Closing Bell - Closing Bell 9/29/25

Episode Date: September 29, 2025

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Thanks very much. Welcome to closing bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This make-a-breakout begins with major market cross-currents on one side, a looming shutdown, more tariff threats from the president. On the other, a Fed cutting rates, and what should be another strong earnings season on tap. We're going to ask our experts and get the very latest from Washington as well during this final stretch. In the meantime, let's show you the scorecard here with 60 to go in regulation. We've had a nice turn in the markets now. It was a mostly tech-driven story today. but you do now have the three majors, all in the green. Tech and Com services were the big reason why the NASDAQ has continued to lead throughout the day.

Some strong activity from the chip stocks today is certainly helping. Big news today, EA shares. They are higher by near 5%, the company's subject of the biggest leverage buyout ever. We'll follow that story into the close. It is a big one. William Sonoma lowered today. The president's slapping new tariffs on furniture made outside the United States. and that stock down near 5%.

On that talk, it does take us to our talk of the tape. The risks and rewards of buying stocks at record highs. Goldman Sachs just upping its view of global equities today, thanks to strong earnings and a Fed easing cycle. Our next guest bumping up his own outlook as well. Brian Belski is BMO's chief investment strategist. He's here with us at Post 9. It's good to see you.

Welcome. So we're obviously watching the president and Benjamin Netanyahu at the White House. House. We're trying to figure out what's going on with the shutdown. We expect arrivals from congressional leaders at any time, and if we do see it, we'll show it. But that's what you have to deal with, as I say, risk rewards of stocks at record highs. How do you see it? We really do. That just, I go back to my very first months in the business. My very first mentor was William O'Neill and investors at business deal. And you say, Belski, there's always something going on in the markets.

You just threw a bunch at us. And I think you have to try your best got to kind of push that to the side and really focus on something that you and I've talked about now for the majority of 2025 is that this rally has been led by fundamentals. This rally has been led by earnings recovering. This rally is going to continue to be led by that. And that's why we felt so compelled to finally move our targets to our bull case, which we originally published in November of 2024, which was 7,000. So that number's been out there for a while. But what we really need to see are those earnings begin to accelerate. And our earnings number of 275 has been there for a while. We actually think that into next year, we're going to see another 8 to 10 percent earnings growth.

So what we really think has gone on the last six months or so is that 2025, quite frankly, is set up, set the table for Goldilocks for 2026 and 27. All right. So the headline here from you, just to make it clear, you raised your target back to 7,000 as a bull case. Yep. So when I sort of throw out there the risks and rewards of buying stocks at record highs, which ostensibly we are at, you see much more reward than risk? We do. And quite frankly, we wrote in the piece, too, that we knew we would get a lot of pushback.

Like, a way to go, a way to call it a top belski or you're polyamipositive and all this kind of stuff. What's wrong with stocks going up? It's actually a really, really good thing, number one. Number two, I think it justifies that I think actually $7,000 by year end could be too low. I think we could probably go higher than that and then all of a sudden settle in $7,000. I don't want to just be as easy as the trend is your friend and like that. But we also have this notion of a lot of cash on the sidelines. We have a fourth quarter that traditionally when you see a market that's up 15 to 20 percent,

the first nine months of the year, the average return is like 5.6 percent going back to 1950 or so. So seasonality is involved, but also the believability of equities are back in terms of it working and the believability of the U.S. markets to have some wherewithals also. So I have a little bit of an issue with the Goldilocks moniker. Can you have Goldilocks with stocks not only at record highs, but with valuations where they are to historical averages? I mean, I don't know. Is that Goldilocks? Well, Goldilocks is the notion of interest rates staying steady, earnings growth being positive, GDP growth being positive, doesn't have a valuation metric to it traditionally. But I think that we're heading back, and I was a strategist back in 1995, 96.

I think we're heading back into that era again, where toward the end of 96, you start to see a broadening out of the market away from just the consumer staples high multiple stocks. So remember, too, that the multiples peaked in the 30s during the tech wreck of 99, 2000, really into 2000. So I think we've got a long ways to go. I don't think we're anywhere, any kind of bubble territory for tech. inflation's higher than Target, can not be Goldilocks? Well, inflation, I think. Stagflation is a word that's tossed around.

Is that Goldilocks? It's an excellent point. And I think of the one thing that we need to be worried about is that if the Fed cranks interest rates down too fast, could that ultimately be something that would feed inflation? Remember a year ago when the Fed started cutting, 10-year treasury went up, yields went up. Oh, well, I have news for you. The long end of the curve has been up since the Fed started cutting. cutting this year just now. We actually think the yield curve is going to continue to

steepen and that'll be good for financials and that's where a lot of the earnings is where it's going to come out. But also ultimately that will help drive participation to broaden into small cap into value and the like. I'm not, I think it's going to be right now, I'm not going to give away my forecast for 20, 26 so far, but I think it's going to be really difficult. Well, you kind of already did. No, I didn't. I think that Goldie locks in a consistent kind of normalcy type pattern, Scott, doesn't mean up 20 to 25 percent. I think it's a it's very, very possible that we're going to enter into a period where stocks are up high single digits to low double digit, especially with the dividend. So let's call it near the historical

average of 10 to 12 percent. High single digit. But if you, you know, you include the total return and all of that, you're better than that. But why only single digits? If the environment's so great. No, I think, again, I think you have to under promise and over-deliver. And I think the market has to prove itself. The Fed has to prove itself in terms of how they're going to engineer this in the turn with respect to the dual mandate, and we'll see from here. But ultimately, especially when we're taking a look at the consensus numbers that we see from economists, but also our great economics team at BMO, interest rates are going to tighten in. So that's why we think what we think in terms of where we're going to go.

Hold your thought for just a minute. We're going to do this breaking news now with Leslie Picker, who has that for us. Leslie, what do we know? Hey, Scott. In this closely watched trial of Charlie Javis, this is the entrepreneur who was convicted recently of defrauding J.P. Morgan into buying her college financial aid startup known as Frank for $175 million. Well, she was just sentenced to about over seven years in prison. This was handed down at a hearing in Manhattan Federal Court. Just moments ago, the 33-year-old was convicted about six months ago when all four counts she faced, which was bank fraud, securities fraud, wire fraud, and conspiracy, she pleaded not guilty and is expected

to appeal her conviction. J.P. Morgan declines to comment on the sentence. Scott, I'll send it back to you. All right. Okay, Leslie, thanks for that breaking news for us. Just make the point that you were making again when I was sort of rushing you to finish because I had to get to that about the Fed. Yeah. The role that the Fed plays in next year and why you think it could only be a single-digit return kind of year? Well, I think, you know, again, I think that's kind of the bottom end of where we think we could be. And I think the Fed has to build some credibility back with the market, especially considering all of this tenseness with respect to the White House, but also what you mentioned in terms of inflation. Now, we have seen inflation be stickier than everybody thought,

including ourselves. So I think that the Fed has to kind of thread the needle here a little bit. We ourselves didn't think the Fed was going to go 50 like most people thought they were. And I do think we're probably going to see at least two more cuts before the end of the year. I think if we are more aggressive than that, I think, then the inflation thing comes back into play, especially if it hasn't fallen. So let's bring our senior economics correspondent, Steve

Leesman, in. We'll come back to this in a minute. This plays right into some of the Fed speak that we've gotten today. Last week was busy with that. Of course, we got the Fed chair, and then we had a social media post over the weekend from the president, which has rekindled the whole

conversation around the Fed term. Yeah, the, you're fired cartoon. I'll get to that in the second, but I want to talk about the actual Fed speak today. Scott, they really broke a long and kind of between the new fault lines on the committee, which is those more concerned about tariff inflation, those more concerned about a weakening job market. St. Louis, Fair President, Alberto Musilam, kind of on the hawkish side, but saying he's open-minded to future cuts, but the Fed needs to be cautious here. Tariff inflation is going to play it over the next two or three quarters. Policy could soon be too losing. the Fed isn't careful, and the labor market weakening is a greater risk.

You know, for a president, John Williams, saying inflation X tariffs is around 2.4%. That's lower than it was in the past. So he sounds okay with the inflation and kind of excusing the tariff inflation. Fed is still putting downward pressure on inflation, and the neutrator on 1%, that's real or inflation adjusted, hasn't changed much in his opinion. Take a look at the probabilities. Still on course or lots of confidence in an October cut, maybe a little less than it was, but still confident in the second cut in December there.

Earlier in the day, Cleveland Fed President Beth Hammock, one of the more hawkish people out there gave him more cautious speech about rate cuts, emphasizing Scott the Fed's continued missing of the 2% inflation target, which you were just getting on with Belski about. So, but Belski's not over his skis by much at all if he thinks two more cuts this year. The market obviously more sold on October than later, but nonetheless is still two-thirds leaning towards two cuts. Yeah, I haven't often seen Brian out over his skis.

It would be an interesting sight to see I'd point out. He is from Minnesota, so I don't know what it looks like. That's where the market is. Brian is right there. And it becomes a question of next year. It becomes a question of the extent to which the Fed says, hey, it's going to be another one or two years until we get to that 2% target. It's going to be a question.

Scott, I would watch this notion of the. the X-tariff inflation rate. You had some people come forward like Waller and Bowman have talked about the ex-tariff inflation rate. Jeff Schmidt from Kansas City said that's the dumbest thing I've ever heard of. Well, not quite in so many terms, but he said he would never use such an indicator. And then you have Williams there saying, hey, if I look at inflation without tariffs, 2.4% it's lower than it was. It's going the direction. I want it to go.

People watching that. So that's a really important aspect for the Fed to look at, whether or not they decide. that, hey, I don't, you know, Powell says, I don't want to be Arthur Burns. I don't want to leave with an inflation rate that's above target and rising. You know, he may decide that next year is more cautious than the market has penciled in right now. I mean, speaking of not wanting to leave, presumably he doesn't want to leave before his term is up into next year. Any reaction whatsoever from the Fed regarding that cartoon that we talked about the president posting over the weekend? No reaction, but Scott, I would say investors need to watch carefully what this report

decides on Lisa Cook. If the Supreme Court gives the president leave to fire Lisa Cook, depending upon how they do it, if they do it, it might embolden the president to try to make a change at the level of chair before it's time in May. Steve, thank you. Pleasure. Our senior economics correspondent, Steve Leesman, I'll just come back to you for a comment. How are you thinking about all of this, whether Chair Powell serves out his whole term, whether

it gets fired, whether the Supreme Court sides with the president over Lisa Cook, whether that is a market change in how you would think about Fed independence and whether that's a negative for the market. You tell me. I think it really wants you, it really forces us to be focused on large cap stocks and add some sort of liquidity to it because of the way the market's going to be volatile. And so what happens when volatility increases? We go right back into large caps. You know, you've heard me talk about it. cartoon over the weekend, right? Let's put it back up there because we didn't, we didn't show it before, let's put it back. Yeah, so if, if the president fires chair Powell, what does the

market do? Well, I think there's going to be some volatility. We'll probably see some sort of a sell if I think that's why you're going to have a still an inherent bid in large cap stocks, Scott. I mean, you've heard me talk about the broadening out and value and small cap, but at the end of the day, and when people are nervous about the market, market goes down, they're going to buy large caps. So what's large cap? It's going to be mega caps. It's going to be the mega caps. It's going to be the MAGACAPS, can be the Magnificent 7 or whatever they are at that time. So I think, really, I mean, we've said this for 10 years. The new consumer staples are tax stocks and communication services stocks.

And again, going back to the early 90s, that's what really worked coming out of the commercial banking crisis in 94, into the Goldilocks period where Greenspan was cutting and then it was off to the races in the late 90s. All right. Let's continue the conversation with New Edge Wealth's Cameron Dawson. In Northwestern Mutual Wealth Management's Matt Stuck, it's good to have you both. Cam, your thoughts is you sort of take everything. into context here. Yeah, so when we look at this market, we think it's being driven by the fact that liquidity

remains still extraordinarily abundant. You have earnings estimates that continue to make new highs. And so when you put those two things together with the fact that institutional positioning is still fairly light, we think it's one of the reasons why you are seeing this chase in September, which is usually a weak seasonal month, is that if you look at discretionary institutional positioning based on the Deutsche Bank survey, it's in just the 44th percent. percentile. So there are still a lot of people who've sat on the sidelines of this market. Now, that doesn't mean that all places are light in positioning. Households look to be very

fully invested. Households sentiment looks to be getting a little bit frothy. Valuations, we know are high, but they're a poor timing tool. So those are all things that we'll have to contend with as we go into 2026. But for now, you get this gravitational pull upward because of liquidity and earnings and positioning. Well, it's an interesting point. I mean, Brian referenced all this cash on the sideline, whether you really believe that that cash is going to come into the market as I bring it back to the very beginning of the show at record highs, right? People look at that. You know, valuations are rich. Stocks are at record highs. Rates aren't going down in a, you know, really meaningful way. So you're still getting paid for cash. Maybe you're going to miss out some

on the stock market. But that doesn't sound like the environment where you're going to get a dump truck into the stock market. It's hard to look at the high cash balances in money market, $7.4 trillion that we all know about, and think that that is absolutely fungible into equities. You look at the AAII survey and the Fed Flow of Fund survey that looks at stock allocations by households, and they're all at near records, which just suggests that households are fully invested. Yes, will some of the money move back into the market? We have clients that are still sitting on cash that wants to get invested and wants to buy every single dip. But when we look in aggregate, it does look like households are fairly well invested.

And the important point here is when you are so allocated or exposed to equities, it means that the consumer is very sensitive to equities as well, because that high-income consumer is what's been driving a lot of the consumption growth in the economy and they hold the most of the equities. How would you address that? Well, she nailed it on the biggest thing, the biggest takeaway from what she said is It's two different markets. It's the institutional market that doesn't trust anybody.

They're negative. We can read surveys till we're blue in the face, but you know how you get the best information by talking to an institutional client, looking in their eyes, based on their questions. They are bearish. They're worried about Trumpy. They're worried about the Fed.

They're worried about the market that they missed since April. They've massively underperformed since April. When you're talking to high net worth and wealth clients or family office clients, they want to put cash to work, they want to buy the dip. Not too dissimilar. This has been a trend going on for the last 10 years, but it really started to exacerbate in 2020. I had a call with the institutional client today.

Massively underperforming, super worried about the fourth quarter. They've missed the move, and so they really want to know how to position going forward. Matt, what are your thoughts as we kick this all around? Look, I mean, I think to me, one of the most encouraging parts of the market that I've seen is just the broadening out of earnings estimates increasing across the board. And, you know, I'm just looking at kind of what's happened since mid-May. It's not just been a large-cap story that we've seen the last couple of years in terms of the magnificent seven driving earnings higher. It's been things like small cap, mid-cap, equal-weighted S&P, kind of all rising at the same pace as we kind of got through the second quarter and saw

that, you know, coming off the first quarter's earnings reporting season, things were much better than expected. Then you add on top of that, you know, the Fed is starting to ease and we think that they're going to continue to ease throughout the rest of this year. That has some fuel to the fire that's some of the rotation and broadening out of the market can continue into next year. You know, it's important to be optimistic when there's good evidence to be optimistic. And this is one area that we're pointing to in saying, you know, this can continue on. You know, however, I would say, you know, we still are caution, a little bit cautious towards valuations here. You know, 22 and a half times forward earnings for the S&P 500 isn't going to be a catalyst to the downside.

But it does limit, we think, a little bit of the upside as we think forward in the next 12 months. But you clearly, you're making the case for the broadening story. You still have faith in it. Because I like when, you know, it's a kind of a pushback a little bit on Brian who suggests, well, if things are uneasy, you're just going to go back to the tried and true and buy the biggest stocks in the market like the Mag 7 because you can play some offense, you can play some defense in that area. I think what's interesting is you go through history and you look at how long large caps can continue to fundamentally outperform things like make cap and small cap in terms of generating the types of superior earnings growth that we've seen from other asset classes. And that's actually a little bit less than a lot of people think. And you go back 20 years and look at three-year rolling time periods of earnings growth for things like mid-caps versus large caps. About 90% of the time, mid-caps have generated superior earnings growth.

And so what we've seen the last two and a half years is somewhat of anomaly in my eyes. And we think that continued easing from the Federal Reserve is likely to continue on the broadening of earnings revisions trends that have been so positive since mid-May. Let me make this clear, too, for our viewers. I mean, your top holdings are as follows. Nvidia, Microsoft, Alphabet, Apple, Amazon, Meta, J.P. Morgan, Lilly. I mean, you are a large cap believer. Obviously, you're putting your money in those places. So that says a lot about where you think this market's going to go.

Yeah, that's right, Scott. And we do certainly value the quality profile of these companies. They're extremely cash-generative. They generate very high returns on capital. and we think that's going to persist. But that's not the only area to continue to allocate within the portfolio. It's just been exciting to see, and it's brush of fresh air as a portfolio manager, see more opportunities to look more positive from a fundamental perspective as we look to

deploy new cash. Are we going to get into earnings, Cam, soon, right? I mean, it's hard to believe. We're going to be talking earnings again. Is that just going to underscore why it's prudent to be bullish like Brian is? Well, we got that huge earnings upside surprise in the second quarter. And so the question is, do we get a repeat of that again? And if you unpack that earnings surprise in 2Q, it came from the fact that tariff costs hadn't

hit companies yet, came from the fact that you had pull forward of tariff demand, and you had big upside surprises in the banks. And that was a critical big upside driver. But when we look at the earnings story, we actually think that the broadening out is an absolute myth. You don't see it in equal weight earnings. They're continuing to get revised lower. Russell 2000 continues to get revised lower, which is why we think that relative performance

continues to hit new relative lows for those indices versus large caps. So until we actually see those things start to turn higher, earnings revisions start to turn higher, this will remain a narrow market. Matt, do you want to come back on that? Yeah, I mean, that's been the story the last couple of years. We would just wonder whether or not the economic expansion can continue at the pace that we've been more excited about recently if only this narrow slice of the economy can continue to grow at these levels.

We think it's a question of whether or not this case yet can continue. And to us, I think there's a little bit more of an expiration date associated with that type of economy versus one that's more broad-based. And so for us, we think it almost has to continue to broaden out for the market to continue to rally into next year and beyond. What do you think? Well, you know, from I think 10 years from now, Scott, let's make a bold call. Ten years from now? Ten years from now when, you know, you're running everything here. And then you have a 40-year career that you can reference instead of 30.

That'll be something, won't it? My 40-year career. My 45 years on Wall Street. Well, you dropped a 30 reference all the time. So what do you do? 35. In 10 years what? I think we're going to be kicking ourselves that we did not own more small mid-cap stocks.

I mean, we run a small mid-cap portfolio. That's one of our best absolute performers. But I don't think the Russell is the right index to be looking at. If you look at the S&P 1,000, which is the 600 and the 400, I've never seen in my collective career, I'm not going to tell you how long, the type of free cash flow, return on equity, consistency of earnings in the small midcap space, and some of them are paying dividends. And so I think as we kind of continue to move on in the market, I think that's going to be a great place to be. Okay, we'll make that the last word. Brian, thanks to you as well. Matt, we'll see you soon. Appreciate having you.

Let's send it now to Steve Kovac for a look at the biggest names moving into the close today. Hi, Steve. Hey, Scott, I got a few for you here. Trading on Wolfspeed, it's halted multiple times today after that stock soared over 1,000%. That comes after the company filed an SEC form to delist its securities in the wake of its exit from Chapter 11 bankruptcy protection. Meantai retailers, Etsy and Shopify, they're popping about 14% and 6% respectively after OpenAI announced its new instant checkout feature. OpenAI says it will allow users to buy products through chat GPT from U.S. Etsy sellers with more than one million Shopify merchants also coming soon. And Carnival

shares, they're falling over 4% after initially popping on earnings this morning. The cruise line raised its annual profit outlook on strong demand, higher ticket prices and more on board spending, Scott. All right, Steve, thank you, Steve Kovac. We're just getting started here. Up next, two pops and it drop. The three big stock stories on our radar. today should be on yours as well. We're live at the New York Stock Exchange. You're watching closing bell on CNBC. We're back with three big stories in the markets today, starting with the biggest LBO ever. Steve Kovac is back with news sending shares of EA hired a day. What do we know?

And there's Scott Longtime, No, C. Well, this deal that we heard. about today with electronic arts. It comes amid a slump in gaming growth. Take a look at EA's annual revenues over the last five fiscal years. It's been relatively stagnant those last three years coming out of the COVID pandemic. The rest of the gaming industry looks pretty similar. And the stock is up only 56% in that period. That's lagging behind the S&P, which is up 100% in that same time. Now, the Saudi Public Investment Fund is the big investor here and the biggest owner, and it continues to amass a gaming empire. It also owns 6.2% of Grand Theft Auto Maker Take 2 and 4% of Nintendo. And on the mobile side, it bought Pokemon Go and the parent company of Monopoly Go.

Now, this is not a done deal. E.A. has 45 days to solicit other offers before taking this one. And Clay Griffin, he's an analyst on gaming over at Moffitt Nathanson. I caught up with him earlier today. And he said potentially Take 2 Interactive could swoop in here with a better offer. though the market today is not acting like that's an option. He also says the gaming space is already consolidated and there aren't too many public players left, Scott. Well, we'll watch. I mean, it'll be interesting to see if what if anything happens.

Steve, thank you. Steve Kovac. Now to Robin Hood shares, they're also sharply higher today. McKenzie Sagalos following that money for us. It's a big, big mover today. Yes, it is, Scott. It has been a blockbuster run for Robin Hood. It's up threefold year to date.

And shares are jumping more than 10% on the day. on track to close at a record high. Now, this rally follows a new milestone for the company. CEO Vlad Ten of saying earlier that Robin Hood's prediction markets have now crossed four billion event contracts traded, with more than half of that volume happening in Q3 alone. Prediction markets let users wager on those yes or no outcomes from Fed moves to sport results, and the fast-growing business has drawn investor buzz, but also regulatory scrutiny for blurring

that line between investing and gambling. Investors are also digesting news out late Friday that Robin Hood is starting. started rolling out banking services meant to mimic luxury private banking. It is part of that broader push to become a full-service financial hub and potentially replace the need for a traditional bank account. Scott? You know, it's interesting. We're doing this story, and our Max Myers was pointing out to me that Robin Hood's market cap

is now slightly larger than KKRs, which had me thinking back to when PayPal had, just a few years ago, had a bigger market cap than Bank of America. It just shows you the fervor behind some stocks that have a sort of cult-like personality for a while. You could also look, Mac, at Crypto's big comeback now today as helping these shares of Robin Hood. Yeah, and I mean, just think back to this summer when Robin Hood cleared that $100 market was pegged to this exposure to tokenizing private equities when they said that they would be offering shares of SpaceX and Open AI. And that's something that Vlad Tenev has really been using as part of his push this year, the crypto ambition. So certainly seeing alignment there. All right.

Story number three, Mack, thank you. Finally, shares of William Sonoma selling off today. Courtney Reagan joins us now with those details. Hey, Corey. Yeah, Scott, so President Trump posting on Truth Social this morning that he will be imposing substantial tariffs on any country that doesn't make its furniture in the United States, but then give no further details, at least not now. This, of course, does follow the president saying in late August that he's investigating new tariffs on furniture. imports, and then last week announcing a 50% tariff on kitchen cabinets, bathroom vanities, and, quote, associated products, and then a 30% tariff on upholstered furniture starting

October 1st. Last week, furnishing related stocks or even home building stocks, they held up a little bit better than they have today. Key Bank analyst Bradley Thomas estimates 20% of Williams Sonoma sales are upholstered furniture, 18% of which are sourced in the U.S., so that means the rest are imported and may be subject to these tariffs. Now, the firm estimates that R.H. upholstered furniture business is as much as 40% of its sales, though a bigger portion, 20 to 30% is made in North Carolina currently, and they have a goal to increase that over time here. Now, Ethan Allen and Lazy Boy, a little bit more insulated with much of their manufacturing, either here in the United States or in North America and thus

compliant with USMCA, and so we're not subject to these potential tariffs. But again, we still don't have a lot of the details. And so it's interesting, Scott, when you see sometimes these stock selling off like today, whereas last week, Home Depot and Lowe's didn't really move much. And I know for a fact, they sell bathroom vanities and they sell kitchen cabinets, too. Yeah, well, one day's activity doesn't a story make, really. So we'll have to see what happens in the days ahead. Court thanks. Courtney Reagan.

Still ahead, why the cannabis stocks are shooting higher in today's session. The bell's coming right back after this. Coming up next, the big debate over an AI bubble. Have we come too far too fast? Deepwater asset management's Gene Munster standing by. He'll give you your take next. Welcome back. Is history in danger of repeating itself or at least rhyming as the current AI craze has some harkening back to the dot-com crash of the late 90s?

Too many stocks up too far too fast on the promise of riches down the road. We all know how that ended. Gene Munster, managing partner with Deepwater Asset Management joins us now. How do you think about that question? Are we at least rhyming? Well, I'm always looking for the rhyme, Scott. Of course, we're never going to see it perfectly mapped to what happened 25 years ago. But I want to first kind of mark where we're at, mark the moment here.

This is a big week that since GPT made its debut in November of 22, the NASA X up 100%. Typically over that period it would be up like 25%. So this conversation is most appropriate. And the reason why these bubbles happen is outlandish behavior. starts happening from investors. And this comment thing that may fall into that category for some people is that a few months ago I thought we're in the third inning of the AI build out the AI trade.

Now I think we're in the second inning. And that's based on what we've heard from the big CapEx, the big spenders, hyperscalers after the June quarter, and also more recently from Zuckerberg and CFO Susan Lou Lee at the Goldman Conference and from OpenAI, Oracle, and video, all that put together, Scott, I think there still is a massive amount of investment. I think that investment will lead to these valuations

going higher. One other piece about the rhyming part. Yeah, go ahead. Go ahead, no, go ahead, Gene. You paused, I thought you were done. Please go ahead. Right on the rhyming part. One more on this rhyming part is,

I think one piece that we're gonna see is these companies that are so loved by the AI trade, the private, the private companies, whether it's Open AI, XAI Anthropic, Andrel, none of these are public it. None of them have seen this crazy public euphoria around it. And so at a very high level, it's hard for me to imagine that we're at the end if, in fact, we haven't seen some of these biggest companies have their breakout period in the public markets. So you mentioned the NASDAQ up 100% since November of 22. We looked at some of the groups within the AI.

story. The hyperscalers, the Googles, the Metas, meta's up 579% since November 30th of 2022 when GPT was announced. Invity is up better than a thousand percent. The so-called others of AI love. Dell's up 200 percent, Oracle 250, IBM is almost a double. The power companies that get a lot of love, utilities that are now modern-day growth companies. Vistra is 725% G.EVernova up 355%. It's why Ken Griffin probably said what he did on CNBC last week. I want you to listen. There's obviously echoes of the dot-com bubble in this moment.

All right, and let's take a step back. The dot-com bubble, there was a huge amount of capital that flowed into what today we refer to as the internet. Now, the true winners and losers, were not readily identifiable at the start of that whole bubble. But move forward 10, 15, 20 years later, there's no doubt that the world was radically transformed by that moment in time. It's interesting when he says, quote,

now the true winners and losers were not readily identifiable at the start of that whole bubble. Have we decided that we know who the winners and losers are this time or the ones that we think, and they're the names, the very names that I read off those lists to you? I think they've been a winner. I think that there's a whole other class of companies coming, these AI-first companies. There's a handful that I mentioned, those four that I mentioned, that are at the top of that shelf, kind of this golden list, but we spend time in our venture business and look at these other kind of emerging companies,

and they will be, I think, a whole battery of $100 billion-plus companies that, that most investors don't know about. I think this, it is important to focus on kind of how narrow that trade has been like you just described. But if in fact the impact is as big as I think it's going to be, then it's gonna kind of spread out. I go back to Walmart CEO comments last week

saying that AI will impact literally every job. And I pause and think like, how many jobs are being impacted by it today? And the answer is few, very few. And so when I think about, you know, The class of companies, I do think it's going to spread out. I think you're going to see better performance more broadly with some of these smaller companies over the next one, three, five years.

I also think, again, there's this new class. We haven't seen them. We've seen a few of them. Core, we've read it, but we really haven't seen the private class. And those are the companies that are growing, if you take OpenAI, 2 billion last year, 13 this year, 26 next year, expected to be 200 by 2030, like that is the exciting part. And so I think until we get to that just that. kind of that breathtaking investors can really get a solid eye on that.

I don't think they're at the top. One other piece I want to mention, this is really healthy for the market. The conversation about the bursting in the bubble is, of course, healthy for the market. I remember being an analyst back at Piper Jaffrey in the mid-late 90s and thinking this is going to go on forever. Like the concept of a bursting bubble just wasn't in the conversation. And I think because that was such a painful moment, I actually don't think we're going to get like a spectacular. I've described that in the past, a spectacular bursting. I think what will happen is we'll get a move in the market for the next three years, continued, massive outperformance.

But then I think it's more or less going to be more of a dip or kind of a steady, a leveling off versus this big blowup that everyone's expecting. But bubbles bursting are always spectacular. Are they not? I mean, that's part of the point, is that greed, rule. everything else when it comes in part to investing into perceived bubbles. You're afraid of missing out. You continue to ride it up until the rug is pulled out and that's why it's so often so spectacular. I think the piece, the difference, you know, I talk about the strength I believe in the market of the next few years, if

not for this conversation about what happened 25 years ago. I think the market, I think the top would have been even higher. And so So I do believe we're going to reach a point when it's crazy, when it's absolute pandemonium. There have been pockets of that, but I don't think it has been as breathtaking as what happened 25 years ago. I also believe that because we've been through this, we're just not going to see, to put it into perspective, is that, you know, the average NASDA company back in 2000, at the peak of the bubble, was treating it at 100 times earnings.

And right now we're at like 32. we're not going to get back to the 100. We might get back to 50 or 40 or, you know, some much bigger number, but it's not going to get back to that. And so I think the bubble is going to burst is, you know, the degree of the spectacularness of the burst is a, I think it's a helpful debate. I think this conversation is really important. But I just ultimately coming back to very simple fact. Do you believe in AI? Do you believe it is going to do what Satya Nadella said back in April? Is it is going to solve the world's most difficult problems? Hasn't even started from my perspective. I think a chat, bot, a programming bot customer service doesn't even begin to scratch the service of its potential. And so if you believe that ultimately that that future, you think about Walmart's comments, if you believe that that is on the come, I think it's reasonable to believe that the market still has a few years left. Gene, thank you. Appreciate it. Thank you. A good conversation. I look forward to having more. That's Gene Munster. Up next, we track the biggest movers into the close today. Steve Go back, standing by with that. Steve? Yeah, investors are loving the price target change

to one mobile tech company and another biotech acquisition has shares rising for one cancer treatment researcher. We'll share the names when closing bell comes back after this. Well, Lesson 10 from the Bell. Let's get back now to Steve Kovac for the stocks that he's watching. Top your list today. Right now, what? Let's go with that bluffing here, Scott, because those shares are popping today. After Morgan Stanley maintained its overweight rating and increased the price target on the stock to $750 from $4.80, MS is bullish on the company's upcoming self-serve ad tool for e-commerce and non-gaming clients.

Meantime, biotech company Maris is surging today after GenMAB acquired it for about $8 billion or $97 a share. It says the acquisition will help it transition into a wholly owned model and also touted Maris's flagship cancer treatment in late-stage trials. And Galaxy Digital is higher today after invested in a Korean entertainment tokenization platform. The platform says it will create revenue sharing tokens and automate royalty distribution, among other tools. Scott, we see shares up 11% there. Steve Kovac, thank you very much. Up next, the headline that has cannabis stocks rallying today, that and much more in the zone next.

All right, we're now in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down these crucial moments of the trading day. Plus Diana Oleg on today's housing data and Brandon Gomez standing by with what is sending cannabis names higher today. Diana, we begin with you on these housing numbers. Yes, got a big surprise to the upside for August pending home sales up 4% from July. Now, this count is based on signed contracts, so people out shopping in August when mortgage rates were slightly lower than they were in July, but not quite as low as they are now.

Sales of newly built homes also counted by contracts saw a huge jump in August. And while it's expected to be revised lower, clearly we are seeing a little more energy in the overall. housing market, thanks to these lower rates. Now, a survey of realtors showed 19% expect an increase in buyer traffic over the next three months, up from 16% last month, but fewer expect an increase in seller traffic compared with July. And we did see inventory in August fall for the first time since the start of this year. Builder stocks aren't moving much on this, a little bit higher, but perhaps everyone's waiting

until that all-important jobs report Friday, if it comes Friday, that could move markets. Back to you. All right, Diana, thanks so much. Brandon Gomez, tell us more about cannabis stocks. Hey, Scott, yeah, Tilray, Canopy Growth, Aurora shares all making massive jumps today. President Trump sharing a video on Truth Social last night about the health benefits of hemp-derived CBD. Now, the video said it could, quote, revolutionize senior health care as an alternative to costly prescription drugs. Another area of the president's focus.

Just last month, he hinted also at a move to reclassify cannabis from a Schedule I to a less dangerous Schedule 3 drug, which, most notably, would open pathways for medical research. Now, one lawyer I spoke with emphasizing that reclassification would ease the path for big pharma to research and seek cannabis approval for drugs. To Re CEO, Irwin Simon, telling me earlier this hour as well that this is about complementing, not replacing existing care. A buzzy industry, of course, Scott, some stocks halved in value this year while others are up over 40%. Brandon, thank you.

Brandon Gomez. All right, Mike Santoli, got two minutes left. You're going to hear the sound effect in a minute. minute. Your thoughts on this market today? You know, market just finds a way. Friday was a very broad, inclusive rally, responding to macro, you know, PCE numbers that were in line. Today, it's a little more narrow, just finding a way to let Nvidia protect the indexes once again that the majority of stocks in the New York Stock Exchange down does not do any damage to the S&P. So we can keep repeating the fact that this is a resilient tape, refuses to come in in anything but the shallowest of pullbacks,

haven't had a 3% dip in a while, but you have these kind of persistent overbought readings and everybody keeps saying, you know what, the big money is not fully committed yet. So I think we're still in this dynamic. Everyone pretty much assumes there's going to be a year-end ramp. The question is, do you get some kind of an entry point lower? Before that, we do have this window into October,

where in theory, you have the potential for some bumps. But on a given day, either the big guys or the majority of stocks don't allow for it. Yeah, and the resiliency, you know, today look like a little uneven, and it was kind of a NASDAQ show, a tech andcom services. And then to your point, we did have then, okay, now the Dow's green and then everything's green. It speaks to the kind of market we have, even though we don't know what's going to happen with the shutdown, whether, you know, we're going to get any data this week as a result of that either.

The markets talked itself out of any acute concern about the shutdown, just looking at the history. I guess that makes sense from here. I do think the market has something to prove. It did sort of knock up against 6,700 on the S&P twice last week, didn't manage to get through it. We're still just kind of hesitating in a sideways fashion. Today, you know, Invidia comes to life. Bitcoin gets a bid, and it feels as if a lot of the hyperactive stuff is moving again. Take a look at Robin Hood.

So we'll see if that's just a one-day phenomenon, and maybe you have to kind of build a new storyline going into tomorrow. All right, good stuff, Mike. Thank you. Mike Chen Toll. Bill rings is green across the board, as we were just saying. I'll see tomorrow into overtime.