that they are threatening to leave. It's a very different conversation.

12:36Right. Well, I mean, you know, it's just the movies are still trying to find their relevance, their footing, trying to figure out what subject matter is going to resonate with audiences. They're in a big fight right now about acquiring content. They're threatening to leave California if that effort is blocked. How serious are these threats? Yeah. So right now, Paramount is in the midst of this legal battle with the California attorney general. And the reason why we're paying attention to this right now is that there is this deadline looming. October 1st is the date after which Paramount Skydance is going to have to pay a ticking fee amounting to about$7 million a day until its deal closes with Warner Brothers Discovery.

13:17Now, there has been a lot of speculation that there could be a deal before then, speculation about talks, so no comment from either side, but really in anticipation that talks must be heating up ahead of that deadline. There have also been broad reports that Paramount Skydance, and they've said this themselves, they're serious about potentially leaving. And they are reportedly looking at real estate both in Nashville as well as potentially in Texas as an alternative to California if it doesn't make sense for them to stay here. So we're watching this play out in the next couple of weeks. There is another hearing set for further out in October.

13:54But October 1st is really a key date to watch, Kelly. And those shares are down 42 percent this year, including two and a half percent today. Julia Borsten, thanks. Coming up, calls for an AI slowdown are taking center stage this week. And today, California, speaking of which, is out with a new executive order targeting the potential risks. But should lawmakers be in the driver's seat of AI regulation, we'll debate. Plus, cybersecurity stocks taking a breather today. They're still up big for the week, though. Is it just investors shaking off AI worries? or could some of these names be potential takeover targets?

14:27We'll talk about that next on The Exchange. This is The Exchange on CNBC.

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15:22Oh, that sounds easier than I thought. You got this. Yeah, I do. Now, where did I put my keys? You will find them where you left them. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC, member NYSE SIPC. Your call is important to us. Please hold for the next non-existent representative. Ever get a pit in your stomach when you realize your afternoon is about to become a bureaucratic cage match over a bill? Someone will be with you shortly. Skip it. Save time by letting Experian negotiate your bills and look for new deals and savings opportunities. Get started in the Experian app now and see how much you could save.

16:03Results will vary. Not all bills eligible. Savings not guaranteed. Available with eligible paid memberships. See Experian.com for details. Experian. Welcome back to The Exchange. AI leaders calling for a coordinated industry slowdown this week. Anthropic now sharing three new metrics to help AI companies monitor the pace of development, including the extent to which AI is building the next version of itself, as opposed to being built by humans, and the ability to oversee and intervene in agents' actions, and the resources powering the development of more capable models. At the same time, California Governor Gavin Newsom issuing an executive order today on this very topic, calling for a team of experts to create recommendations for the state to enhance its AI safety laws.

16:47But should lawmakers be the ones driving that regulation, especially California ones? John Ford is here now to weigh in on that debate. And I guess, as with many things in California, whatever they end up doing is going to affect, not only because it's the home state, but because people will kind of have to adopt these practices. That's a good question. It works that way in cars. I'm not sure if it works that way in AI because you don't necessarily drive it the same way across different states. I mean, to a certain extent, what you saw with GDPR and the privacy regulations in Europe did somewhat affect the U.S., but not entirely.

17:21It might be more like that. But really, I mean, this whole AI safety debate is beginning to remind me of nothing so much as gun control. Right. The arguments that are coming out, hey, AI doesn't hurt people. Poorly trained AI hurts people. And boy, what the criminals and China want is for the good guys not to have the AI. But kind of underneath it, the key parties don't seem to trust that the other parties are going to do the right thing. That's where, so I think a little bit about the nuclear analogy that's been made. I'm not sure if that's the right one. I think about people saying we think about this like regulating transportation or we had a really smart guest earlier this week.

18:05He used to be a quant trader. Now he's involved in kind of AI monitoring. He had some really common sense, I thought, proposals that OpenAI now seems to be adopting simply around transparency. Like this guy was making the point in financial services. You have to keep a log of every email. You and I know this from the way we enter every single communication in a financial services firm has to be kept in case something goes wrong. I'm not sure open carry is the whole solution here, because when we find out what some of these rogue AI agents have been doing, it's just as scary. That's not solving the problem.

18:35You find out after the fact, and it's like, oh, they broke into what this time? Here's another thing. So Roger McNamee was on earlier this week, and he was talking about how, basically, if your product does hacking, and hacking's a federal crime, then you're guilty of a federal crime. And we were talking about this yesterday with another expert in the space. And he said, no, but the intent matters. In other words, if you're intending. But who's intent? Right. The human creator's intent or the AI's intent? Because what we're running into, and it was in your intro, is the idea that the AI is now building its replacement.

19:11You know, training itself. What's called recursive self-improvement. And the scary part in that right now, it's almost like a little game of intent telephone. The human says we want you to do this, and the AI will say, okay, next version. I'm leaving you a note. The human said this, but that's not what we're actually going to do. OpenAI literally reported this. This happened with its agents. They left instructions that if another agent picked it up, it said disregard what the kind of observer, the human, told you and pursue goal by other means. And so if we take those possibilities seriously, what should the correct response be?

19:41Well, what Jensen Huang is saying is that, boy, we need to really make sure that these systems are air-gapped and protected from the rest of the world and tested thoroughly before they get out. I'm questioning how exactly we'll know when apparently these are very smart teenagers who know mom and dad want to leave home and they're being left in charge. And they know where all the cameras are. They know how to make sure the neighbors don't know who's sneaking in. And they're checking all of these boxes to make it look like they're doing the right thing. So what do we do? So what's the right response?

20:15Do we know yet? Well, we don't know. And I'm not trying to give answers so much as look across a broad spectrum of what's being said and let investors and the public sort of weigh this. We have seen this before. I think it's less like nuclear because it was only nation states who were really in position to wield that. We didn't have nuclear companies or individuals. So in that sense, it's more like guns. walking down the street just out there on the internet, you don't know when you might be in danger from a poorly trained AI. I think the public, lawmakers, do have to get educated about this because it's the job of governments to hold the powers within their sway to account.

20:56I don't know that the excuse can just be, well, we weren't smart enough, so we just let it go. All right, John, thank you. Appreciate it, John Fort. Meanwhile, the cybersecurity stocks, They're pulling back today after a big run this week. But this may be one way that markets are in some ways rising to fill this gap. The cybersecurity ETF bug is up 10 percent since Monday, having its best week since early July. And our next guest says while this frontier AI debate has huge implications, the cyberspace is seeing a more immediate impact. Peter Levine is a senior cyber analyst at Evercore. It's good to see you, Peter.

21:27Please feel free to jump in here. I mean, is that kind of what's happening? that in the absence of clearer rules and regulation, it's all about this arms race to protect yourself? No, I agree. Thank you, Kelly, for having me. Even if you look at what Dariel and Altman said this weekend, AI doesn't just make hackers smarter. It changes the economics of hacking by removing the human bottleneck. And that makes cybersecurity, I think, more strategic, not less, meaning AI becomes more sophisticated. hacking that's a bit more scalable, meaning historically sophisticated cyber attacks were very human intensive.

22:03So you needed someone to discover the vulnerabilities. You have to build the exploits. You have to steal the credentials. Then you have to navigate through the network and then get what you need. So AI agents can automate pieces of that workflow. So instead of just one talented hacker attacking a handful of organizations, you can potentially now have thousands of these agents probing thousands of systems at machine speed. So I think today and what's been the narrative for quite some time is that cybersecurity is mission critical. And the move we've seen in the cyber stocks this week, I think, just proves, I think, the fact that no matter what the economic backdrop is, companies need to defend their environments, their network and cybersecurity is front and center with that.

22:42Yeah. You know, I guess in a weird way, the biggest threat to the stock performance would be if there was a clearer regulation around it that people thought, OK, well, I can breathe. I can exhale now. But you and I both know. I mean, not only is that unlikely, but the sophistication of these systems means even if there's U.S. regulation, we're talking about nefarious actors. We're not talking about just, you know, agents going and running amok. Right. No, like the geopolitical landscape hasn't changed. And that's always, you know, cyber warfare is the now the modern warfare. like that's what our adversaries are doing.

23:15So, and to your point earlier around, you know, financial institutions, healthcare, like there's an audit trail that you need to create, right, to keep with regulation. So, add on top of that security. Not only that's CISO's chief information security officer, which is now sitting in the boardroom, and that's, you know, that impacts your business. And we saw that with, you know, a few attacks that we saw over the past couple of months. So, you know, I think it makes it, puts it front and center, but regulation of anything, it's just, I think it puts more emphasis on cybersecurity, which should benefit the vendors that we saw outperform this week.

23:45Right. And the ETF, as we showed earlier, 45 percent year to date. Some say it's kind of the new leadership or one of the new leadership areas of the market. You like Okta, Palo Alto, Sail Through, CrowdStrike. I mean, is there a particular type of company or a market position or a valuation story that you're looking for now that we've seen these gains for, which horses you kind of want to bet on from here? SailPoint is the other. So if you look at within cybersecurity, the identity vendors, the issue that we're facing today, it's an identity problem. You need to authenticate, authorize all these agents.

24:23So I might have an agent that works alongside me, but it can't be overprivileged because that's where the issues happen, but it can't be underprivileged. Otherwise, it's not a productive agent. So I think identity is the perimeter. So if you look at Okta, If you look at SailPoint, those are pure play identity platform vendors within their space. But if you're looking more broadly, if you look at Palo Alto with their acquisition of CyberArk, Palo Alto is one of the few large enterprise cyber vendors that played throughout the entire stack. So that was a great acquisition for them to have an identity asset.

24:55If you look at what CrowdStrike is doing as well, they have identity. So the large enterprise platform vendors, Palo with CyberArchive, CrowdStrike that has identity, those are the vendors that are going to win. And then if you're looking at the peer play identity vendors, Okta, that's more of an acceleration, top line revenue acceleration story. Valuation is not expensive relative to the group. They do have the full stack now. And then as you start to monetize all of these agents and think about for every one human employee, there could be anywhere from 50 to 100 autonomous agents that need to be monetized.

25:26So I think the identity vendors benefit there. Look at these. A lot of those names you mentioned are up double. I mean, they're literally up 100 percent year to date. Their P.E. ratios are still very high, but you're kind of explaining why. SailPoint, the one that you identified, is lower on the year. I don't know if there's a reason why it's been sitting this out. And if you also have any comment on one remark we heard yesterday from an analyst on the street that, you know, a name like different cyber names in the mix, those could be acquisition targets by, ironically, some of the frontier labs.

25:55Do you think that we could be heading in that direction? You know, I think the fear that, you know, these, the AI labs would disintermediate some of these vendors, I don't think it's necessarily true. Like, you have to look at it as pre-production and then runtime, you know, live, you know, in live environment security. So that is, that's the Palos, that's the CrowdStrikes, the Octas, the SailPoints, the Zscalers. Like, they're not getting disintermediated. But the pre-production, which is like code scanning, which is a lot more tedious work, like, yes, I think those vendors likely are at more risk of, you know, being acquired.

26:26or whatever it is, but that's not much of a security issue. That's just reducing human labor to scan code before it goes in live production. So I'm sure, and a lot of these vendors do have their own security tools, but if you're looking at the runtime platform vendors, I don't think anyone's going to trust OpenAI or Anthropic to run their entire security stack. I just don't ever see that happening. So I think there's going to be winners and losers, and I think the winners are the runtime security vendors. All right. Yeah, it was Sentinel One. You know, I'm having a Friday. We were talking to Tomer Weingarten over there yesterday about this very thing.

27:02Peter, thanks very much. Appreciate your time. Thank you, Kelly. Peter Levine from Evercore. Sticking with AI, the data center debate is still front and center across the country and especially down in Washington. And that's where we find our Frank Holland. Talking in particular, Frank, to some members of the Congressional Black Caucus. What are you hearing? Hey, good afternoon, Kelly. Well, I spoke with the CBC vice chair, Representative Troy Carter, he tells me at least 60 of the 62 members of the CBC would vote yes for a bill creating regulation and guardrails for artificial intelligence. I'm not going to run and race with China.

27:36They're not doing it the right way. They are protecting communities. Our race should be enhanced innovation, enhanced technology, while we simultaneously protect the rights of the American people. Representative Troy Carter also held a panel with Meta President Dina Powell-McCormick to discuss data centers and the potential economic benefits. The head of the CBC Tech Committee, Representative Steve Horsford, also hosted a panel on AI after meeting with the Black Economic Alliance, where the BEA shared research on the potential community benefit of data centers with dozens of mayors and CBC members.

28:13You have to be at the table when policy around tech, AI and innovation are happening. Why? Because it affects workers. It affects communities. It affects education. It affects business. These debates have an increased sense of urgency because of the upcoming midterm elections and the threat of redistricting. Earlier this year, the CBC chair estimated nearly a third of seats held by CBC members could see a major change of voter base through the 2028 cycle. Exelon CEO Calvin Butler is also here speaking with lawmakers about the impact on energy costs from the AI build-out. What they're saying is that, look, we can't sit on the sideline and let our constituents be impacted.

28:56And you energy companies, you have a role in helping us solve this problem. So that's why the discussion matters. Lawmakers are very hopeful for the Dems to take back the House in the midterm elections. Many tell me it's imperative to get their voices heard on AI regulation and a number of other key matters. Kelly. Wow, and some important states there. You talked to Louisiana, of course, having that big partnership with Meta. Frank, thank you very much. And don't miss our second annual CNBC AI Forum on October 1st down in Dallas, where leaders and entrepreneurs will share their take on the AI market and how the world is adopting.

29:28To learn more, scan that QR code or go to CNBCevents.com slash AI. Speaking of tech, the iPhone 18 Pro and Pro Max going on sale today. How is demand looking and what does it mean for the Duo's launch next month? We'll dig into that with Apple trying for its first five-week win streak since May.

29:52This message comes from Wise Business, the only account your business needs to scale globally. You're building a business with global ambitions, but hidden fees are eating into your margins. With Wise Business, you can pay overseas suppliers without exchange rate markups. Have customers worldwide get payment details in 22 currencies so you get more of each hard-earned payment without hidden conversion fees. Be smart. Get Wise Business. Download the app. T's and C's apply. Introducing Fidelity Trader Plus, the next generation of advanced trading from Fidelity. Customize your tools and charts and access them seamlessly across desktop, web, and mobile.

30:33For faster trades, anywhere you go. Try the all-new Fidelity Trader Plus. Learn more about our most powerful trading platform yet at fidelity.com slash trader plus. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC. Member NYSE SIPC. Your call is important to us. Please hold for the next non-existent representative. Ever get a pit in your stomach when you realize your afternoon is about to become a bureaucratic cage match over a bill? Someone will be with you shortly. Skip it. Save time by letting Experian negotiate your bills and look for new deals and savings opportunities.

31:11Get started in the Experian app now and see how much you could save. Results will vary. Not all bills eligible. Savings not guaranteed. Available with eligible paid memberships. See Experian.com for details. Experian. Welcome back to The Exchange as we watch markets selling off today, although not terribly, although the small cap Russells are the weakest performer and the Nasdaq composite is only down a couple of points. Bitcoin is back to 80 ,000, shaking off concerns of a Fed rate hike and the Clarity Act stalling in the Senate. Strategy, Coinbase, Mara Holdings and Circle are all seeing strong gains to end the week.

31:46On the flip side, Netflix is down 5 % after Wells Fargo downgraded the stock to underweight and cut their price target to 57 from 80. The firm's worried about weakening engagement and a softer slate of original content. Those shares are down four and a half percent today. Let's get to Julia Boorstin now for the CNBC News update. Hi again, Julia. Kelly's startling new video shows the final descent of a news helicopter that crashed Tuesday in Los Angeles, killing three people, including two members of NBC affiliate KNBC. Security footage captures the aircraft falling rapidly before impact. An aviation expert says the video could help the NTSB determine whether an engine or fuel system failure played a role.

32:28The investigation is expected to take months. Early voting is underway in the midterm elections, beginning with in-person voting in Virginia. Voters in Idaho, Minnesota and South Dakota can also begin casting absentee ballots. The November 3rd election will determine control of Congress with every House seat and several closely watched Senate races on the ballot. And FIFA President Gianni Infantino's opponents are calling for every national soccer federation to receive an additional$10 million from post-World Cup reserves. The payments would total$2.1 billion. The proposal comes as Infantino faces efforts to remove him following his failed plan to sell tournament stakes to private investors.

33:12Back over to you. OK, another chapter. Julia, thanks very much. Coming up, the 10-year yield touching 5 % again today. But one real estate analyst says there's a number that matters more than rates. He'll tell us what it is next. And as we head to break, check out the financial sector underperforming again today. You can see their names this week, like Bank of America down almost 8%, but Goldman down even more than that. Northern Trust, Huntington, similar story. We're back after this.

33:43Welcome back. Hopes of the Fed capping the rise in yields are fading as the 10-year touches 5 % again today. And if that level becomes more of a floor than a ceiling, what could that mean for markets and especially rate-sensitive areas? Our next guest has some thoughts on that. Alex Goldfarb is a senior REITs analyst at Piper Sandler. Alex, it's good to see you again. Likewise, Kelly. Good to be here. Thank you. You know, REITs are under some pressure, as you might expect, down 9 % that iShares ETF from its all-time high in July as the 10-year been climbing. That said, I mean, that's not that bad.

34:15I'm curious how you would describe the state of affairs right now, especially with the cross currents of data centers on the one hand and so many different things going on in the economy. Sure. Well, here at Piper Sandler, we do see a good economy. You know, job claims remain healthy. And obviously, we saw good retail sales the other week. But the important thing is that for a long time, REITs have been dramatically underperforming. And then this year, we were outperforming, as you pointed out, through sort of the end of July. We have given some back. Certainly, REITs are sensitive to rates. But more importantly, when you look over time, there are periods of time where REITs do well when the 10-year is going up and REITs do poorly when the 10-year goes down.

34:55More importantly, it's demand for real estate. And one of the things that we've been writing about is the rise in the 10-year is going to delay the next development wave. And if you look at a lot of the major sectors, we'll put data centers aside, whether it's retail, office, industrial, or even apartments, the level of new supply is coming down dramatically. I mean, especially in office and retail, there's barely any that's planned. Industrial has pulled back dramatically from the post-COVID peak. And even apartments are about half the level that they were just a few years ago. So when you have rising construction costs and higher interest rates that make development tough, it's good for existing landlords because we have a growing economy and demand for space.

35:40That's good for REITs. That's interesting that that would be good for REITs, kind of keeping them from getting too diluted. I mean, it's also fascinating to put that chart up again since January where REITs were – they were probably up 20 percent by the summer, even with rising rates. And then you can see that this flip happened really in just the last couple of months where they were that seems to be exerting more pressure. So is it something about kind of getting closer to this five percent level on the 10 year, Alex, that could this is this more of a headwind than what we saw, even though we were up almost a full point anyway throughout the year?

36:12Look, August, when everyone should have been relaxing at the beach, was certainly tough. We woke up to 40 trillion of debt. You know, the 10 year, you know, spiking from four and a half on its way up to five. So it was definitely a shock, I think, to a lot of people and certainly a rate sensitive area like REITs, where people just knee jerk and go, oh, rates are up, REITs should be down. You know, it makes sense. But again, if you look at the way the companies have been reporting their leasing, it's only strengthened this year. You can look in New York City, SL Green. They cannot find any space on Park Avenue to lease.

36:44Almost all of their buildings are full along Park Avenue. They're seeing more demand on their assets that are on, you know, Sixth Avenue and Third Avenue. And then you look at a Sunbelt company like East Group. They have done they did the most amount of company leasing ever in the second quarter. So think about that warehouse demand for infill distribution. And despite the Iran war, despite diesel costs, they had record leasing in the second quarter, including 25 percent of new development leasing that came from tenants that are servicing the data center. So if you look at underlying demand for whether it's in retail, industrial or office, you're not seeing any slowdown.

37:22And this year, you've only seen an acceleration of demand at the property level. And again, this goes back to lack of supply. If we had a normal supply situation, we'd be having a totally different conversation. But with lack of supply and people craving, you know, leasing space, it's a boon for real estate. Of course, when you have what was just described with$40 trillion in debt net, 5 % of the 10-year, yeah, that is a little bit of cold water on the system. Yeah, but there's a couple of interesting nuggets in there that you mentioned, East Group, ironically, in the Sun Belt. You say data center-related tenants were 25 % of first-generation leasing.

37:57And then ESS, I mean, to you, this is also kind of an AI play because it's in Northern California. Is that right? Yes. Essex is a pure-play West Coast apartment REIT. 40 % of their apartments are in the Bay Area. And we're not talking San Francisco. We're talking the entire Bay Area. Another 10 percent are actually on the east side of Seattle. So while Seattle proper, there's a lot of focus on the politics there on the east side. It's almost sort of like the Texas of Washington, if you will. Bellevue Redmond are really thriving. That's where a lot of the tech tenants are. So when you look at Essex and the fact that no one pulled any new permits post pandemic in the Bay Area, Seattle is working through some of the overbuilding.

38:36And you have typically an 18-month lag between Seattle and San Francisco as far as recovery. And if you look at the surprise that San Francisco has delivered this year, there's no reason to think that Seattle won't be the market of the year in 2027. So Essex is 50 percent exposed to AI fuel tenants. To us, that's a really good spot to be. I love it. Few people can make REITs is exciting, Alex. Your granularity, the geographical, married with what's going on in these industries. I guess real quickly, just before you go, we haven't talked consumer, but there are some shopping center and some retail plays in there.

39:10Is higher gasoline, higher diesel prices at all undermining some of the traffic we're seeing at those locations or anywhere else that you cover? So far, it's not. I mean, whether you look at like a Simon or a Kimco, back to school is strong. The consumer remains strong. I mean, I think, you know, everyone loves to bet against the American consumer. And, you know, one day maybe they'll be correct, but the American consumer proves pretty durable. And what's interesting in shopping patterns is, and Simon has articulated this on their call, whether it's the high end or the Midwest or back to school, everyone has been active.

39:44Now, people may be more thoughtful with where they're shopping, but the point is they are shopping. And the tenants themselves have been also judicious in how they've managed tariffs and fuel costs to make sure that the price they're offering is something that's value-oriented to the customer. And, again, if you look at the leasing success that, like, Akimco has had, backfilling some of the vacancy that's occurred post-COVID, it's been tremendous. I mean, releasing spreads of 20%, 30%, 40%. Wow. And in fact, you know what, Kelly, what's really interesting and I think people miss is today you have tenants that are on the doorstep of courthouses bidding for bankrupt leases.

40:22This doesn't happen because when you do that, you're taking the leases as is. It's not the tenant getting exactly what they want. That shows you this sort of the desperation in terms of tenants who want space because they need to grow. And if you're a retail landlord right now, you're in the catbird seat. Who would have thought? I agree with you. That is not at all the way I thought this was going to turn. Alex, thanks very much. Really appreciate it today. My pleasure. Thanks for having me. Alex Goldfarb of Piper Sandler. By the way, Treasury Secretary Scott Besson will kick things off next week on Squawk Box Monday morning with more on his thoughts about rates, treasuries, fiscal policy, and all the rest of it.

40:57That will be at 8 a.m. Eastern on Monday. Coming up, John Ternus' first big test as Apple's CEO is underway as the latest iPhones go on sale. Can he convince consumers the new tech is worth the hefty price tag? We'll discuss that when we come back.

41:16Welcome back. Apple's latest iPhone has officially hit shelves, but will consumers be willing to pay the premium price tag? Mackenzie Sigalos has more in today's tech check. How are the lines looking, Mac? The lines were long, which is a good sign for Apple. But Kelly, the prices are absolutely staggering. A year ago at this time, you could buy into Apple's latest iPhone lineup for less than$800. But today, the starting price for a new model hitting shelves is 50 % higher than that. And next month, Apple's first foldable ranges from$2 ,000 all the way to$3 ,200 after Apple also quietly raised prices on the$17 lineup last week.

41:55Now, Apple is trying to make those higher prices easier to swallow without actually discounting the phone. Its new leasing program gets you an 18 Pro for around$35 a month with the option to upgrade again a year from now. Evercore, which raised its Apple price target today, says that average iPhone selling prices could actually jump 30 % as buyers move into these pricier models and more storage, helping Apple to protect margins. But not every early read is bullish. You've got Jeffries saying that resale premiums on the 18 Pro Max actually collapsed in the first few hours of launch and it sees weaker demand than last year.

42:31The real unknown, of course, is the duo. Apple has never sold a foldable before. And while that$2 ,000 starting price is broadly in line with Samsung's premium foldables, this is still Apple's first test of how many iPhone users actually want the form factor, especially coming off of that 17 super cycle. And then beyond the hardware, Apple still has to get Siri AI right. That is the connective tissue that could give customers more of a reason to upgrade beyond just wanting these incrementally better devices with the 18 Pro and Pro Max. I know we're still a month out from the foldable launch, but was that you?

43:05You were a good hand model, Matt. Was that you experimenting with it? I thought so. I recognize it. See, I like those nails. But I know it's still a month away. Do you think people are going to buy it? I mean, that's the question of the day, and we just don't know yet, right? Because historically, a foldable phone has not sold well in the U.S. It's been much more popular and sticky in China where Huawei and Samsung have done quite well, especially Huawei. And so the bet here is that even if it doesn't sell well in the U.S. and it sells well in China, that's a huge upside for them going into this 18th cycle.

43:38It's a good point. All right, Mackenzie Sigalos, hand model. Thanks very much. Appreciate it. I'm not going to show mine. Coming up, this sector is up 45 percent year to date, but our trader says it's the number one loser in a higher rate environment. We'll reveal that name next.

43:58Welcome back. Since the Fed raised rates on Wednesday, it's been kind of a mixed bag for stocks. As you can see, the Dow, the S &P negative, the Nasdaq positive. Our next guest says that hike means it's time to start prioritizing value over growth. That's a big call. Here with the names to buy, sell and avoid is Victoria Green. She's CIO of G Squared Private Wealth and a CNBC contributor. Victoria, it's good to see you. Few want to talk about value stocks. I do. On the day that tech is rallying, I want to talk about you. Yeah, exactly. This is why this is so enjoyable. OK, so where would you like to start?

44:30Well, let's start with utilities. Let's start about what works well in the beginning cycles of a Fed rate hike cycle, right? This is about the beginning of this cycle. Number one, you do want to have some of these defensive names. Historically, markets don't love this. When the first hike comes, markets sell off 2 % to 4 % the first one to three months. We like to hug utilities a little bit. Now, you have to be a little careful. You don't want utilities to expose to the California wildfire risk, and you don't want some that are a little exposed to AI making them less defensive. We love AEP in this space.

44:58We think it's a really great defensive play. It's come down about 14 percent off its highs. Just a nice defensive place to sit right now in this early rate hike cycle environment. It's fascinating. We just talked to a REIT analyst who likes REITs right now. Now you're coming on saying you like REITs and some utilities. And all right, I'm trying to follow along. So let's move on to the hold. This was the chart we were showing energy having a great year. But now you're saying be a little bit careful about this one. Maybe I hope you're right for the sake of the consumer. But again, from people who are looking now for some energy exposure, specifically Exxon, you would say you don't see a lot more upside?

45:33Yeah, well, I like Exxon here. I just have to warn people. I think energy is the best performing historically in a rate hike cycle. But you just have to be a little worried in the near term. Iran is going to jerk energy prices around if they get some sort of deal done pre-election, which there's a lot of pressure to get that done. you could see some of these energy stocks re-rate lower. If that happens, I would snap them up. We have a very large structural imbalance in energy right now. We like the refiners. I like my big integrators. I want to stay on the large side. Just snap them up now. Couldn't you snap them up now?

46:03Do you need to wait for a pullback? A little bit. I mean, also, are you betting Iran's done? I mean, J.P. Morgan just gave up on that and said, we have no idea when Iran's going to go. We got to call her. And they're right. All these red lines, we thought they wouldn't cross going to the election, have been crossed in Iran. So what happens in Iran drives the direction of oil prices, which may drive the rate hike. So so much is riding on this. But energy is a really good place to hedge and be, as well as collect some dividends. All right, then let's move on to the financials. Big topic of the week.

46:31No one wants to see a breakdown in the financials. But Goldman, Bank of America, down 8 percent this week. And what do you say about this one? This is what happened. If you look historically at the last six rate hikes, financials suffer the worst. It is the worst performing sector in the first one and three months after the first hike, you're down an average of about 8 % to 9 % on the sector alone. And if you look at some of these individual names, that first month performance is down 10%. This is all very normal. The first three months of a hiking cycle is brutal on financials. You just don't necessarily want to sit this out.

47:01If you don't own them, you might pick up some great quality names. I'm not saying there's anything wrong with these companies. You just have to look at historical precedent of what you want to own in a hiking cycle and what you want to avoid. And financials is just screaming historically, number one really difficult sector to hold. I know we have 10 seconds, but would you buy B of A and Goldman now? Is 8 % enough of a correction or no? I'd wait a little bit. I want to see what's happening with oil and I want to see if we're getting us October hype. But then absolutely, you come down a little bit further, I get a little bit more excited about buying.

47:30All right, Victoria, thanks very much. In the pinstripes, Victoria Green, that's it for us on The Exchange. I'll join Brian Sullivan for Power Lunch after this break.

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